NBFIs should invest in housing, SMEs, women's entrepreneurship uplift: BB
Tuesday, 14 August 2007
FE Report
The Bangladesh Bank (BB) said Monday the non-banking financial institutions (NBFIs) should invest in different sectors, including housing, small and medium enterprises (SME), and also for development of women entrepreneurship.
The advice came at a review meeting with the chief executives of the NBFIs held at the central bank Monday with the BB Governor Salehuddin Ahmed in the chair.
"The NBFIs may invest in housing and SMEs and help develop women entrepreneurship with credit at tolerable interest rates," the central bank chief told reporters after the meeting.
He also said time has come to create jobs opportunities in different sectors.
The meeting discussed different issues, including depreciation of lease assets as allowable expense, provisioning on special mention account (SMA) and floatation of the initial public offerings (IPOs) of some leasing companies.
Lease financing, term lending and housing loan constituted 95.59 per cent of the total financing of all NBFIs up to December 31, 2006, according to the Bangladesh Bank (BB) statistics.
The shares of leasing, housing, and other assets in the total portfolios of NBFIs were 44.96 per cent, 35.00 per cent, 13.99 per cent and 1.65 per cent respectively, the data showed.
The chief executives of the NBFIs requested the central bank governor to take up the matter with the National Board of Revenue (NBR) to continue the depreciation allowance facilities to protect the interest of the sector.
The BB governor assured the chief executives of the NBFIs that the central bank would look into the matter, but suggested to take up the issue with the NBR first, meeting sources said.
The meeting also discussed about issuing different types of bonds by the NBFIs to create a new window for investment as well as bringing dynamism in the country's secondary bond market.
About issuance of new bonds, the central bank assured the NBFIs to provide its policy supports to facilitate the move.
"We will try to provide our supports relating to issuance of new bonds by the NBFIs," the BB governor said, adding that the meeting also discussed the matter relating to tax on bonds, particularly the corporate bonds.
At least three zero-coupon and other bonds are likely to hit the country's secondary market within the next six months if the concerned authorities provide their policy supports in this connection.
"We are expecting to float at least three zero-coupon and other bonds within six months,' the Bangladesh Leasing and Finance Companies Association (BLFCA) Chairman Anis A Khan told the FE Monday.
"We believe the pragmatic steps will help revive the stalled securitisation initiative, an alternative and cheaper source of financing, especially for resource-strapped financial institutions," Anis, who is also chief executive officer (CEO) and managing director (MD) of IDLC Finance Limited, observed.
The BLFCA chairman noted that successful securitisation deals and other bonds would lead to reduction of the cost of funds of financial institutions, which would, in turn, allow them to pass on the benefits to their clients.
About withdrawal of the depreciation allowance, he said the government has withdrawn it from lease assets without consultation with the stakeholders, which threatens to affect the profitability, equity growth and sustainability of the NBFIs, particularly the smaller ones.
The NBFIs leader also sought cooperation of the central bank to keep the previous arrangement unchanged for the NBFIs.
Currently, 29 NBFIs are operating their business across the country.
The Bangladesh Bank (BB) said Monday the non-banking financial institutions (NBFIs) should invest in different sectors, including housing, small and medium enterprises (SME), and also for development of women entrepreneurship.
The advice came at a review meeting with the chief executives of the NBFIs held at the central bank Monday with the BB Governor Salehuddin Ahmed in the chair.
"The NBFIs may invest in housing and SMEs and help develop women entrepreneurship with credit at tolerable interest rates," the central bank chief told reporters after the meeting.
He also said time has come to create jobs opportunities in different sectors.
The meeting discussed different issues, including depreciation of lease assets as allowable expense, provisioning on special mention account (SMA) and floatation of the initial public offerings (IPOs) of some leasing companies.
Lease financing, term lending and housing loan constituted 95.59 per cent of the total financing of all NBFIs up to December 31, 2006, according to the Bangladesh Bank (BB) statistics.
The shares of leasing, housing, and other assets in the total portfolios of NBFIs were 44.96 per cent, 35.00 per cent, 13.99 per cent and 1.65 per cent respectively, the data showed.
The chief executives of the NBFIs requested the central bank governor to take up the matter with the National Board of Revenue (NBR) to continue the depreciation allowance facilities to protect the interest of the sector.
The BB governor assured the chief executives of the NBFIs that the central bank would look into the matter, but suggested to take up the issue with the NBR first, meeting sources said.
The meeting also discussed about issuing different types of bonds by the NBFIs to create a new window for investment as well as bringing dynamism in the country's secondary bond market.
About issuance of new bonds, the central bank assured the NBFIs to provide its policy supports to facilitate the move.
"We will try to provide our supports relating to issuance of new bonds by the NBFIs," the BB governor said, adding that the meeting also discussed the matter relating to tax on bonds, particularly the corporate bonds.
At least three zero-coupon and other bonds are likely to hit the country's secondary market within the next six months if the concerned authorities provide their policy supports in this connection.
"We are expecting to float at least three zero-coupon and other bonds within six months,' the Bangladesh Leasing and Finance Companies Association (BLFCA) Chairman Anis A Khan told the FE Monday.
"We believe the pragmatic steps will help revive the stalled securitisation initiative, an alternative and cheaper source of financing, especially for resource-strapped financial institutions," Anis, who is also chief executive officer (CEO) and managing director (MD) of IDLC Finance Limited, observed.
The BLFCA chairman noted that successful securitisation deals and other bonds would lead to reduction of the cost of funds of financial institutions, which would, in turn, allow them to pass on the benefits to their clients.
About withdrawal of the depreciation allowance, he said the government has withdrawn it from lease assets without consultation with the stakeholders, which threatens to affect the profitability, equity growth and sustainability of the NBFIs, particularly the smaller ones.
The NBFIs leader also sought cooperation of the central bank to keep the previous arrangement unchanged for the NBFIs.
Currently, 29 NBFIs are operating their business across the country.