Creating investment opportunities to encourage savings

---

IT is important to create newer schemes of investment, other than the ones operated by the government, to attract the potential investors with the surplus. It is unfortunate that the savers, in many cases, fail to find the merit of putting their money in the mutual funds or unit trusts of the Investment Corporation of Bangladesh (ICB) and its subsidiaries. The reason for more savings not going into such schemes is probably a lack of public awareness about what they have to offer or the perceived cumbersome procedures concerning related investments. Besides, there is shortage of the more sought after mutual funds. Therefore, more mutual funds as well as awareness about them do need to be created.
The private commercial banks (PCBs), competing harder these days, are otherwise offering competitive interest rates on fixed and general savings deposits, though the recent price-rise phenomenon continues to erode the real value of related interest earnings. Meanwhile, interest rates provided by the government's saving schemes are also not very lucrative now. Small savers are moving to the capital market but the recent overheated conditions in the stock market should make such investors extra-cautious about future safety of their investments, in terms of prices of stocks, there in the capital market.
The insurance companies can also play a very useful role in encouraging savings. For this purpose, insurance policies of various types should be marketed to meet a variety of practical hedge financing needs of the small savers as well as to offer them capital gains.
Above all, both the insurance companies and the banks ought to create greater awareness among their potential customers so that bank deposits and insurance policies attract their savings as viable alternatives to investing in government securities.
It is important here to strengthen the regulatory framework in order to ensure greater transparency in the operation of the banks and insurance companies. Improved the regulatory supervision on them will make it easier for the investors to know the strengths and weaknesses of the banks and insurance companies that are needed in taking informed decisions to avoid risks before investing.
For the capital market to be able to draw people's savings, steps are needed to increase the market's depth by offloading the stakes of profitable state owned enterprises.
Aref Karim
DOHS, Dhaka