The financial system in Bangladesh is a comprehensive network comprising various institutions, markets, and regulatory bodies that facilitate the mobilization and allocation of resources, financial intermediation, and provision of financial services. It plays a crucial role in supporting economic development, maintaining financial stability, and promoting financial inclusion.
Financial system in Bangladesh
The financial system in Bangladesh is evolving, with ongoing reforms aimed at enhancing efficiency, inclusivity, and resilience, thereby supporting sustainable economic growth. The financial system of Bangladesh is comprised of three broad fragmented sectors:
- Formal Sector
- Semi-Formal Sector
- Informal Sector.
The sectors have been categorized in accordance with their degree of regulation.
See also:
❏ Origin of Banking
Formal Sector
The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs). There are two types Formal Sector of Financial system in Bangladesh:
- Financial Market &
- Regulators & Institutions.
Financial Market
The financial market in Bangladesh comprises various institutions, instruments, and platforms that facilitate the trading of financial assets. It is crucial for economic development, providing mechanisms for raising capital, investment opportunities, and liquidity.
- Money Market: (Banks, NBFIs, Primary Dealers)
- Capital Market: (Investment banks, Stock Exchanges, Credit Rating Companies etc.)
- Foreign Exchange Market: (Authorized Dealers).
Regulators & Institutions
The financial system in Bangladesh is regulated and overseen by several key regulatory bodies and institutions to ensure stability, transparency, and efficiency. These regulators and institutions play vital roles in supervising financial markets, institutions, and transactions, protecting consumer interests, and promoting economic development. Here are the main regulators and institutions of the financial system in Bangladesh:
- Bangladesh Bank: (Central Bank): 62 scheduled & 5 non-scheduled banks, 34 NBFIs
- Insurance Development & Regulatory Authority (Insurance Authority): 18 Life and 44 Non-Life Insurance Companies
- Securities & Exchange Commission (Regulatory of capital market Intermediaries): Stock Exchanges, Stock Dealers & Brokers, Merchants Banks, AMC s, Credit Rating Agencies etc.
- Microcredit Regulatory Authority (MFI Authority): 599 Micro Finance Institutions (MFIs).
Semi Formal Sector
The semi formal sector includes those institutions which are regulated otherwise but do not fall under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange Commission or any other enacted financial regulator. This sector is mainly represented by Specialized Financial Institutions like:
- House Building Finance Corporation (HBFC)
- Palli Karma Sahayak Foundation (PKSF)
- Samabay Bank, Grameen Bank etc.
- Non Governmental Organizations (NGOs) and
- Discrete government programs.
Informal Sector
The informal sector includes private intermediaries which are completely unregulated. The informal sector financial system in Bangladesh operates outside the formal banking and financial institutions, playing a significant role in providing financial services to individuals and businesses that lack access to traditional banking. This sector is crucial for economic activities, particularly among low-income populations and small-scale entrepreneurs.
The financial system in Bangladesh is evolving, with ongoing reforms aimed at enhancing efficiency, inclusivity, and resilience, thereby supporting sustainable economic growth.
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