Md. Saiful Islam Masum :
The economic narrative of Bangladesh is a captivating tapestry of progress and potential. Nestled in South Asia, this nation has not only embarked on a journey of development but has also demonstrated an unwavering commitment to fostering business growth and achieving economic advancement. Central to this journey is the catalytic influence of Non-Bank Financial Institutions (NBFIs), which have emerged as indispensable players in steering Bangladesh’s diverse sectors toward prosperity.
NBFI as ‘A Mosaic of Financial Complexity’, to appreciate the role of NBFI in Bangladesh’s economic landscape, one must first grasp the intricacies of its financial milieu. Bangladesh, like many developing nations, possesses a financial structure predominantly characterized by traditional banking institutions. These banks, while pillars of stability, often grapple with limitations in accommodating the multifaceted financial needs of a rapidly evolving economy.
NBFI, An Evolutionary Force, The emergence and evolution of NBFI in Bangladesh stand as a testament to adaptability and innovation. Over the years, these institutions have evolved from being mere financial intermediaries to becoming versatile entities that bridge critical financial gaps. Regulatory changes and milestones have paved the way for NBFI to thrive, facilitating a more diversified and inclusive economic landscape.
Here a statistical data is presented for the demonstration of the NBFI advancement. NBFIs’ total advances have been increased by Tk.91772 lac or 1.31 per cent to Tk.7123939 lac during Jan.-Mar., 2023 as compared to Oct.-Dec., 2022. Whereas, advances in public NBFIs increased by Tk.52166 lac or 5.43 per cent to Tk.1013688 lac and in private NBFIs increased by Tk. 39605 lac or 0.65 per cent to Tk. 6110251 lac during Jan.-Mar., 2023 .Total deposits (excluding inter NBFIs) of the NBFIs decreased by Tk.5386 lac or 0.12 per cent to Tk.4369878 lac during the Jan.-Mar., 2023 as compared to Oct.-Dec., 2022.
However, loans disbursement by NBFIs increased by Tk 917.7 crore in the January-March-2023 period compared with that in the previous quarter September-December-2022), according to Bangladesh Bank data. However, the total loans by the NBFIs increased to Tk 71,239 crore at the end of March 2023 from that of Tk 70,321 crore at the end of December in the past year.
In Catalyzing Business Expansion, NBFIs play pivotal role in Bangladesh. One of the foremost roles of NBFI in Bangladesh is to serve as a catalyst for business growth. While traditional banks tend to adhere to stringent lending criteria, NBFI offers alternative financing solutions that are often more accessible to small and medium-sized enterprises (SMEs). These agile institutions understand the nuances of businesses operating in diverse sectors, making them invaluable partners in expansion endeavours.
NBFI also trigger the most vital role in navigating diverse sectors. Bangladesh’s economic spectrum is rich and variegated, encompassing sectors as diverse as real estate, agriculture, and infrastructure development. NBFI has positioned itself as a pivotal player in these domains, providing tailored financial products and expertise. In real estate, for instance, NBFI have played an instrumental role in financing large-scale housing projects, fueling the nation’s urbanisation.
As a role-player in Fueling Economic Development, NBFIs also play the secondary role aligned with the Banks. The undeniable impact of NBFI in Bangladesh extends beyond individual businesses. These institutions have a broader mandate – to contribute significantly to economic development. By facilitating access to finance for the previously underserved segments of society, NBFI are champions of financial inclusion. This, in turn, helps alleviate poverty and spurs economic growth in both urban and rural areas.
NBFI in Navigating Challenges and Regulation face hit & dust and conquered immense success in the economic development of Bangladesh. However, it is essential to acknowledge that the journey of NBFI in Bangladesh has not been without its challenges. Managing risks, maintaining financial stability, and ensuring ethical conduct are constant concerns. Regulatory frameworks have been instituted to address these issues, reflecting the government’s commitment to fostering a responsible and sustainable financial ecosystem.
It widened up the new Horizon of Possibilities through various significant activities. Looking ahead, the prospects for NBFI in Bangladesh remain promising. The sector is poised for further growth, driven by innovation and technology. Digitisation of financial services and the advent of fintech are opening new avenues for NBFI to provide more efficient and accessible solutions to a wider audience. Moreover, as the nation continues to modernize and diversify its economy, the role of NBFI will become even more pronounced. NBFIs are undeniably playing a robust and multifaceted role in shaping the national economy of Bangladesh. Their contributions extend across various sectors, each with its own unique potential. Let’s delve into how NBFI are bolstering the economy and their potential sectoral contributions in Bangladesh:
NBFI are instrumental in providing financial support to small and medium-sized enterprises (SMEs) and microenterprises, which are the backbone of Bangladesh’s economy. They offer customized financing solutions, helping these businesses thrive, create jobs, and contribute significantly to GDP. The real estate and construction sectors in Bangladesh have witnessed remarkable growth, and NBFI play a pivotal role in funding large-scale housing and infrastructure projects. They provide the necessary capital for developers to build homes, offices, and vital infrastructure.
Agriculture remains a cornerstone of Bangladesh’s economy. NBFI contribute by financing agricultural ventures, providing farmers with the means to invest in modern equipment, seeds, and practices. This boosts agricultural productivity, reduces poverty, and ensures food security.
NBFI are actively involved in financing critical infrastructure projects, such as roads, bridges, and power plants. These investments enhance connectivity, promote industrialisation, and lay the foundation for sustained economic growth.
The consumer finance sector benefits greatly from NBFI, enabling individuals to purchase durable goods, vehicles, and homes. This boosts consumer spending, which, in turn, stimulates economic activity and employment. Industries focused on exports, like the textile and garment sector, rely on NBFI for working capital and trade finance. This support ensures the competitiveness of these industries in the global market, contributing significantly to foreign exchange earnings.
NBFIs are actively engaged in promoting financial inclusion by reaching underserved populations in both urban and rural areas. Through microfinance and digital financial services, they empower individuals and small entrepreneurs to access financial resources. NBFI are key players in capital market development. They facilitate initial public offerings (IPOs) and provide investment advisory services, encouraging individuals and institutions to invest in stocks and bonds, thus strengthening the capital market.
In recent years, NBFI have shown interest in financing renewable energy projects and green initiatives. NBFIs are embracing technology and partnering with fintech companies to offer innovative financial services. This includes mobile banking, digital payments, and online lending platforms, which enhance financial access and convenience.
Non-Bank Financial Institutions have become indispensable components of Bangladesh’s economic landscape. Their contributions span across sectors, from empowering SMEs and rural development to fueling real estate and infrastructure growth. As Bangladesh continues to march toward economic advancement, NBFI will remain pivotal in realising the nation’s full potential and ensuring a more inclusive and prosperous future.
In the intricate mosaic of Bangladesh’s economic development, Non-Bank Financial Institutions emerge as pivotal brushstrokes that add depth, color, and texture. Their catalytic influence in fostering business growth and driving economic advancement across diverse sectors is undeniable. As the nation marches forward with unwavering determination, NBFI stand as steadfast allies, ready to navigate the complexities of finance and propel Bangladesh into a brighter and more prosperous future.
(The writer is a banker and certified expert in Credit Management).