Safety concern deters banks to invest in long term projects
REPORT in a national daily on Friday said most banks are on back foot in financing infrastructure projects. It said they do not feel comfortable to offer long term loans that run over years while banks’ commercial loans at beast run over 5 to 7 years, according to a study report released by Bangladesh Institute of Bank Management released on Thursday. It said nearly 91 per cent banks are uncomfortable with long-term projects due to asset-liability mismatch. Such financing is usually risky with depositors’ money while lack of long-term sources of funds such as bond, insurance fund, pension fund dissuades banks from going into risky infrastructure ventures.
Need no mention that the banking sector in Bangladesh is not well organized. It is beset by huge default loans that big business house and wealthy people are beholding while most banks are suffering from internal mismanagement and liquidity crisis. To be able to finance big infrastructure projects banks must have big resources but most banks were stolen in the past years by people having political links with the government. Private Banks’ sponsors also mutually laundered them showing fake project documents against fictitious loan. Most non-bank financial institutions were also stolen by top management officials. They are now trailing in dire situation.
We must say it is good sign that multilateral, bilateral or other foreign agencies are now financing more than half the country’s infrastructure projects. But these are adding financial risk to the nation’s future loan liability. In this context local commercial banks now only support 29.40 per cent financing and we must say it must increase. Here we may explore using the foreign currency reserves now spilling over $41 billion in the central bank. We would say immediate steps must be taken to increase bond market and funnel pension funds to infrastructure financing. It however needs some sort of regulatory support to address the risk issues.
We would say there should be a new look at mobilizing banks funds for infrastructure financing at a time we trying to attract more foreign investment to build infrastructure to fix our roads and ports to support external trade. But a highly corrupt dysfunctional government which has only witnessed bank laundering and capital flight by party leaders and top bureaucrats missed the point. We need change to bring change.
Need no mention that the banking sector in Bangladesh is not well organized. It is beset by huge default loans that big business house and wealthy people are beholding while most banks are suffering from internal mismanagement and liquidity crisis. To be able to finance big infrastructure projects banks must have big resources but most banks were stolen in the past years by people having political links with the government. Private Banks’ sponsors also mutually laundered them showing fake project documents against fictitious loan. Most non-bank financial institutions were also stolen by top management officials. They are now trailing in dire situation.
We must say it is good sign that multilateral, bilateral or other foreign agencies are now financing more than half the country’s infrastructure projects. But these are adding financial risk to the nation’s future loan liability. In this context local commercial banks now only support 29.40 per cent financing and we must say it must increase. Here we may explore using the foreign currency reserves now spilling over $41 billion in the central bank. We would say immediate steps must be taken to increase bond market and funnel pension funds to infrastructure financing. It however needs some sort of regulatory support to address the risk issues.
We would say there should be a new look at mobilizing banks funds for infrastructure financing at a time we trying to attract more foreign investment to build infrastructure to fix our roads and ports to support external trade. But a highly corrupt dysfunctional government which has only witnessed bank laundering and capital flight by party leaders and top bureaucrats missed the point. We need change to bring change.
