Ease fund sourcing for non-banks

Ensuring good governance and easing liquidity sourcing are necessary to bring back the good days for the non-bank financial institutions (NBFI), said experts yesterday.

There is no doubt over the fact that the NBFI sector is suffering from a liquidity crunch for the malpractices of a few companies, said Shamsul Alam, state minister for planning.

So, Bangladesh Bank should think of ways to provide support to the sector, he said.

The bond market can be a good source of funding, so it should be strengthened, he added.

His comments came in a meeting organized by the Bangladesh Leasing and Finance Companies Association (BLFCA) and Daily Bonik Barta in Pan Pacific Sonargaon Dhaka.

The meeting was a part of Bangladesh's first-ever daylong NBFI Fair, inaugurated by Industries Minister Nurul Majid Mahmud Humayun and in which 15 NBFIs participated.

Alam said the NBFIs play an important role in providing loans to small and medium enterprises (SME) and non-government organisations while the SME sector was a major engine for creating jobs.

"So, we should stand beside the NBFI sector in their crucial time," Alam added.

Bangladesh Bank Deputy Governor Ahmed Jamal said the NBFI sector was passing a period of crisis.

If the NBFI sector had the strength, it could have met all the nation's demand for long term loans, which would have given relief to the banking sector, he said.

However, now the banking sector was suffering for giving out long-term loans whereas the leasing companies were formed to specifically give out such types of loans, he said.

The NBFI sector needs to ensure good corporate governance for their own safety. But the challenge is that some of the NBFIs did not even properly maintain their accounts, he said, adding "even a shopkeeper maintains an account".

Ensuring good governance, internal discipline, proper liquidity management and risk management is necessary for the NBFI sector, Jamal added.

The Bangladesh Securities and Exchange Commission (BSEC) launched a corporate governance code for all listed companies that ensures the proper culture, said BSEC Commissioner Shaikh Shamsuddin Ahmed.

But banks and NBFIs do not abide by it, reasoning that there was no such directive in the banking companies act, he said.

There should be more collaboration among the regulatory bodies, he opined.

Independent directors can play a vital role for the betterment of a company and so the BSEC is working on employing these directors in proper ways, he added.

The NBFI sector's contribution to the economy is huge but they are now suffering for some wrongdoings of a few companies, which has led to a drop in lending and deposit collections, said BLFCA President Mominul Islam.

"In India, the government provided liquidity support in many ways, so their contribution was higher. But Bangladesh Bank could not provide any liquidity support to the NBFI sector due to some legal barriers," he said.

Islam, also managing director of IPDC Finance, recommended bringing foreign financial institutions to boards, easing issuance of bonds, allowing savings deposit through debit cards or digital wallets, and fixing a percentage of loan that banks can give out for the long term.

Anis A Khan, former chairman of the Association of Bankers, Bangladesh; Arif Khan, vice chairman of Shanta Asset Management, Mamun Rashid, senior partner of PwC Bangladesh, Md Mofizur Rahman, managing director of SME Foundation, and M Jamal Uddin, CEO and managing director of IDLC Finance, also spoke at the event.