The banking system of Bangladesh has gone through several broad phases of evolution and growth since its inception. It started by offering a narrow range of financial services, just after independence, and remained largely non-competitive in structure for some time. Only the government controlled banks tended to open up new branches during this period.
Competitive reforms were introduced in the early 1980s to improve efficiency and the subsequent period, up until the early 1990s, was marked by privatization of banks and the entry of new banks in the private sector to enhance competition.
That was followed by a period of financial reforms and consolidation in the early 1990s, when a series of legal, policy, and institutional reforms tried to improve the process of financial intermediation and to ensure a more efficient allocation of financial resources.
Over the years, the industry improved its performance further by increasing their scope of activities, improving service quality, adopting new technology, and promoting social inclusion through CSR practices.
With regard to the change in governance, the enactment of new banking laws and prudential regulations brought changes in the banking sector.
Changes in size, market structure, activity, and technology have brought greater competition into the industry along with several novel challenges.
The intensive and continuously increasing competition has created a need for continuous access to information and evaluation of commercial banks on a regular basis.
The reforms injected more competition in the banking sector, with most banks increasing the range and diversity of their products and services. Nevertheless, a few state-owned banks still hold considerable market share and influence in the industry.
Information sharing and analysis
In order to cope with the growing changes, it is crucial for bankers and other stakeholders to have access to reliable information.
Evaluating and reviewing the financial health, product developments, changing process, operations, and drivers of banking industry become indispensible with the increasingly complex dynamics of the domestic and global banking industries.
Examining and analyzing detailed information on the trends, processes, changes, and challenges are critical for practitioners to rectify malpractice, to handle challenges and to undertake future course of action for greater efficiency.
Moreover, information sharing on critical banking issues can provide a backdrop for further research activities on related issues.
On Sunday, March 4, a two-day long Regional Banking Conference will be held for the first time in Bangladesh, to exchange and share knowledge, experience and research outputs on banking and related issues.
The Bangladesh Institute of Bank Management (BIBM) has been organizing the Annual Banking Conference as an information and knowledge-sharing forum targeting academics, researchers, and practitioners every year, and a large number of participants from home and abroad take part in the conference.
This time BIBM attempts to extend the same concept to cover the entire region, ie, India, Nepal, Bhutan, and Bangladesh.
The objective is to help banking sectors of the countries to come up with the relevant information necessary to keep up with a rapidly changing global banking environment.
The event would not have been possible without the participation and cooperation of our co-organizing institutions from Bhutan, Nepal, and India.
The topics of discussion will range from comparative banking practices to regulatory and supervisory issues, products, performances, opportunities, and challenges.
Challenges for Bangladesh
The Bangladeshi financial sector is largely made up of banks, with private commercial banks in particular dominating the market.
Banks here have been meeting the credit needs -- short-term and long-term -- of businesses and other drivers of economic activity, in the absence of more specialized and sophisticated financial institutions.
Product diversification and operational changes and improvements are visible in credit, trade operations, and Islamic banking operations of the country; and treasury activities improved to offer support to the asset-liability management and risk management practices in the banking industry.
However, it is crucial now to work towards market development to relieve banks from the burden of high volume of long-term loans in their portfolios.
In addition, internal control and compliance systems remain the weakest link that demands much more attention of the bank management.
With regard to human resource management, situation improved, however, more efficient performance evaluation system and employee development is the need of the time.
Especially, banks need to emphasize more on soft-skills of the employees for better outcome.
Asset quality in terms of non-performing loans remained a key concern of the banking industry of the country. The current liquidity management experiences of banks demand greater efficiency and attention of the bank management.
Especially, non-performing loans of state-control banks became a severe concern for the policy makers and other stakeholders. Moreover, financial crimes of different types are becoming worries for the banking industry, which is not very different in other economies. Incidences of trade based money-laundering are a growing concern for policy makers and central banks throughout the globe.
Compliance is already among the greatest concerns for the banks, and greater compliance requirements are affecting operational costs of trade financing.
The banks also faced disruption associate with correspondent banking relationship in response to insufficient compliances.
We believe that this regional conference will be an opportunity for us to better understand the current dynamics and also the road ahead, so we can choose the right direction for our economy and for our country.
Dr Shah Md Ahsan Habib is a professor and director (Training) at the BIBM