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'Ethical crisis is destroying the financial sector'

  • Published at 10:47 pm December 21st, 2017
  • Last updated at 01:08 am December 22nd, 2017
'Ethical crisis is destroying the financial sector'
Noted economist Prof Rehman Sobhan has said ethical crisis in banking system has been destroying the competitiveness of the financial sector in Bangladesh. Prof Sobhan blamed the failure of the regulatory system and political patronage in access to credit for the crisis. He was addressing the inaugural session of three-day 20th Biennial Conference of the Bangladesh Economic Association (BEA) in the capital on Thursday. Professor Rehman Sobhan, late Dr Mahbub Hossain and Professor Dr Asraf Uddin Chowdhury were awarded Bangladesh Economic Association Gold Medal Award 2017 for the outstanding contribution in Bangladesh economy through their activities and research and writings. He said the financial sector was characterized by wide disparities in access to credit. “If you look about the functioning of the credit market, it begins with the fact that they operate on the basis of privileged access, where you go to bankers or a bank owner who you know or with whom you are politically connected.”
Also Read- Prof Rehman Sobhan: We live in an elite-dominated deeply unjust society 
“The system as it works in Bangladesh is now getting deeply integrated with the political economy of society. The economy has now gotten into a situation where the perpetuation of debt default has in fact been ingrained in business practices… it is destroying the competitive nature of financial system, because when you have got perpetuated default then the cost of credit is not the same for every borrower, depending on the nature of the default,” he said. Prioritizing the need of low-income groups’ access to bank borrowing, Prof Sobhan said there was no reason why these people should not have the access. “They are the ones who are most ethical in servicing their debt liability,” he added. “We suffer from the perverse and totally unethical situation where the biggest defaulters tend to be the elite, and the most credible debt service agents are low-income households.” Prof Sobhan also said that if ethics is not taken into consideration, and only market competitiveness is considered, a significant amount of macrocredit should relocate from the elite into the hands of the low-income people and small and medium enterprises. Speaker of the parliament Dr Shirin Sharmin Chaudhury, who was present as chief guest, said by integrating morality in framing economic policies, Bangladesh can build a poverty and discrimination-free society. “In the global economy, discrimination still exists largely and the Millennium Development Goals did not put much emphasis on removing disparity. But in the Sustainable Development Goals it is incorporated to ensue equality,” she added.