The gentleman had studied Economics at home and abroad. Having obtained a PhD, he teaches at a US university and works as an adviser to the Federal Reserve Bank. He was meeting with friends and colleagues who are teaching at various public and private universities in Bangladesh.
While discussing challenges facing the Bangladesh financial sector, the gentleman politely asked a question: “I know many of our professor friends are engaged with the financial sector here, how far could they be blamed for the dismal picture of the financial sector?”
More than most countries, we have seen many public university professors or teachers appointed to advise and lead state owned banks and regulatory bodies in Bangladesh. Their numbers have increased many fold in recent years, especially during the present government.
Though primarily political appointees, many of them are or were very good academics. But has their engagement done much to help state banks improve their overall situation? Could they help in reducing the classified loans? Did they help to manage risks better? Did they improve employee development or reform the “system, process and platform” of state banks?
There are few answers to these questions with which we can be happy. Profitability, return on assets, and employee productivity show little or no improvement overall.
So why was this group of people appointed then? I was told they were active in politics or to be more precise and simple, their posts were typically rewards for their political loyalties.
The opposition, many said, did exactly the same while they were in power and are likely to do so again if they come to power in future.
Rather than being the outcome of a thoughtful process then, such appointments are more politically motivated practices.
This is not the case in other developing countries where good teachers and economists are expected to first and foremost teach well, conduct research, contribute to policy planning and influence growth strategies and opinion in favour of good governance, accountability and distributive justice.
Commercial enterprises are left with professionals, more commercially driven persons who can drive profitability, protect capital, improve service delivery channels and develop customized products to suit the emerging needs of their clients and market.
We have seen the opposite happening in our own state owned commercial banks and regulatory bodies. In the name of financial inclusion, many of the seniors are forcing the banks to divert attention from their hard core commercial functions.
The real meaning of financial inclusion being is distorted. Many are championing the Bangladeshi definition or their own political definitions of financial inclusion, inclusive growth or sustainable development.
Bank coffers are being used to ego massage top advisers or serve the political purpose of the government.
As a consequence, many of these banks are bleeding profusely. We have not adequately prepared them to be sustainable through rainy days, or to increase their profitability through booking good clients. Insufficient work has been done to improve their IT and management information systems.
The attraction of talent and establishment of a respectable risk management culture in these banks has been left secondary to other purposes. Political appointees have not helped professionalise structures or to develop the local management or “in-house” talents.
Most of the banks are managed by a half engaged board or, more precisely, disengaged chairmen. With other priorities in their lives, they are not adequately committed to building successful organisations.
Another downside of political academic appointees is that our future generation of students are deprived from good teaching from these professors.
Like any other developing country or transition economy, we need hard core professionals to be engaged in running commercial enterprises, including the state owned banks.
In order to drive private sector led growth in this globalised world, our professionals need to be properly motivated, highly accountable and adequately empowered to bring in respectable changes in the way we run our public enterprises.
To discover better examples for managing the state’s stake in the financial sector, we would not have to search far: China, India or at times the supposedly “failing” Pakistan will serve as fine examples.
