Finance and Planning Minister Amir Khosru Mahmud Chowdhury announced that the government is exploring alternative sources of financing to restructure the country’s financing framework. He highlighted growing interest from foreign investors, including major US investment banks JPMorgan and Goldman Sachs, in Bangladesh’s capital market. The minister made these remarks at a luncheon titled “Building Investors Confidence: From Policy Reform to Effective Implementation,” organized by the American Chamber of Commerce in Bangladesh (AmCham) at a city hotel.
Shifting Away from Traditional Banking
Khosru noted that Bangladesh’s industrial and commercial sectors have become overly dependent on the conventional banking system, which is not suitable for a modern economy. He emphasized that commercial banks typically collect short-term deposits but provide long-term loans. Instead, large-scale investments should be financed through the capital market.
He stressed that the global financial architecture is changing rapidly, and Bangladesh remains heavily dependent on bank financing. Therefore, the government is exploring alternative financing sources and redesigning the financing structure for the future.
Exploring New Financial Instruments
The minister said the government is looking beyond traditional development partners such as the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB) to explore new financing sources. He noted that alternative financing will be crucial to achieving the goal of building a $1 trillion economy by 2034.
Khosru highlighted that many countries have long been using a wide range of financial instruments, but Bangladesh has failed to utilize them effectively. He mentioned that bond financing often costs less than bank borrowing, and equity-based financing offers significant opportunities. Such instruments could help reduce the overall cost of financing.
Reforms and Challenges
Expressing optimism about the capital market, Khosru said reforms at the Bangladesh Securities and Exchange Commission (BSEC) and changes to capital-market regulations have encouraged both domestic and foreign investors. However, he noted that the country’s market capitalization remains small, and more companies need to be encouraged to list on the stock exchanges.
He also highlighted challenges facing the banking sector, including capital shortages, money laundering, and high levels of non-performing loans. The minister said recapitalization of banks is extremely important and that the government is trying to address the problem through a combination of government support, rescue funds, and other recapitalization measures.
