Dr. Atiur Rahman
Governor, Bangladesh Bank :
In the last few years, Bangladesh Bank has recalibrated its focus from traditional central banking to a comprehensive, all-encompassing effort at financial inclusion and financial stability. Indeed, we believe that as the banking system greases the wheels of the economy, the wheels will accelerate more smoothly the more well-oiled it is. At the end of the day we will have more inclusive growth process which is of course, our ultimate objective.
The banking sector in Bangladesh has grown several?fold since independence in 1971, in tandem with the uninterrupted spell of steady, stable growth of the country’s economy. Beginning as almost wholly state?owned sector making directed loans at prescribed interest rates, our banking sector has undergone successive rounds of major structural and regulatory reforms; transforming it to a vibrant private sector led market based banking system, largely shaking off the legacy of repayment default culture from the years of directed lending regime. BB has steered this transformation by continually promoting market development in a broadly stable monetary and inflation environment. Recognizing that the conventional short term business cycle focused monetary and financial policy approaches are failing to address the longer term needs of inclusivity and environmental sustainability, mandated by its charter to support output and employment growth besides protecting monetary and financial stability, BB stepped in with initiatives of imparting a deliberate directional bias in financing flows away from speculative and sustainability harming uses towards IT enabled inclusive financing of ‘green’ output initiatives.
The multifaceted financial inclusion initiatives of Bangladesh Bank are enhancing the intermediate target of reducing financial inequality with an ultimate objective of slimming income inequality down with job creation among the un-served and under-served population segments steadying the inclusive growth trajectory. Bangladesh’s sustained spell of steady real GDP growth, and her pioneering promotion of socially responsible inclusive, green financing is attracting widespread attention and interest of other countries and supra-nationals like the UN agencies, IMF and WB. It is my immense pleasure to recall in front of you that recently, Bangladesh Bank was awarded ‘the Alliance for Financial Inclusion (AFI) Policy Award’ for its contribution in substantial expansion of Mobile Financial Services (MFS) in Bangladesh. Very recently, I have been awarded ‘GUSI Peace Prize International 2014’ for my work in the field of economics focused on welfare of the poor. But this prize is not my personal achievement; rather this is a collective achievement. This credit goes to you all.
A countrywide massive modernization of the financial sector IT infrastructure including fully automated online settlement of paper based and electronic fund transfers, online credit information and supervisory reporting etc. have spawned exponential growth of mobile phone banking, vastly benefitting the underserved poor. The rapidly digitized banking enabled mobile financial services to encourage the women more to participate in the financial services narrowing the gender disparity down since it may not even require their physical presence in the financial institutions to receive financial services. BB is active in spearheading initiatives of putting in place and upgrading countrywide connectivity backbone for the interbank settlements infrastructure; individual banks will need to be correspondingly proactive in installing and upgrading their own IT platforms in line with rapidly growing and evolving needs. With the progress already achieved in online interbank settlements and in mobile telephony, banks can and should now move fast in expanding mobile phone/smart card based banking services reaching out to new depositor and borrower customers in rural and itinerant urban populations. Lately, a school banking program has been started to inculcate the savings habit among the youngsters. Also the initiative of opening bank account for street children is another milestone to enhance its financial inclusion program and bringing more unbanked people in its umbrella.
We are all aware that the most vital challenge for mankind is to save the world from environmental disaster. Bangladesh Bank has taken the lead in promoting environmentally benign innovations like harnessing solar energy, biogas, effluent treatment plant and Hybrid Hoffman Kiln for the brickfields as well as generating electricity from biogas, employing solar irrigation pumps and encouraging the banks to finance setting up of solar energy panels in households and business establishments.
At this point I would like to dwell briefly on enhancing the supervisory capacity of Bangladesh Bank, especially in the light of some recent financial irregularities in the state-controlled banks in particular which threatens to taint the image of the Bangladeshi banking system and its regulator. In the backdrop of these short-comings, the Bank has started introducing strategic changes in its existing supervision techniques for ensuring financial stability in the banking sector. As part of its effort at ensuring good corporate governance in bank management, monitoring has been enhanced in the areas of responsibility and accountability of the board of directors including the chairman, directors and the chief executives of the banks in financial, procedural, administrative and policy-related issues. Internal control structure of the banks have been sought to be strengthened and the process of risk identification, measurement and mitigation has been attempted to be streamlined in the light of international best practices. With the massive digitization of the Bangladesh Bank and the banking sector, it is expected that the existing and potential loopholes would be effectively plugged.
Ladies and gentlemen, our movement towards sustainable banking including financial inclusion ethos with inclosive and green banking along wth and mobile banking initiatives have already paid us well and the strategy will be blostered futher in the coming days. The results have been significant in the area of financial deeping, financial inclousion and financil stability.
The growth of broad money (M2) as proportion of gross domestic product (GDP) rose to 59 per cent in 2013 from 48 per cent in 2009 while the overall banking sector asset increased to 80 per cent from 59 per cent of GDP.
Besides, total credit to GDP ratio increased from 46 per cent to 55 per cent during the period under review.
On the other hand, total bank accounts including school and mobile bankings stood at around 84 million by the end of 2013 from only nearly 38 million in 2009. The number of bank branches per 1000 sq/km area increased to 59 from 48 during this period. The ATM penetration per 1000sq/km also increased to 35.5 per cent from just 8 during 2009-2012.
I believe all the critical issues of our banking arena would find place in the discussion of the conference. And, I hope the conference would help gather knowledge and generate ideas by the banking communities and researchers that would ultimately contribute in improving the performance of the banking industry of Bangladesh.
