Business
MFS transactions record breached again in April; number of accounts now 26.5 crore
Mobile Financial Services, adopted by Bangladeshis across social strata like ducks to water, continue to grow in volume as more and more financial transactions in the country take place over the platform.The latest statistics on MFS from Bangladesh Bank reveal that Tk1.25 lakh crore was transacted through licensed MFS in April this year. This figure is a record for the volume of monthly transactions, even without the amount transacted over Nagad, which was still offering a similar kind of service in April, but without an MFS license.
Also read: MFS transforming money transactions in Bangladesh, soon to cross Tk. 1 trillion
Adding Nagad’s amount increases the total transacted in April up to Tk1.54 lakh crore. It means on average Tk 5100 crore everyday was being transacted through this digital platform in April. MFS is growing gradually, the BB report states, with typical understatement.
The number of customers is increasing along with transactions in mobile banking. Currently, 13 banks are providing MFS under the names of bkash, Rocket, Ucash, MyCash, SureCash.
Also read: BB re-fixes MFS money transaction limit to ease payment during Eid
At the end of April 2023, the number of customers, or more logically the number of registered accounts with MFS stood at 26.5 crore. This includes the Nagad customer base, after it finally registered as a non-bank financial institution just recently.
Also read: Fintech MFS: Best Mobile Financial Services in Bangladesh
The number of mobile banking agents, meanwhile, has reached 15.55 lakh this time.
‘De-dollarisation’: Bangladesh, India to trade using taka, rupee from September
A silent revolution is underway, as Bangladesh and India will start using Indian rupee and Bangladeshi taka for trade purposes from September 2023.
At the same time, Bangladesh Bank will introduce a debit card called “Taka Pay Card”, through which people can withdraw taka or rupee. People who travel to India will get the facility of paying through this card, said the central bank Governor Abdur Rouf Talukder recently.
Also read: Bangladesh Bank yet to allow Indian rupee in foreign trade
He said, people going for treatment, students, and businessmen will benefit from this system and they can avoid using the US dollar.
From September, India and Bangladesh will open LCs for import and export, using the Indian rupee and Bangladeshi taka.
Also read: “Use rupee, taka”: India asks exporters to refrain from trading in dollars with Bangladesh
Until now, rupee was converted into dollar, and that was converted again into rupee; the same was done with taka.
As a result, Bangladeshi and Indian citizens were losing at least six percent of rupee or taka. As the new system provides for the direct rupee to taka or taka to rupee conversion, no party will be affected, Bangladesh Bank sources said.
Also read: Bangladesh-India: Better cooperation to ensure more trade benefits
The offer was from the Government of India, and Bangladesh accepted it. This will eliminate use of US dollar from trade and personal travel purposes.
IBBL gets new chairman
Ahsanul Alam has been elected as the chairman of Board of Directors of Islami Bank Bangladesh Limited (IBBL).
The decision to elect a chairman was taken at the 324th meeting of the Board of Directors of the bank on Monday, said a media release signed by Nazrul Islam, senior vice president of the bank.
Also: Tk 30,000cr loan from Islami Bank: HC asks S Alam Group to explain reports
Ahsanul is the son of Saiful Alam, chairman of S Alam Group, which has controlled IBBL since 2017.
After completing Bachelor's degree from University of Bradford and Master’s in Business Administration (MBA) from Edinburgh Napier University, United Kingdom, he performed duty as chairman of the Board of Directors of Union Bank Limited.
Also read: Scam-hit Islami Bank earns operational profit in 2022, Basic Bank reports loss
Currently he is the chairman of Hasan Abasan (Pvt.) Limited, S Alam Group's flagship real estate company based in Chattogram, and managing director of a number of other companies controlled by the group, including Artsy Holdings Limited, Shining Assets Limited, Affinity Assets Limited, Wesco Limited, Marina Assets Limited and Kraft Holding Company Limited.
Also read: BB disburses Tk 4000 crore as liquidity support to 5 Islami banks
He is also a director of SS Power-I Limited, the country's largest privately-owned thermal power plant located in Banshkhali. Ahsanul is a prominent businessman in the textile, garment and trading sectors.
Also read: Scam-hit Islami Bank earns operational profit in 2022, Basic Bank reports loss
He has already been conferred with the highest taxpayer from Chattogram award twice.
BHBFC-AFD hold bilateral meeting on green-featured buildings
The Bangladesh House Building Finance Corporation (BHBFC) and France based development partner The Agence Française de Développement (AFD) held a bilateral meeting on Sunday.
The meeting was held at the BHBFC Bhaban in the capital, said a press release.
The board chairman of the organization, Professor Dr Md. Salim Uddin FCA, FCMA was present at the meeting as chief guest.
BHBFC Managing Director Md Abdul Mannan presided over the meeting.
In the meeting different aspects of financing in constructing affordable and green-featured buildings were discussed.
AFD Task Team Leader of Financial System Division Marie Rale and Thomas Josselin and AFD Bangladesh Office Project Officer Tamanna Binte Rahman participated in the discussions.
Ex-governors optimistic MPS can claw back inflation, implementation the key
Two ex-governors of Bangladesh Bank with divergent viewpoints are viewing the H1 Monetary Policy Statement (MPS), applicable to the first half of the 2023-24 fiscal, as a routine response to the call for moving towards a market-based interest rate, towards a unified exchange rate and efforts to curb inflation.
Dr Atiur Rahman, who served as the 10th governor of Bangladesh Bank from 2009-16, told UNB that the rise in the policy rate by 50 basis points (0.5%) would make credit costlier for the banks from the central bank, which would be passed through to borrowers. This will help the central bank mop-up excess liquidity from the market.
Also read: Contractionary monetary policy announced to curb inflation
“Both broad money in circulation and private sector credit growth have been reduced to make the monetary policy look contractionary,” he said, comparing the policy to others in the region. “This is certainly a move in the right direction as many of our neighbouring central banks like RBI and Bank of Thailand have been pursuing such contractionary policy for quite some time achieving inflation rates of 4.3 percent and 2.7 percent respectively.”
“Indeed, inflation is essentially a monetary phenomenon and should be treated as such,” Dr Atiur said, quoting the quantity theory of money, according to which prices vary in proportion to the money supply.
He said the current monetary policy of Bangladesh tries to make credit costlier by raising both policy rates and providing flexibility in setting interest rates based on a reference rate plus a margin of 3 percentage points that banks can add on.
Also read: Bangladesh Bank to announce new monetary policy tomorrow, 9% interest rate cap to be withdrawn
The broad money and private credit growth rates have been reduced to reduce the money supply in the market. If implemented well, Dr Atiur said, this monetary policy will give a proper signal that the central bank is willing to use the tools at its disposal to address inflation which has been rising persistently.
The monthly inflation rate in May soared to a decade-high of 9.94%, up from 9.24% in April, according to the Bangladesh Bureau of Statistics (BBS). Dr Atiur supports the move to come away from the previous policy setting a ceiling on the interest rate.
“Interest ceiling was not a well-designed policy. When inflation crossed this ceiling rate, large entrepreneurs started getting loans at negative real rates of interest. This encouraged the willful borrowers to take more loans, not necessarily for productive investment. The risk of a rise in non-performing loans increased in the process,” he added.
Also read: Central bank to announce new monetary policy soon with focus on macroeconomic stability
He noted that the interest rate cap (ceiling) has been removed partially - the central bank will still have control over the reference rate, which it said will be based on the average interest rate of the six-monthly treasury bond.
“The auctions of this bond are managed by the central bank. Yet, this is a step forward in the right direction,” he said.
“The central bank will continue to print money as the public borrowing will increase by three percentage points. There is nothing wrong in it if the government spends this money for productive development projects instead of salaries or other unproductive activities,” Dr Atiur said.
Also read: CPD dismisses budget's projections on growth, inflation, revenue collection
As for the foreign exchange market, Dr Atiur believes it will stabilise once the single, unified exchange rate is rolled out as there would be less speculation in the forex market. Instead, there will be more competition in the market and the exchange rate will vary within a band (up to 2 percent) as stipulated by the Foreign Exchange Act.
Dr Atiur hopes Bangladesh Bank will guide the foreign exchange market to remain competitive.
His immediate predecessor as governor of the central bank, Dr Salehuddin Ahmed, also said the contractionary monetary policy should help to reduce inflation.
Also read: Market-based interest rate, unified exchange rate from July: Bangladesh Bank
He too expects neither the interest rate nor the exchange rate to be fully market-based as Shapla Chottor would continue to exercise indirect control through its reference rate.
Dr Salehuddin also doubts the inflation rate would ultimately be curbed due to concerns over proper and independent implementation of the monetary policy statement within the current climate.
First Bhutan Trade and Investment Fair to begin June 23
The Royal Bhutanese Embassy in Dhaka is organizing the first Bhutan Trade and Investment Fair 2023 from June 23-25 at the Shooting Club in the capital Gulshan.The event is being organized in collaboration with the Ministry of Commerce, Industry and Employment, and the Ministry of Agriculture and Livestock, Royal Government of Bhutan, supported by the Bhutan Country Office of Food and Agriculture Organization, according to a press release on Monday.
Also read: Bangladesh's role in Bhutan’s socio-economic dev immense: EnvoyThe investment fair is organized with the primary objective to further facilitating the implementation of the provisions of this for the mutual benefit of the people of the two countries, it said.Themed “Bridging the Gap Between Investors, Producers, Traders and Consumers for Made in Bhutan and Grown in Bhutan”, the fair will provide a platform for businesses, entrepreneurs and service providers of the two countries to build networks, explore opportunities, and strengthen trade and commercial relations, it also said.
Also read: Bhutan Travel Guide: Best places to visit, interesting things to doCommerce Minister Tipu Munshi will attend the inauguration of the fair, as the chief guestOn the sidelines of the fair, experts from Bhutan will also organize seminars at the fair venue on investment opportunities in Bhutan, in general, and agri-food systems in particular, said the release.About 25 companies from Bhutan will be participating in the fair, showcasing a wide range of, made in Bhutan and grown in Bhutan, products. Detailed information can be found on the website www.bhutantradeshow.com
Also read: Cabinet okays Bhutan's use of land and sea portsBhutanese Ambassador Rinchen Kuentsyl, Trade Counselor (Trade) Kencho Thinley, Political Counselor Jigdrel Y Tshering, Finance Counselor Tshering Choki and Second Secretary Pema Seldon, were present during a press meet arranged to give details of the fair.
Time-befitting policy needed to utilise potentiality of tannery sector: BTA President
President of Bangladesh Tanners Association (BTA), Md. Shaheen Ahamed, said on Monday that despite immense potentiality of earning foreign exchange from the leather sector the tannery industries have remained backward for lack of time-befitting policy.
The entrepreneurs of the tannery sector faced loss and struggled to survive at Savar Tannery hub where the factories have been shifted without developing necessary infrastructures including an inefficient waste management plant, he said.
Shaheen made the statement in a seminar on "Actions for Sustainable Development of the Leather Industry” jointly organised by the Economic Reporters’ Forum (ERF), BTA, and The Asia Foundation at the ERF Auditorium on Monday.
BTA President Md. Shaheen Ahmed, and Rehena Akter Ruma, head of projects and program of BTA, presented a keynote paper on the overall situation of the tannery sector.
Kazi Faisal Bin Seraj, Country Representative of The Asia Foundation, Ferdaus Ara Begum, CEO of BUILD, Tariqul Islam Khan, Managing Director, Marsons Tannery Ltd, ERF president Refayet Ullah Mirdha and its secretary Abul Kashem, among others, spoke on the occasion.
Read: Treat tannery wastes properly to export leather to EU, US: Speakers
Shaheed said around 40 lakh cows and 45 lakh goats are expected to be sacrificed during the Eid-ul-Azha later this month in the country, and Tk 50,000 to 55,000 crore will be the turnover in the sacrificial animal market.
He said on average the market value of raw hide of a cow of 22 square feet is estimated at Tk 850.
“Other processing will cost Tk 1900. The price of the finished leather is Tk2750. It is possible to make 10 pairs of good quality shoes in the local market or exportable items at an estimated price of Tk50,000,” he said.
Read: Speakers press for compliance in labour rights to develop tannery industry
Shaheen said foreign investors and local entrepreneurs can invest more in the potential leather industries if the government strengthens policy support and ensures global standard waste management plants.
Read more: Speakers press for timely implementation of tannery sector compliance work plan
FBCCI and Faction sign MoU to boost research, innovation
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the apex trade body of Bangladesh, and Faction, a US-based company, have signed a memorandum of understanding (MoU) to enhance cooperation in establishing the FBCCI Innovation and Research Center.
FBCCI President Md. Jashim Uddin and Faction Co-Founder Max Garza III signed the MoU on behalf of their respective organisations yesterday at the Bengal Commercial Bank head office in the capital.
Read: Rationalize public sector borrowing to encourage private borrowing: DCCI President
Distinguished attendees at the signing ceremony included FBCCI Senior Vice President Mostofa Azad Chowdhury Babu; Vice Presidents M A Momen, Md. Amin Helaly, Md. Habib Ullah Dawn; Acting Secretary General Ambassador Mosud Mannan; and Chief Executive Officer of the FBCCI Innovation and Research Center, Bikarna Kumar Ghosh.
The FBCCI president said, "Bangladesh is moving towards digitization. We must ensure the maximum use of technology to build a developed Bangladesh by 2041, as announced by the Prime Minister. At the same time, country's businessmen must increase capacity to work with the government on the policy level with the problems and possibilities of the private sector.” The collaboration between FBCCI and Faction in the domains of innovation and research will significantly benefit the business landscape of Bangladesh, he added.
Read: Contractionary monetary policy announced to curb inflation
Instead of adopting a "one product, one policy" approach, focus must be on sector-wise policies to encourage product diversification. Innovation and research should be prioritised to foster differentiation among various sectors and clusters, the FBCCI president added.
Md. Jashim Uddin noted that these initiatives with Faction aim to establish linkages between universities, students, and organisations in both countries. By leveraging the expertise and knowledge-sharing between the best universities and institutions in the United States and Bangladesh, both nations will reap substantial benefits.
Read: IDRA appoints observers for Sun-Life, Progressive Life Insurance
Faction Co-founder Max Garza III expressed his enthusiasm for the partnership and acknowledged the immense potential for mutual growth. He stated that the collaboration between Faction and FBCCI would not only benefit Bangladesh but also contribute to the advancement of research and technology worldwide.
Rationalize public sector borrowing to encourage private borrowing: DCCI President
President of Dhaka Chamber of Commerce and Industry (DCCI) Barrister Md. Sameer Sattar said on Sunday that a contractionary Monetary Policy Statements (MPS) will help to revive the financial and private sectors.
The MPS primarily aims to curb inflation by reducing the aggregate demand in the economy, continuing supply-side interventions and a stable and favourable business environment, he said in response to the declared Monetary Policy for the first half of the fiscal year 2023-24 (July-December 2023) by the Bangladesh Bank.
The repo and reverse repo have been adjusted to 6.5% and 4.5% respectively to control inflation by reducing the money supply.
However, the effectiveness of these instruments of controlling inflation is yet to be seen. Because reverse repo was raised earlier but inflation did not decline as expected.
Read: NBR-private sector partnership crucial to achieve high revenue target: DCCI President
MPS showed that the lending rate cap of 9% has been lifted. However, the lending rate will be determined based on a new policy termed as “Short-Term Moving Average Rate (SMART)”.
As a result, the interest rate on bank loans may reach double-digit which may trigger manifold challenges for the survival of businesses in the current volatile geo-economic situation as well as provoking inflation. Lifting the cap of lending rate and introducing the SMART policy may also increase the cost of doing business for CMSMEs.
The public sector credit growth has been set at 43% for July-December of FY24, which was 40% in January-June of FY23. On the other hand, the private sector credit growth has been set at 10.9% for July-December of FY24, which was 11% in January-June of FY23. It is apparent that private sector credit growth has slowed down due to the current geo-economic uncertainty.
Read: DCCI urges industrialists to setup factories in EZs for uninterrupted power supply
DCCI President believes that the target set for public sector credit may limit the scope for private sector borrowing.
“To reduce public sector borrowing, efficiency and good governance must be ensured by adjustment in government spending through austerity measures, rationalization of government expenses and prioritization of development projects,” he said.
He also underscored enhancing tax revenue to reduce the public sector borrowing from the banking sector.
Regarding exchange rate stability, Barrister Sattar agrees that a unified exchange rate will stabilize the market. However, strong monitoring should be in place by the Bangladesh Bank so that it is properly maintained.
Read: Bangladesh economy is growing to offset global challenges: Speakers tell DCCI seminar
Reduction of ERQ encashment limit to 50% and increase of interest of EDF to 4.5% are necessary moves to mitigate the foreign exchange challenges.
To enhance remittance inflow in the country, Bangladesh Bank needs to be very stringent to discourage the informal channel of inward remittance like Hundi.
Barrister Sattar was hoping for solid recommendations from the Bangladesh Bank to deal with Non-Performing Loans (NPLs).
This is because maintaining low NPLs and ensuring good governance in banks and financial institutions are critical for maintaining financial sector stability.
"We hail Bangladesh Bank and the Government of Bangladesh for the formation of a committee to review the existing Bank Company Act 1991 to propose effective resolution to the growing NPLs,” he said.
Since growing NPLs is limiting the private sector credit and in turn, stalling private sector growth, Barrister Sattar feels that stern measures for quick loan recovery should be brought into place.
In connection, he said, Bangladesh Bank can identify and pinpoint the exact reasons, focusing on habitual defaulters, and start engaging with various institutions and stakeholders in order to work towards reducing the current backlog in recovery cases along with quick reforms to introduce ADRs in an effective manner.
Contractionary monetary policy announced to curb inflation
Bangladesh Bank (BB) on Sunday announced a tight monetary policy statement (MPS) for July-December of FY24, lifting the interest rate cap and giving priority to taming inflation and stabilising the exchange rate.
Governor Abdur Rouf Talukder announced the new monetary policy in a press conference at Jahangir Alam Conference Hall, at 3pm. Chief Economist Dr Md Habibur Rahman gave a presentation on the new MPS highlighting the different measures relevant to the macroeconomy.
The governor said, “The BB adopted a contractionary monetary policy to bring down the rate of inflation to a desired level, while remaining supportive to investment and employing generating.”
The central bank has finally removed the lending interest rate cap along with increasing the policy rate (repo rate) by 0.5 percent from July this year from the present 6 percent, in order to control money flow and reduce consumptions, said the BB governor.
Read: Proposed budget for FY 2023-24 fails to address macroeconomic challenges, says CPD
Though it is a contractionary monetary policy, the central bank will ensure money flow for agriculture and rural credit to ensure food production and employment, Rouf said.
These measures are usually adopted to control inflation to bring macroeconomic stability and cut demand.The interest rate cap of 6 percent on deposits and 9 percent on lending(deposit-lending) ended, replacing it with a market-driven smart reference rate, which will be regulated by the average treasury bills rate.
As per the smart rate formula, adopted in the monetary policy, the reference rate will be calculated as the six-month moving average rate of treasury bills with a 3 percent margin for banks and a 5 percent margin for non-bank financial institutions.
Read: RMG exports growth over 10% in first 11 months of FY2022-23
Currently, the rate of the 6-month treasury bills stands at 7.10 percent, so the maximum lending rate for bank loans will be 10 percent plus, and for NBFIs 12 percent plus.
Governor Abdur Rouf said the monetary policy focused on interest rates in order to control the growing inflation, which was created by external effects.
In reply to a query, he said a stable exchange rate and standard foreign exchange reserves are the challenges of this monetary policy.
The MPS has projected private sector credit growth of 11 percent in FY24 from 14 percent in FY23, and public sector credit growth to 30 percent from 37.7 percent.
Read: Bangladesh Bank to announce new monetary policy tomorrow, 9% interest rate cap to be withdrawn
Deputy Governors, executive directors, and different department heads were also present at the press conference.