“The banking system has expanded but the capacity of the Bangladesh Bank to supervise has not as the appropriate human resource empowerment is missing. “
Former Governor of Bangladesh Bank (1998 to 2001) Dr. Mohammed Farashuddin was born in Habiganj in 1942. He obtained his Ph.D. degree from Boston University and is the President of the Board of Directors of East West University. His career spans 44 years, of which 18 years was spent teaching Economics at the University of Dhaka and at East West University. During the period of 1972- 75, Dr. Farashuddin worked in the Ministry of Finance and Planning and in the Prime Minister’s Secretariat. During the period 1984-1995, Dr. Farashuddin worked in Iran, the Philippines and Maldives. After returning to Bangladesh in 1995, Dr. Farashuddin initiated and led the establishment of East West University with a view to opening the door of a high quality modern and scientific education for the students of the middle class families at reasonable costs.
Is Bangladesh is an overbanked country?
Bangladesh is not an overbanked country rather this view has been propagated by the existing bankers as they want restriction of new entry. Curbing entry is quite a common phenomenon in the market economy. Nevertheless, the statistics shows that on an average, one branch of Bangladesh serves 21000 people but in India, the number is 15000. Therefore, what Bangladesh needs more are branches, not new banks.
We need to shed light on the issue of the distribution of these branches. Number of people per branch in the urban areas is less than that of villages. Due to better transportation and the outreach of technology, lives of villagers have become more dynamic than ever before and for this, banks need to spread their wings to cover more rural outposts to bring more unbanked people under the umbrella of formal banking facilities.
How would you rate Bangladesh’s progress from a ‘basket case’ to middle-income country?
The country is developing: our per capita income, which was $ 170 in 1990, is now $ 1130. In terms of social indicators, our achievements have received kudos. But we need to remember that without sustainable development, our progress will be short-lived. In fact the banking system of Bangladesh is given much less credit that it deserves: a lot of criticism is there but it is growing under the circumstances which is better than many other countries.
Bank deposits are experiencing growth but the spread of this growth is an issue. The lending rate compared to the rate being provided by these deposit accounts is also something to be worried about. The deposit mix comprises of STD/SND accounts, low interest Savings or Current accounts and Fixed Deposit accounts (FDRs). Most banks are currently providing FDR rates in between the 7-10% range where these accounts are taking up 35% to 40% of the deposit mix. The other accounts which make up for the larger portion of the deposit mix are only offering 3% to 5% interest rates. Compared to these rates, loans and advances are being given out at much higher rates which can be in the range of 14-18%. This paints an imbalanced picture in the banking scenario.
The banking system has expanded but the capacity of the Bangladesh Bank to supervise has not as the appropriate human resource empowerment is missing. They have endorsed autonomy in the industry and have gained additional powers since the 90s such as the ability to fix the exchange rate. The streamlining of certain issue is still something that needs to be addressed. In the mobile banking sector regulations have been established to ensure accountability but there are still cases where agents are pocketing more money than they should be which has not been traceable as of yet. The necessary guidelines will be provided and are in the pipeline but these things should have been tackled a lot earlier.
Bangladesh is encircled in 6 % growth trap but has a vision to achieve 10% growth rate by 2021. Will that be possible?
For more than a decade, Bangladesh has ensured a steady growth rate, with setbacks in 2001 and 2008. Now the question is – how do we achieve a double digit growth? The answer is simple: the private sector will have to invest more. Around 80% of the total investment of the country owes to the private sector, but it is more or less stagnated. Political uncertainty has been throttling businesses time and again. Under such circumstances, earning the confidence of the private sector, understanding their need and providing everything that will help the economy jumpstart is essential.
The efforts of the government are commendable in terms of building infrastructure but there are external problems like the issues created by the contractors in Dhaka-Chittagong 4-lane. Shortage of gas pressure in large industries is serious as we are the only country supplying 8-12% of our gas for cooking, instead of going for cylinder system.
Around the world, only 20% of the electricity is being produced using gas as nations doing the same with either coal exploration or hydro-based power generation.
We need to strengthen the Board of Investment (BOI) with more authority and skilled human resources so that it can work as a one-stop service center to provide facilities in the quickest possible time.
Last but not least, we need to reschedule our tariff structure and enthuse in electricity generation to supply quality and uninterrupted electricity to the industry although by charging higher price.
The lack of quality human resources are creating vacuum on the top positions of high-end corporate jobs that are being occupied by expatriates. How to tackle this problem?
Of the total number of universities, 63% are privately owned and these also vary from one another in terms of quality. Due to existing laws, instead of having the intention to control, the government is failing to supervise the private universities. To face the challenge of tomorrow, we need to amend the laws soon. Finalizing the higher education commission draft and forming the Accreditation Council are cries of the moment. We need to identify the multitude of demand persisting in the internal job market and prepare our students accordingly so that none of them have to wait months and years after passing without a job.
