Welcome to Our Presentation

Principles of Finance (EIB-508)

Prepared for
Mohammad Rakib Uddin
Bhuiyan
Associate Professor
International Business
University Of Dhaka
 Group Members

Farabi Masum Khan 801826006

Md. Rezaul Hossain 801826020

Md. Abdullah Al Momin 801825003

Sohana Afroz 801825029

Reyad Morshed Shihab 801825049

The Financial Market Indicators of Bangladesh
 Introduction on Bangladesh’s Financial Market
The financial system of Bangladesh comprises of the following:

# Sector Includes

i Formal Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, Capital Market
Intermediaries like Brokerage Houses, Merchant Banks, Micro Finance Institutions
(MFIs) [This sector is the key contributor in the financial market]

ii Semi Formal Specialized Financial Institutions like House Building Finance Corporation (HBFC),
Palli Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non
Governmental Organizations (NGOs and discrete government programs)

iii Informal Private intermediaries which are completely unregulated

 Introduction on Bangladesh’s Financial Market (continued)
The formal sector of the financial market which is divided into two parts:

 Money Market: comprises of banks and financials institutions who act as intermediaries. The
Foreign Exchange Market and the Taka Treasury Bond Market are also part of the Money
Market. 68 percent of the country’s GDP are made up of assets generated from this market.

 Capital Market: The primary issues and secondary trading of equity securities, debentures and
corporate bonds of capital market take place through Dhaka Stock Exchange and Chittagong
Stock Exchange. Who are regulated by Bangladesh Securities and Exchange Commission
(BSEC). 15 percent of the country’s GDP are made up of assets generated from this market.
 Money market Indicators

Call money: money loaned by a bank or

Call Money financial institution (FI) to other banks
and FIs which is repayable on demand.
14,000.00
Usually it’s tenor is one working day in
12,000.00
Bangladesh.
10,000.00
8,000.00
The daily call money transactions that
6,000.00
take place in the market averages
4,000.00
around, BDT 60.00 billion.
2,000.00
0.00 Government banks, specially Sonali
25-Jul-2017 27-Mar-2018 03-Dec-2018
Bank holds most of it. Almost 20%.
 Money market Indicators (Continued)
Broad Money is the total money circulated in the
economy in forms of deposits, notes and coins.

16.00% In average the broad money of Bangladesh grew

Broad Money Growth by 10.75% from the start of January 2017 till
14.00%
date.
12.00% Total Broad Money as on September 2018 is
BDT 11.19 trillion.
10.00%

8.00% Broad money consists of the following

components:
May

Dec

May

May
Dec
Nov

Nov
Feb

Jun

Sep

Feb

Jun

Sep

Feb
Oct

Oct
Aug

Aug
Jan

Jan

Jan

Jun
Jul
Apr

Apr
Jul
Mar

Mar
Apr

Mar
• Currency Outside Banks
2016 2017 2018
• Deposits of Financial Institutions with
Bangladesh Bank (except DMBs)
• Demand Deposits with DMBs and
• Time Deposits with DMBs

DMB*: Deposit Money Bank, are corporations

who are registered to collect deposits from public
repayable on demand.
 Money market Indicators (Continued)
Private Sector Credit Growth, assesses how
much credit are being provided by banks and FIs
Private Sector Credit Growth
to the private sector.
(m-o-m)
The more it will grow, the more the economy will
Growth % develop.
(y-o-y)
10,000 Currently the private sector credit growth is
19.50%
8,000 growing at 15.96% for the fiscal year 2018-19,
18.50% whereas the government targets to reach a
6,000
4,000 17.50% growth of 16.80%.

2,000 16.50%
Total private sector credit at the end of Sep 2018
- 15.50% stands at BDT 9.19 trillion
ar l
-2,000 ep
S ov Ja
n ay Ju Se
p 14.50%
N M M However, it’s at a declining trend, as banks and
FIs looks to keep their funds in check, as a
measure to ensure their safety, due to nearing of
the upcoming parliamentary elections.
 Foreign Exchange Market Indicators
Total Foreign Exchange Reserve (in million USD) Workers' Remittance (in million USD)

33500 1600

33000 1500
1400
32500
1300
32000
1200
31500 1100
31000 1000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Jan Feb Mar Apr May Jun Jul Aug Sep Oct
2017-2018 2018-2019 2017-2018 2018-2019

As on October 2018, the foreign currency reserve of Bangladesh stood at USD 32.08 billion, alongside workers’
remittance inflow of USD 1.24 billion. The foreign currency reserve took on a declining trend from the last fiscal year,
which continued this year as well, due to increase in import cost and opening of new Letter of credits.

Workers’ remittance, which also contributes to the foreign exchange reserve, is also facing a declining trend, as most
migrant workers’ going from the country are unskilled labour and due to fast paced globalization and rise to automation,
demand for such labour is falling, for which many migrant workers from Bangladesh are now becoming jobless and
are unable to send money back home or returning to the country.
 Capital market Indicators
5600Dhaka Stock Exchange DSEX
10600
5550
Chittagong Stock Exchange CSCX index
index
5500 10400
5450
10200
5400
5350 10000
5300
9800
5250
5200 9600
5150
9400
5100 jun
jul
jun aug
jul sep
Both the stock exchanges of
augthe country
sep follows the same trend all the time as oct
nov
oct nov the markets operations are
Bangladesh’s financial market is small and both
based mostly over rumors rather than concrete statistics. After the share market collapse back in 2011, the
Since the country is a small developing country, the control of the market lies capital market never fully recovered, thus both the
mostly to a handful of institutions and individuals, who dictate the terms of this securities’ hub’s indexes are very low.
market at their will, with full support from the political front. The sudden spike during August was due to the
government’s decision to impose banks and FIs to
borrow at 6% and lend at 9%, which gave rise to
encashment of deposits, which were reinvested in the
stock market. However, due to poor implementation
of the decision, everything went back to as it was.
 Derivative market Indicators
Bangladesh is yet to establish a formal derivative market. Thus authentic economic data regarding such market is
unavailable.

However, it has been found that as per FE circular No. 4, dated May 25, 2018 issued by The Foreign Exchange Policy
Department of Bangladesh bank, banks who are authorized dealers of foreign currencies can participate in hedges if they
deem it as necessary, based on customer/client’s requirement. The use of commodity derivatives will only be permitted
when customers have genuine underlying commodity price risk exposure(s). This can be monitored by the Authorized
Dealers (AD) through checking of the underlying risk exposure documents. Any kind of speculation through the use of
commodity derivative instruments will not be permissible.

ADs must completely hedge the commodity price risk arising from the commodity hedge transactions by booking back to
back transactions with banks having international standing or their branches operating in Bangladesh.

As a result, banks like The City Bank Limited, Eastern Bank Limited, BRAC Bank Limited to name a few. regularly
participate in derivative transactions. Such transactions involve foreign currency, interest and commodity based Options,
SWAPS and Forwards. Statistics related to such transactions are company specific for which utmost, confidentiality is
observed by them.
 Conclusion
The banking sector and the capital market of Bangladesh are both advancing well. The banking sector compared to
the capital market, is far more advanced. However, internationally they both lacks behind. There’s too much
government intervention in both of them, which prevents the financial market to operate normally.
Due to such, the banking sector took its biggest hit during 2017 and is yet to revive fully, following the first bank in
the history of nation to be bailed out of bankruptcy by the central bank, named The Farmers Bank Limited. On top of
which, the government’s decision to impose banks and FIs to borrow at 6 percent and lend at 9 percent further
worsened the situation.
Due to the upcoming parliamentary elections the situation is even worse. Banks and FIs are not ready to disburse and
are holding back funds, which has dried up the money market to some extent, at the year end. On top of that, the
share market has seen conservative investment throughout the year. The share market is yet to fully recover from the
2011 debacle.
The foreign exchange market comprises of a foreign exchange reserve of around USD 32.00 billion as on October
31, 2018. A formal derivative market is yet to be established in the country.
Automation is highly spreading across every sector of the financial market. However, the advancement rate is very
slow and the infrastructure is weaker compared to other countries
The country looks forward towards financial inclusion of all its nationals by 2024. It has already achieved 50 percent
of its target.
Overall, the financial market in Bangladesh requires proper attention, as it’s a growing country, thus, it would require
a solid financial market in order for it to flourish and fully develop.
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