FBCCI’s arrange for a bank can be an absurd idea: experts
The country's apex trade body plans to create a commercial bank and an insurance provider to serve better cottage, micro, small and medium enterprises (CMSMEs), which battle to secure loans despite being the backbone of the economy.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also really wants to establish a university to build up the workforce good requirements of industries.
The outgoing board of the federation approved the proposals in a virtual meeting on Saturday.
Experts criticised the proposal to create a separate bank.
"The theory is absurd as the apex trade body did little for the CMSME sector," said Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh.
Currently, there are 61 banks and 34 non-banking finance institutions in Bangladesh.
Mansur said the FBCCI, as the apex trade body, had a whole lot of responsibilities, such as for example negotiating with the federal government to safeguard the interests of the business enterprise community.
"It can't demand to perform a bank separately. There is absolutely no such precedence of bank operations by any trade body on the globe."
The former economist of the International Monetary Fund said it would be a wrong policy to permit government agencies and departments to perform banks, and almost do not require could prove their worthiness.
Fahmida Khatun, executive director of the Centre for Policy Dialogue, said there was no dependence on any new bank as the quantity of lenders was already too much given the country's business volume.
"Allowing a fresh bank won't bring worthwhile for the economy. Rather, we ought to focus on how exactly to enhance the financial health of the prevailing banks as only 10 to 15 of them are successful."
Salehuddin Ahmed, a former governor of the central bank, said there was no genuine logic to get a licence for a bank from the end of the FBCCI.
"If the directors of the FBCCI or other businesses face any issue in managing loans, they are able to urge the government and the central bank to reform the banking industry."
He said professional groups didn't control banks in the developed countries and even in India. But, the scenario was quite contrary in Bangladesh.
"Such control has had a negative effect on the banking industry to a sizable extent," Ahmed said.
If the directors of the FBCCI need the ownership of a lender, they can purchase shares of a weak bank, he said.
The number of insurance firms can be higher in Bangladesh than required, he said. "So, the federal government should not entertain the FBCCI's demand."
Siddiqur Rahman, senior vice-president of the FBCCI, said the board would go on and lobby with the government to create a bank, a university and an insurance provider.
"A bank is required to disburse loans to the businessmen, especially to the CMSMEs, for the reason that existing commercial banks are reluctant to lend to the businesses without collaterals. We've geared to lend money to the cottage, micro and small entrepreneurs without collateral."
He said most commercial banks fixed unusual interest rates that are affecting the standard businesses.
Most CMSMEs do not have the ability of availing loans from the traditional bank operating system by fulfilling stringent conditions, he said.
For instance, almost all of the CMSMEs cannot secure loans from the government-sponsored stimulus package because of the strict terms.
"But they are in trouble as a result of the fallouts of Covid-19," said Rahman, also the commerce and professional affairs secretary of the ruling Awami League.
The insurance company will become the guarantor of the loans which will be disbursed among the CMSMEs, he said.
The federal government has allowed banks for the Army, the authorities, the Border Guard Bangladesh, and the Ansar and VDP. "Why can't there be a bank for the trade body?" Rahman asked.
"FBCCI deserves a bank since it may be the apex trade body of the united states."
The FBCCI board will run the bank, and everyone can buy the shares once it goes public, he said, adding that former FBCCI directors or presidents could be sponsor directors of the lender.
Rahman, also a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said he wished to create a BGMEA bank. However, it had been not possible as his tenure expired.
"Still, we have an idea to use for a bank for the BGMEA. We want a bank for the BGMEA as the garment sector may be the single largest export earner for the country."
The proposed FBCCI University will formulate the curriculum targeting the necessity of the industries as public and private universities are failing to produce the required recruiting.
