Financial Institutions/Intermediaries:

An organization which borrows funds from lenders and lends them to borrowers on
terms which are better for both parties than if they dealt directly with each other.
Financial institutions as intermediaries:
As a general rule, financial institutions are all engaged to some degree in what is
called intermediation. Rather obviously intermediation means acting as a go-between
for two parties. The parties here are usually called lenders and borrowers or
sometimes-surplus sectors or units, and deficit sectors or units.
As a general rule, what financial intermediaries do is: to create assets for savers and
liabilities for borrowers which are more attractive to each than would be the case if
the parties had to deal with each other directly.
There are two general consequences of financial intermediation. The first is that there
will exist more financial assets and liabilities than would be the case if the community
were to rely upon direct lending.
The second general consequence of the intervention of financial institutions is that
lending and borrowing have become easier. It is now no longer necessary for savers
to search out borrowers with matching needs. In this sense financial intermediaries
have lowered the transaction costs of lending and borrowing.
Banks:
Banking is essentially based on the debtor-creditor relationship between the
depositors and the bank on the one hand and between the borrowers and the bank
on the other. Interest is considered to be the price of credit, reflecting the
opportunity cost of money.
The commercial banking system dominates Bangladesh's financial sector. Bangladesh
Bank is the Central Bank of Bangladesh and the chief regulatory authority in the
sector. The banking system is composed of four Public commercial banks, five
specialized development banks, thirty private commercial Banks and nine foreign
commercial banks.
Out of 6562 scheduled bank branches operating in the country, up to end December
2006 the NCBs operate 3384 branches, of which 2146 are in rural areas and 1238 are
in urban areas; SBs have 1354 branches of which 1200 are in rural areas and 154 are
in urban areas; PCBs have 1776 branches of which 488 are in rural areas and 1288
are in urban areas; and FCBs have 48 branches exclusively in urban areas. Out of 30
PCBs, six have been operating as Islamic banks. After the year 2006 that total
number of branches are increasing rapidly up to 2009.
List of All types of banking sectors are:
Central Bank
Private Commercial Banks
Public Commercial Banks
Foreign Commercial Banks
Specialized Development Banks
Private Commercial Banks:
Even with all the provisions at hand, during the interviews many experts opined
that there could be separate agencies to regulate and supervise the private
sector banking activities in Bangladesh. A number of agencies can be set up and
each would look into a number aspects related to private sector banking. Under
the current system, the commercial banks and financial institutions have to
report to and are to a certain extent supervised by the Securities and Exchange
Commission, when they register with the stock exchange.
Private banks are the highest growth sector due to the dismal performances of
government banks (above). They tend to offer better service and products.
AB Bank Ltd
BRAC Bank Limited
Eastern Bank Limited
Dutch Bangla Bank Limited
Dhaka Bank Limited
Islami Bank Bangladesh Ltd
Pubali Bank Limited
Uttara Bank Limited
IFIC Bank Limited
National Bank Limited
United Commercial Bank Limited
NCC Bank Limited
Prime Bank Limited
SouthEast Bank Limited
Al-Arafah Islami Bank Limited
Social Islami Bank Limited
Standard Bank Limited
One Bank Limited
Exim Bank Limited
Mercantile Bank Limited
Bangladesh Commerce Bank Limited
Mutual Trust Bank Limited
First Security Islami Bank Limited
The Premier Bank Limited
Bank Asia Limited
Trust Bank Limited
Shahjalal Islami Bank Limited
Jamuna Bank Limited
ICB Islami Bank
Moon Bank Limited
United Commercial Bank Limited
Aziz Co-op Commerce & Finance
Bank Ltd.
Eastern Bank Limited
Social Investment Bank Limited
Uttara Bank Limited
STRUCTURE OF FINANCIAL SYSTEM IN BANGLADESH
7
b) Public Commercial Banks:
The Basel Committee on Banking Supervision published guidance in 1999 to assist
banking supervisors in promoting the adoption of sound corporate governance
practices by banking organizations in their countries. This guidance drew from
principles of corporate governance that were published earlier that year by the
Organization for Economic Co-operation and Development (OECD) with the purpose
of assisting governments in their efforts to evaluate and improve their frameworks
for corporate governance and to provide guidance for financial market regulators
and participants in financial markets at public commercial banks.
Sonali Bank Limited
Janata Bank Limited
Agrani Bank Limited
Rupali Bank Limited
c) Private Foreign Commercial Banks:
The state and nature of corporate governance has been studied under five general
headings. Three types of foreign commercial banks or companies were studied: a)
the public corporations - these are mainly private utility companies operated by the
government with a board of director consisting of the people of Bangladesh and
few experts, b) financial institutions like banks which are listed in the Dhaka Stock
Exchange but related with governmental condition about share distribution and c)
non-financial limited companies also listed in the stock exchanges in the country but
related with governmental condition about share distribution.
Citibank
HSBC
Standard Chartered Bank
Commercial Bank of Ceylon
State Bank of India
Habib Bank
National Bank of Pakistan
Bank Alfalah
d) Specialized Financial Institutions:
Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi
Unnayan Bank) were created to meet the credit needs of the agricultural sector
while the other two ( Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin
Sangtha (BSRS) are for extending term loans to the industrial sector. The
Specialized banks are:
Grameen Bank
Bangladesh Krishi Bank
Bangladesh Development Bank Ltd
Rajshahi Krishi Unnayan Bank
Basic Bank Ltd (Bank of Small Industries and Commerce)
Bangladesh Somobay Bank Limited (Cooperative Bank)
Ansar VDP Unnyan Bank

Non-Bank Financial Institutions:
Non-Bank Financial institutions in Bangladesh have been playing a significant role in financial
system of the country. This sector has emerged as an increasingly important segment of the
financial system because of the rapidly rising demand for long term financing and equity type
services. NBFIs added differentiation to the bank based financial market of Bangladesh. The
inevitability of the NBFIs has created a new phase to strengthen the financial system of the
country in parallel with the saturated banking industry. Thus, this sector has become a distinct
player in maintaining the sound health of our financial and economic sectors. NBFIs in
Bangladesh play major role in filling gaps in financial intermediation by providing diversified
investment instruments and risk pooling services. NBFIs have achieved impressive growth in
recent years reflecting the importance of financial innovation and holding the promise of
deepening financial intermediation through satisfying long term financing need.
Backgrounds of NBFIs in Bangladesh
NBFIs were incorporated in Bangladesh under the Company Act, 1912 and were being regulated
by thr provisions contained in Chapter V of the Bangladesh Bank Order. 1972. Later to remove
regulatory deficiency and also to define a wide range of activities to be covered by the NBFIs, a
new statute titled the Financial Institution Act, 1993 was enacted in 1993 by the Financial
Institution Regulation, 1994. NBFIs have been given license and regulated under the Financial
Institution Act 1993. There are 31 NBFIs licensed under this act. As per the Financial Institution
Regulation, 1994, at present minimum paid up capital for NBFIs is Taka 1.0 billion or 100 Crores.
So far, twenty one NBFIs raised capital though issuing IPO, while three are exempted from the
issuance of IPO. Other major sources of funds of NBFIs are term deposit, credit facility from
banks and other NBFIs, call money as well as bond and securitization. The NBFIs business line is
narrow in comparison with banks in Bangladesh. Now a days the NBFIs are working as multi
product financial institutions.
Year 2006 2007 2008 2009 2010 2011 2012
No. of NBFIs 29 29 29 29 29 30 31
Government
owned
1 1 1 1 1 2 3
Joint-venture 8 8 8 8 8 8 10
Private 20 20 20 20 20 20 18
New branches 10 8 8 8 20 53 3
Total branches 64 72 80 88 108 161 164
Source: Department of Financial Institutions and Markets, BB

NBFI Sector Performance
Assets: The asset base of the NBFIs increased substantially in 2911 and 2012. Aggregate
industry assets increased to Taka 288.4 billion 2011 from taka 251.5 billion in 2010, showing a
growth of 14.7 percent. The growth rate for 2012 will probably be higher than that of 2011. By
the end of June 2012 taka asset increased to Taka 309.0 billion.
Investment: NBFIs are investing in different sectors of the economy, ut their investments are
mostly concentrated in industrial sector. In June 2012 the different sectors in which the NBFIs
invested were industry (42.6%), real estate (18.5%), trade and commerce (10.4%), merchant
banking (1.4%), agriculture sector (1.3%) and others (17.8%)
Liabilities and equity: The aggregate liability of the industry in 2011 increased to Taka 235.7
billion from Taka 206.8 billion in 2010 while equity increased to Taka 52.7 billion in 2011
compared to Taka 44.7 billion in 2010 showing an overall increase of 14.0 and 17.9 percent
respectively. Total liabilities and equity were Taka 252.2 billion and Taka 56.8 billion
respectively at end of June 2012
Deposits: Total deposits of the NBFIs in 2011 rose to Taka 112.6 billion (47.8% of total liabilities)
from Taka 94.4 billion (45.7% of total liabilities) in 2010 showing an overall increase of 19.3
percent. On 30 June 2012 total deposit stood at Taka 124.2 billion (49.2 percent of total
liabilities)

Overall Performance of the NBFIs in terms of CAMELS rating
As of December 2011, out of the 29 NBFIs, the composite CAMEL rating of 2 NBFIs were 1 or
Strong, 16 were 2 or Satisfactory, 10 were 3 or Fair and the rest was 4 or Marginal. On
the other hand, in December 2010, out of the 29 NBFIs, the composite CAMEL rating of 14
NBFIs were 2 or Satisfactory and the rest of the 15 NBFIs rating were 3 or Fair. The CAMEL
rating of the entire industry improved compared to the previous year.











Different products and services







a) Insurance Companies
The insurance sector is regulated by the Insurance Act, 1938 with regulatory
oversight provided by the Controller of Insurance on authority under the Ministry of
Commerce. A separate Insurance Regulatory Authority is being established. A total of
62 insurance companies have been operating in Bangladesh, of which 19 provide life
insurance and 43 are in the general insurance field. Among the life insurance
companies, except the state-owned Jiban Bima Corporation (GBC) foreign owned
American Life Insurance Company (ALlCO), and the rest of the private. Among the
general insurance companies, state-owned Shadharan Bima Corporation (SBC) is the
most active in the insurance sector. A total of 31 insurance companies are listed in
the capital market, of which 8 offer life insurances.
i) Life Insurance Company (Public)
Jiban Bima Corporation
ii) Life Insurance Company (Foreign)
American Life Insurance Co.
iii) Life Insurance Company (Private)
National Life Insurance Co. Ltd.
Delta Life Insurance Co. Ltd.
Fareast Islami Life Insurance Co. Ltd.
Homeland Life Insurance Co. Ltd.
Meghna Life Insurance Co. Ltd.
Padma Islami Life Insurance Co. Ltd.
Sandhani Life Insurance Co. Ltd.
Sunflower Life Insurance Co. Ltd.
Baira Life Insurance Co. Ltd.
Golden Life Insurance Co. Ltd.
Progoti Life Insurance Co. Ltd.
Prime Life Insurance Co. Ltd.
Popular Life Insurance Co. Ltd.
Progressive Life Insurance Co. Ltd.
Rupali Life Insurance Co. Ltd.
Sun Life Insurance Co. Ltd.
STRUCTURE OF FINANCIAL SYSTEM IN BANGLADESH
12
iv) General Insurance Company (Public)
Sadharan Bima Corporation
v) General Insurance Company (Private)
Agrani Insurance Company Limited.
Bangladesh Co-operative General Insurance Ltd.
Bangladesh General Insurance Co. Ltd.
Bangladesh National Insurance Co. Ltd.
Central Insurance Co. Ltd.
City General Insurance Co. Ltd
Eastern Insurance Co. Ltd
Eastland Insurance Co. Ltd
Federal Insurance Co. Ltd
Green Delta Insurance Co. Ltd
Janata Insurance Co. Ltd
Karnafully Insurance Co. Ltd
Meghna Insurance Co. Ltd
Mercantile Insurance Co. Ltd
Northern General Insurance Co. Ltd
People's Insurance Co. Ltd
Phoenix Insurance Co. Ltd
Pioneer Insurance Co. Ltd
Prime Insurance Co. Ltd
Progoti General Insurance Co. Ltd
Provati Insurance Co. Ltd
Purabi General Insurance Co. Ltd
Reliance Insurance Co. Ltd
Rupali Insurance Co. Ltd
United Insurance Co. Ltd
Takaful Islami Insurance Company Limited
Crystal Insurance Co. Ltd
Republic Insurance Company Limited
Global Insurance Company Limited
Paramount Insurance Co. Ltd.
Standard Insurance Co. Ltd.
Asia Pacific Insurance Co. Ltd.
South Asia Insurance Co. Ltd.
Express Insurance Ltd.
Continental Insurance Ltd.
Desh General Insurance Ltd.
STRUCTURE OF FINANCIAL SYSTEM IN BANGLADESH
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b) Security Firms
Financial institutions that underwrite securities and engage in related activities such
as securities brokerage, securities trading and making a market in which securities
can trade.
Nabiul Karim Securities Ltd.
Haji Mohammad Ali Securities Ltd.
GMF Securities Limited
Quaiyum Securities Ltd.
Dragon Securities Ltd.
TA Khan Securities Co. Ltd.,
Md. Fokhrul Islam Securities Limited.
Shahiq Securities Ltd.
Habibur Rahman Securities Limited
Ershad Securities Ltd.
Mian Abdur Rashid Securities Ltd.
Khurshid Securities Ltd.
Rapid Securities Limited
Dawn Securities Limited.
Arafat Securities Ltd.
Shahed Securities Ltd.
Tobarak Securities Ltd.
Midway Securities Ltd.
Parkway Securities Ltd.
HR Securities & Investment Limted
Kazi Feroz Rashid Securities Ltd.
MAH Securities Ltd.
DMR Securities Services Ltd.
Alhaj Jahanara Securities Ltd.
RNI Securities Ltd.
GQ Securities Ltd.
Crest Securities Limited.
Asenz Securities Ltd.
Finvest Securities Ltd.
MAH Securities Limited
Nabiul Karim Securities Limited
Jalalabad Securities Limited
Haji Mohammad Ali Securities
Akij Securities Limited
Mian Abdur Rashid Securities
STRUCTURE OF FINANCIAL SYSTEM IN BANGLADESH
14
c) Investment Banks
It primarily helps net suppliers of funds transfer funds to net users of funds at a low
cost and with maximum degree of efficiency.
Bay Leasing & Investments Limited.
Union Capital Ltd.
First Lease International Limited
Phoenix Leasing Co. Ltd.
Peoples Leasing & Financial Services Ltd.
d) Financial Companies
The primary function of finance companies is to make loans to both individuals and
business. Finance companies provide such services as consumer lending, business
lending and mortgage financing.
Industrial Development Leasing Company of Bangladesh (IDLC)
Infrastructure Development Company Limited (IDCOL)
GSP Finance Limited
Delta Brac Housing Finance Corporation Ltd.
Fidelity Assets & Securities Company Limited.
Fareast Finance & Investment Ltd.
LankaBangla Finance Ltd.
Prime Finance & Investment Limited
Bangladesh Industrial Finance Co. Ltd.
e) Mutual Funds
Mutual funds are portfolios of different securities such as stocks, bonds, treasuries,
derivatives, etc. Mutual funds pool money of both individual and institutional
investors allowing the funds to achieve: (i) economies of scale by reducing costs and
increasing investment returns; (ii) divisibility and diversification; (iii) active
management with superior stock picking and market timing; (iv) reinvestment of
dividends, interest and capital gains; (v) tax-efficiency; and (vi) buying and selling
flexibility. There might be varieties of mutual funds that differ in terms of their
investment objectives, underlying portfolios of shares, risks and returns, fees and
expenses, etc.
Mutual funds are professionally managed investment schemes that collect funds
from small investors and invest in stocks, bonds, short term money market
instruments, and other securities. This ensures a diversified portfolio for the
investors at much less efforts than through purchasing individual stocks and bonds.
Fund managers who undertake trading of the pooled money and are responsible for
managing the portfolio of holdings usually manage mutual funds. Generally, mutual
funds are organized under the law as companies or business trusts and managed by
separate entities. Mutual funds fall into two categories: open-end funds and closedend
funds.
STRUCTURE OF FINANCIAL SYSTEM IN BANGLADESH
15
Some categories of mutual funds are:
ICB, 1st ICB Mutual Fund, 2nd ICB Mutual Fund, 3rd ICB Mutual Fund,
4th ICB Mutual Fund, 5th ICB Mutual Fund, 6th ICB Mutual Fund, 7th
ICB Mutual Fund
ICB Mutual Fund
1st BSRS Mutual Fund
AIMS First Granted Mutual
Grameen Mutual Fund One
Grameen One: Scheme Two
ICB AMCL 1st Mutual Fund
ICB AMCL Islamic Mutual Fund
ICB AMCL Unit Fund
ICB AMCL Pension Holder Unit Fund
ICB AMCL First NRB Mutual Fund
ICB AMCL Second NRB Mutual Fund
f) Pension Funds
Pension funds are analyzed as financial intermediaries using a functional approach to
finance, which encompasses traditional theories of intermediation. Funds fulfill a
number of the functions of the financial system more efficiently than banks or direct
holdings. Their growth complements that of capital markets and they have acted as
major catalysts of change in the financial landscape. Financial efficiency in this
functional sense is not the only reason for growth. It is also a consequence of fiscal
incentives and benefits to employers, as well as growing demand arising from the
ageing of the population.
Employers, such as companies, public corporations, and industry or trade groups,
typically sponsor pension funds; accordingly, employers as well as employees
typically contribute. Funds may be internally or externally managed. Returns to
members of pension plans backed by such funds may be purely dependent on the
market (defined contribution funds) or may be overlaid by a guarantee of the rate of
return by the sponsor (defined benefit funds).