Analysis on Non-Banking Financial Institutions (NBFIs) in Bangladesh

(Concentration: 21 listed

October 31, 2011

Analysis on Non-Banking Financial Institutions (NBFIs) in Bangladesh

(Concentration: 21 listed

Submitted to,

Shabnaz Amin Auditi

Assistant Professor Department of Finance University of Dhaka

Submitted by, BBA 13th batch, Section: B ID No.: 13-008 Department of Finance University of Dhaka

Nowrin Ahmed

October 31, 2011

LETTER
October 31, 2011. Shabnaz Amin Audity Assistant Professor Department of Finance University of Dhaka Dhaka Dear Madam,

OF

TRANSMITTAL

It is an honor and great pleasure for me to present my intern report on Analysis on Non-Banking Financial Institutions (NBFIs) in Bangladesh (Concentration: 21 listed companies). It is being submitted as a partial requirement of the completion of my BBA program. The project program gave me an opportunity to apply my theoretical knowledge, views, ideas, and communication skills in the real world of practical experience, which can help me to show my potentiality in future professional career. According to your guideline, I have tried to apply my little knowledge to evaluate the performance of NBFIs of Bangladesh on the basis of selected companies. I hope, you will find that my project is prepared in appropriate manner. I am grateful to you for your cooperation and hope that you will call upon me with any queries occasioned by this report. Thanking you and looking forward to receive your cordial approval of my submission. Yours Sincerely, .. Nowrin Ahmed BBA 13th batch, Section - B ID No.: 13-048 Dept. of Finance
University of Dhaka

ACKNOWLEDGEMENT
I am thankful and grateful to almighty Allah who has given me the strength and ability to complete the Project on Analysis on Non-Banking Financial Institutions (NBFIs) in Bangladesh (Concentration: 21 listed companies). I am also grateful to my honorable Supervisor Teacher Shabnaz Amin Audity who has provided important guidelines to complete this report. Managing director of LankaBangla Finance Limited (LBFL), Mohammed Nasir Uddin Chowdhury, deserves special thanks for allowing me to do internship in his organization. I am also grateful to my co-ordinator in LBFL, Mr. Quamrul Islam, Senior Vice President & CFO, Finance Division. After that, I want to thank all of those elder brothers and sister of Finance Department of Dhaka University working in LBFL as they have given me valuable suggestions and interactions. I do sincerely declare that this project paper has been submitted, in partial fulfillment of the requirement for the completion of my BBA Program. The analysis work is written in my own language. Though I have taken information from different annual report and websites to prepare the report, no part of this paper consists of materials plagiarized from published or unpublished work of other writers and all materials borrowed and reproduced from other published or unpublished sources have been duly acknowledged with full reference in appropriate place. I understand that the term paper may be cancelled if subsequently it is discovered that this term paper is not my primeval work or it consists of materials plagiarized or borrowed without proper acknowledgement. I, at last, express special thanks from the bottom of my heart to all who help me directly & indirectly to complete this project paper.

Table of Contents
List of Tables.............................................................................................. List of Figures............................................................................................ Executive Summary.................................................................................... 1.0 Introduction.......................................................................................... 1.1 Objective of the Study................................................................................... 1.2 Scope of the Study........................................................................................ 1.3 Methodology................................................................................................. 1.3.1 Study Approach............................................................................... 1.3.2 Sampling Procedure......................................................................... 1.3.3 Timeline Used for Data.................................................................... 1.3.4 Data Collection & Arrangement........................................................ 1.3.5 Tools Used....................................................................................... 1.3.6 Data Analysis................................................................................... 1.4 Significance of the Study............................................................................... 1.5 Limitations of the Study................................................................................ 2.0 Literature Review.................................................................................. 2.1 Financial System........................................................................................... 2.2 Banking......................................................................................................... 2.3 Micro Credit ................................................................................................. 2.4 Non-Banking Finance ................................................................................... 2.5 Insurance ..................................................................................................... 2.6 Asset structure.............................................................................................. 2.7 Liability......................................................................................................... 2.8 Investment Portfolio...................................................................................... 2.9 Ratio Analysis............................................................................................... 2.10 Correlation.................................................................................................. 2.11 Regression.................................................................................................. 3.0 Bangladesh Profile ............................................................................... 3.1 Macro-Economy of Bangladesh .................................................................... 3.2 Capital Market of Bangladesh ....................................................................... 3.3 Financial System in Bangladesh ................................................................... .................................................................................................................. .....................................................................3.3.1 Central Bank & Other Banks ..................................................................................................................................... 3.3.2 Micro-Credit Organizations............................................................... 3.3.3 Insurances....................................................................................... 3.3.4 NBFIs............................................................................................... 4.0 NBFIs in Bangladesh ............................................................................. 4.1 List of NBFIs.................................................................................................. 4.2 Brief on NBFIs............................................................................................... 4.3 Growth Rate.................................................................................................. 5.0 Asset Structure of NBFI Industry............................................................ 6.0 Investment Portfolio of NBFIs................................................................ 6.1 Growth in Portfolio .......................................................................................

6.2 Sector Distribution of Portfolio....................................................................... 7.0 Performance Analysis of NBFIs............................................................... 7.1 Size Based Analysis ...................................................................................... 7.1.1 Asset Size 7.1.2 Deposit Mobilization 7.1.3Loans and Advances 7.2 Ratio Analysis............................................................................................... 8.0 Relationship between Value Drivers of NBFI Industry.............................. 7.1 Asset and Deposit......................................................................................... 7.2 Asset and Loans & Advances......................................................................... 7.3 Deposit and Loans & Advances..................................................................... 9.0 LankaBangla Finance Ltd. (A Case Study)............................................... 9.1 Company Profile............................................................................................ 9.2 Prtoducts & Services..................................................................................... 9.2 Shareholding Structure................................................................................. 10.0 Summary & Discussion........................................................................ 7.1 Present Performance of NBFIs in Bangladesh................................................ 7.2 Future Prospects of NBFIs in Bangladesh....................................................... 11.0 Conclusion.......................................................................................... 12.0 Reference........................................................................................................... 13.0 Bibliography....................................................................................... 14.0 Appendix ...........................................................................................................

List of Tables

List of Figures

EXECUTIVE SUMMARY
Core financial services provided by financial intermediaries include paymentsand liquidity, maturity transformation, store of value, information processing andpooling of risks. Banks have traditionally provided most of these services and areincreasingly diversifying into other areas. However, banks typically have an edgein providing payment and liquidity related services and they usually select aportfolio mix with an overriding objective of providing a certain return. Nonbanking financial institutions (NBFIs), on the other hand, tend to offer enhancedequity and risk based products. NBFIs play a crucial role in broadening access tofinancial services, enhancing competition and diversification of the financialsector. They are increasingly being recognized as complementary to the bankingsystem capable of absorbing shocks and spreading risks at times of financialdistress.Traditionally our banking financial institutions are involved in term le ndingactivities, which are mostly unfamiliar products for them. Inefficiency of BFIs inlong-term loan management has already leaded an enormous volume of outstandin g loan in our country. At this backdrop, in order to ensure flow of termloans and to meet the credit gap, NBFIs have immense importance in theeconomy. In addition, non-bank financial sector is important to increase themobilization of term savings and for the sake of providing support services to thecapital market.The purpose of this paper is to highlight different features of NBFIs, their contr ibution to the overall economy and the product base of NBFIs. The paper also describes the performance of NBFIs as measured by different financialindicators, along with the effects of banks entry into the non-bank financing area.Special emphasis has been given to identify the challenges faced by NBFIs inBangladesh. And finally, development of NBFIs as well as their role instrengthening the financial system of Bangladesh has been discussed.

1.0 INTRODUCTION
1.1 Objective of the Study:
I am a BBA student of Finance and to fulfill a partial requirement to complete my graduation I am continuing my internship program in LankaBangla Finance Limited, a Non-Banking Financial Institution (NBFIs) of Bangladesh. Working in this organization I have gathered some idea about the fact that the contribution of Lonka Bangla Finance Ltd. In NBFIS of our country is highly remarkable. So, I have felt the interest to prepare my Internship Report on these institution. The main objective of my report is to know and present some financial analysis on Lonka Bangla Finance Ltd. Besides that, I want to show the position and condition of LankaBangla Finance Limited (LBFL) in this industry.

1.2 Scope of the Study:

There are 29 NBFIs in our country, but information about all of them is not available. So, I have selected 21 DSE Listed NBFIs and tried to analyze information about those. I have Shown some Financial data about these organizations and made analysis on those to see the inter-relationship among the Value Drivers of this industry.

1.3 Methodology of the Study:

1.3.1 Study Approach:
After being ordered by the honorable supervisor teacher of my Internship Program, Ms. Shabnaz Amin Audity, I have decided to make a report on. At first, I discussed about the topic of the report with the personnel of LankaBangla Finance Limited, my intern place. According to their suggestion and from my interest I selected the topic Analysis on Non-Banking Financial Institutions (NBFIs) in Bangladesh (Concentration: 21 listed companies). Then I informed my teacher about the topic and submitted the proposal with the broad outline of the report. After getting the acceptance from her I have started work on this topic.

1.3.2 Sampling Procedure:

I have not selected all of the 29 NBFIs from our industry. I have selected only 21 NBFIs which are listed as Financial Institution Sector in Dhaka Stock Exchange (DSE) in order to find the financial data available. So, my criterion to select an NBFI was its data availability. To fulfill this criterion I have selected those 21 Institutions and tried to represent the condition of total NBFI industry of Bangladesh.

1.3.3 Timeline used for Data:

I have worked on 5 years (Year 2006- Year 2010) data of my selected companies to get a good picture of the industry.

1.3.4 Data Collection & Arrangement:

After selecting topic, my plan for making this report was firstly to collect financial data about the 21 DSE Listed NBFIs and analyze them attentively for finding out the necessary information related to my report and finally to arrange all of those data systematically. I have collected relevant financial information (Asset, Liability, Investment, Profit etc.) about those companies from the financial statements and notes given in their Annual Reports. I have found some reports in the own websites of those companies and some in the library of DSE. I have also collected different information from the website of DSE and Ministry of Finance (MOF). Then I have input and arranged these data using Microsoft Excel Program according to the requirement of my analysis.

1.3.5 Tools Used:

After arranging the data properly I have used some tools to go ahead for analysis of the NBFI industry. My used tools are: Compounded Annual Growth rate Formula Ratio Analysis Correlation-Coefficient Simple Linear Regression Analysis

1.3.6 Data Analysis:

At first I have shown Top 10 NBFIs according to both Market capital and Asset Size. Then I have calculate compounded annual growth rate of Asset, Deposit, Investment portfolio and Loan, Lease & Advances from year 2006 to 2010. After that I have made some ratio analysis of the companies and tried to find some relation among asset, deposit and lease-loan portfolio using the correlation and regression analysis. Finally I have given a brief case study on LankaBangla Finance Limited (LBFL) and drawn the conclusion on the present condition and future prospect of NBFI industry in our country.

1.4 Significance of the Study:

After completing the project I have gained some practical knowledge about the financial position of NBFIs in the economy of Bangladesh. I think this report will be helpful for anyone to know about or to make further analysis on the Financial Institution Sector of our country.

1.5 Limitations of the Study:

I have faced the following limitations in the time of preparing the report: 8 companies of the industry have not been selected for unavailability of data. Different formats of Financial Statements followed by different companies created some problem. Some companies do not provide annual reports in their websites properly. Despite these limitations, we have tried to give our best effort to prepare the report as properly as possible.

2.0 LITERATURE REVIEW

2.1 Financial System:
In finance, the financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow inter-temporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks.

2.2 Banking:
"Banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of the Act. A bank is a financial institution that serves as a financial intermediary. A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets.

2.3 Micro Credit:

Microcredit is the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

2.4 Non-Banking Finance:

Non- Banking Finance means the activities of Non-bank financial Institutions (NBFIs) that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. Unlike banks, these institutions are not allowed to create many options to take deposits from the public. Nonetheless, all operations of these institutions are still exercised under bank regulation. Depending upon their nature of activities, non- banking finance companies can be classified into the following categories: Development finance institutions Modaraba companies Leasing companies House finance companies Investment companies Venture capital companies

Discount & guarantee houses

Corporate companies

development

2.5 Asset Structure:

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. The balance sheet of a firm records the monetary value of the assets owned by the firm. Two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Intangible assets are nonphysical resources and rights that have a value to the firm and give the firm some kind of advantage in the market place such as goodwill, copyrights, trademarks, patents & computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.

2.6 Liability:
In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Liabilities are debts and obligations of the business that represent creditors claim on business assets. Examples of Liabilities are all kinds of payable such as: 1) Notes payable 2) Accounts Payable 3) Interests Payable. 4) Sales Payable and 5) any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time. The balance sheet of a firm records the monetary value of the liabilities payable by the firm.

2.7 Investment Portfolio:

Investment Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual. The term portfolio refers to any collection of financial assets such as stocks, bonds and cash. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. The dollar amount of each asset may influence the risk/reward ratio of the portfolio and is referred to as the asset allocation of the portfolio.

2.8 Ratio Analysis:

Ratio Analysis is a tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. There are many ratios that can be calculated from the financial statements pertaining to a company's performance, activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover and working capital.

3.0 BANGLADESH PROFILE

3.1 Macro-Economy of Bangladesh:
Bangladesh is in the process of a transition from a predominantly agrarian economy to an industrial and service economy. The private sector is playing an increasingly active role in the economic life of the country, while the public sector concentrates more on the physical and social infrastructure. There have been significant structural shifts in the economy over the past two decades. The current condition of our economy is as follows:
Population GDP per capita GDP growth rate GNI per capita Domestic savings (% of GDP) National savings(% of GDP) Investment Rate (% of GDP) Total exports (% of GDP) Total imports (% of GDP) Inflation Rate (Weighted Average) Forex reserves Currency 14.61 crore $687 6% $751 20.10% 30.02% 24.41% 16.20% 21.30% 7.31% $10.700 billion BDT (1 BDT=$0.01438)

We can see some future projection about the economy of our country in the following table: Real sector Projection
201112 201213 201314 201415 187.55 13.5 8.0 6.0 5.0 32.0

GDP at current price (bn 128.03 145.35 165.31 US$) GDP growth at current price 13.2 13.5 13.7 (%) GDP growth at constant 7.2 7.6 8.0 price (%) Inflation (%) 6.3 6.1 6.0 GDP deflator (%) 5.6 5.5 5.3 Total investment (% GDP) 28.4 30.0 31.6 (Source: Bangladesh Ministry of Finance Website)

3.2 Financial System in Bangladesh:

(Year 2009-2010)

The financial system of Bangladesh consists of Capital Market, Bangladesh Bank (BB) as the central bank, 4 State Owned Commercial Banks (SCB), 4 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 30 non-bank financial institutions. Moreover, Micro-Credit Regulatory Authority (MRA) has given license to 298 Micro-credit Organizations. The financial system also embraces insurance companies, stock exchanges and co-operative banks. 3.2.1 Capital Market: The Capital market, an important ingredient of the financial system, plays a significant role in the economy of the country. The Securities and Exchange Commission exercises powers under the Securities and Exchange Commission Act 1993. It regulates institutions engaged in capital market activities. The SEC has issued licenses to 27 institutions to act in the capital market. Of these, 19 institutions are Merchant Banker & Portfolio Manager while 7 are Issue Managers and 1(one) acts as Issue Manager and Underwriter. There are two stock exchanges (the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE)) which deal in the secondary capital market. According to the information from DSE website, 35,000 companies among the total 58,000 companies of Bangladesh are listed in DSE and CSE.

3.2.2 Central Bank and other Banks:

Central Bank Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all banks and non-bank financial institutions. It performs the traditional central banking roles of note issuance and of being the banker to the government and banks. Given some broad policy goals and objectives, it formulates and implements monetary policy, manages foreign exchange reserves and lays down prudential regulations and conduct monitoring thereof as they apply to the entire banking system. Commercial Banks The commercial banking system dominates the financial sector with limited role of Non-Bank Financial Institutions and the capital market. The Banking sector alone accounts for a substantial share of assets of the financial system. The banking system is dominated by the 4 State Owned Commercial Banks, which together control more than 30% of deposits and operates 3383 branches (50% of the total) as of June 30, 2008. There are also 30 domestic private banks and 9 foreign banks in Bangladesh. Specialized Banks Out of the 4 specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) were created to meet the credit need of the agricultural sector and another one (Bangladesh Development Bank Ltd.) is for extending term loans to the industrial sector of Bangladesh.

3.2.3 Insurances:
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. General insurance is provided by 21 companies and life insurance is provided by 6 companies. The industry is dominated by the two large, state-owned companiesSadharan Bima Corporation (SBC) for general insurance and Jiban Bima Corporation (JBC) for life insurance--which together command most of the total assets of the insurance sector.

3.2.4 Micro Credit Organizations:

The member-based Microfinance Institutions (MFIs) constitute a rapidly growing segment of the Rural Financial Market (RFM) in Bangladesh. Microcredit programs (MCP) in Bangladesh are implemented by various formal financial institutions (nationalized commercial banks and specialized banks), specialized government organizations and Non-Government Organizations (NGOs). Some MFIs are ASA, Brac, BURO Bangladesh, Grameen Bank, Jagorani Chakra Foundation (JCF) and Shakti Foundation for Disadvantaged Women.

3.2.5 NBFIs:
In Bangladesh, Non-Bank Financial Institutions (NBFIs) are licensed and regulated under the Financial Institution Act, 1993. NBFIs play an important role in financing various sectors like industry, trade, housing, transport, information technology as well as the capital market. There are 29 NBFIs in the country. At present there are 115 branches of which 59 in Dhaka, 22 in Chittagong and the rest 34 in other districts. As on 31st December, 2010 the total amount of capital and reserve of the NBFIs stood at BDT 44689.29 million. Total assets and total deposits of the NBFIs were BDT 251527.34 million and BDT 94374.80 million respectively. Total outstanding loans and leases of the NBFIs was BDT 178094.20 million. Major sources of funds of NBFIs are Term Deposit, Credit Facility from Banks and other NBFIs, Call Money as well as Bond and Securitization. NBFIs are allowed to mobilize term deposit only of tenor not less than six months. At present term liabilities are subject to a statutory liquidity requirement (SLR) of 5 percent inclusive of average 2.5 percent cash reserve ratio (CRR). SLR for the NBFIs operating without taking term deposit is 2.5 percent. BASEL Accord now in the process of test run phase will be made compulsory from 2012.

(Source: Bangladesh Bureau of Statistics, Bangladesh Bank Website, Bangladesh Ministry of Finance Website, Monthly Review from Dhaka Stock Exchange)

4.0 NBFIS
4.1 List of NBFIs:
1. Bangladesh Finance & Investment Co. Ltd. 2. Bangladesh Industrial Finance Company Limited (BIFC) 3. Bay Leasing & Investment Limited 4. Delta Brac Housing Finance Corporation Ltd. (DBH) 5. Fareast Finance & Investment Limited 6. Fidelity Assets & Securities Company Ltd. 7. First Lease Finance & Investment Ltd. 8. GSP Finance Company (Bangladesh) Limited (GSPB) 9. Hajj Finance Company Limited 10. IDLC Finance Limited 11. Industrial and Infrastructure Development Finance Company (IIDFC) Limited 12. Industrial Promotion and Development Company of Bangladesh Limited(IPDC) 13. Infrastructure Development Company Limited (IDCOL) 14. International Leasing and Financial Services Limited

IN

BANGLADESH

15. Islamic Finance and Investment Limited 16. LankaBangla Finance Ltd. (LBFL) 17. MIDAS Financing Ltd. (MFL) 18. National Finance Ltd 19. National Housing Finance and Investments Limited (NHFIL) 20. Oman Bangladesh Leasing & Finance Limited 21. People's Leasing and Financial Services Ltd 22. Phoenix Finance and Investments Limited 23. Premier Leasing & Finance Limited 24. Prime Finance & Investment Ltd 25. Saudi-Bangladesh Industrial & Agricultural Investment Company Limited (SABINCO) 26. The UAE-Bangladesh Investment Co. Ltd 27. Union Capital Limited 28. United Leasing Company Limited (ULCL) 29. Uttara Finance and Investments Limited

4.2 NBFIs in Capital market:

Seri al No. 1 Name of NBFIs Bangladesh Fin. and Listin g Year 2007 Market Categor y A Face Value (Tk) 10 No. of Securities 53,730,739 Market Price (Tk) 81.00 Market Capital (Tk) 4,072,790,000

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance

2006 2009 2008 2008 2003 1977 1992 2005 2007 2006 2006 2002 2008 2005 2007 2005 2005 2007 1994 1997

A A A A A A A A A A A A A A A A A A A A

100 100 100 100 100 100 100 100 100 100 10 100 100 10 100 100 10 10 100 10

5,534,526 9,486,000 5,045,625 5,166,438 5,031,180 25,000,000 9,900,000 6,932,824 16,293,200 9,485,386 82,351,500 5,466,759 5,720,000 190,627,33 0 7,080,107 5,209,282 162,450,28 8 95,159,591 9,240,000 73,920,000 788,830,7 75

482.50 811.50 1,158.75 529.75 891.00 2,316.25 1,792.25 429.75 526.25 363.00 174.50 869.50 1,027.75 80.80 797.25 364.50 115.30 70.90 674.75 144.80

2,581,856,000 7,403,823,000 5,690,204,000 2,650,383,000 4,172,106,000 55,381,250,00 0 17,738,325,00 0 2,785,262,000 8,289,165,000 3,310,400,000 13,596,233,00 0 4,471,809,000 5,681,390,000 14678304000 5,481,773,000 1,844,086,000 18,113,207,00 0 6,413,756,000 5,943,630,000 10,407,936,00 0 200,707,688, 000

Total in NBFI Industry

4.3 Top 10 NBFIs:

4.3.1 Asset Size based:

Serial No. 1 2 3 4 5 6 7 8 9 10

Name of NBFIs ICB IDLC DBH LankaBangl a Uttara Finance ILFSL Peoples Leasing Prime Finance Phoenix United Leasing

Total Asset (Tk) 38,954,917,98 6 26,929,990,22 9 22,048,792,03 5 19,322,240,00 0 16,066,356,26 1 15,685,448,38 5 13,997,590,09 8 12,911,946,87 2 11,913,226,38 7 9,259,758,909

4.3.1 Market Capital based:

Serial No. 1 2 3 4 5 6 7 8 9 10

Name of NBFIs ICB Prime Finance IDLC Peoples Leasing LankaBangla Uttara Finance ILFSL Bay Leasing Union Capital United Leasing

Market Capital (Tk) 55,381,250,000 18,113,207,000 17,738,325,000 14,678,304,000 13,596,233,000 10,407,936,000 8,289,165,000 7,403,823,000 6,413,756,000 5,943,630,000

6.0 INVESTMENT PORTFOLIO

6.1 Growth in Portfolio:

OF

NBFIS

Investment Portfolio S erial No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Name of NBFIs Bang ladesh Fin. and Inv. Bang ladesh Industrial Fin. Bay Leasing DBH FASFinance & Investment First Lease Fin. & Inv. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBang la MIDASFinancing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Averag e 2011 3,445,893,946 5,688,703,687 3,317,572,880 19,068,159,662 2,057,938,245 1,800,080,844 11,423,431,001 21,821,259,774 1,800,080,844 14,851,420,000 5,251,619,925 15,064,570,000 3,789,239,961 4,085,040,000 13,522,134,496 9,157,677,595 4,015,118,259 9,977,830,094 6,345,585,020 7,714,000,000 10,247,691,464 8,306,907,033 2010 2,514,720,547 4,170,638,009 3,310,447,330 13,623,109,277 1,173,045,448 1,332,272,469 8,476,191,471 20,199,540,280 1,332,272,469 12,291,950,000 4,969,522,602 10,699,170,000 2,205,345,911 3,607,270,000 8,022,974,325 7,913,346,663 3,736,639,258 8,705,465,543 4,997,907,633 7,357,000,000 14,352,986,340 6,904,372,170 2009 2,372,597,659 3,108,864,075 408,320,000 10,865,020,832 1,044,227,161 1,265,671,924 7,982,337,974 8,226,643,772 2,620,813,746 10,044,220,000 603,292,894 6,869,630,000 1,910,810,092 3,285,280,000 5,297,080,805 5,297,080,805 2,458,649,738 77,912,811,486 3,567,758,815 7,865,000,000 6,877,604,355 8,089,700,768 2008 2,100,893,734 1,950,314,181 2,732,578,610 9,262,920,562 811,483,262 1,165,867,895 6,650,474,020 7,217,968,014 2,147,463,238 8,164,900,000 309,283,247 4,717,460,000 1,196,726,737 2,515,617,566 3,550,870,127 3,550,870,127 1,716,818,517 70,480,017,746 2,620,310,203 7,412,000,000 7,072,029,755 7,016,517,502 2007 2,240,305,910 1,152,251,179 1,960,737,659 6,544,837,189 251,688,088 856,961,661 6,541,936,748 6,096,929,906 1,895,121,605 6,572,100,000 3,851,465,260 2,420,040,000 1,005,381,341 2,322,487,864 2,578,853,510 3,023,715,547 1,157,862,569 3,198,318,299 1,393,279,853 6,084,000,000 6,515,091,639 3,222,065,039 Growth Rate 11.36% 49.06% 14.05% 30.65% 69.10% 20.39% 14.95% 37.54% -1.28% 22.61% 8.06% 57.96% 39.33% 15.16% 51.32% 31.92% 36.46% 32.90% 46.09% 6.11% 11.99% 26.71%

6.2 Sector Distribution of Portfolio:

To minimize the risk of loss the NBFIs of our country invest in a diversified portfolio. All of the companies mainly invest in Equity, Bonds, Lease Portfolio and Different types of Loan portfolio such as Short & long Term Finance, Housing or Real Estate Finance, Working Capital Finance, Auto Loan, Staff Loan, Mortgage Loan etc. Some of the companies also invest in Government Securities (Bangladesh Government Treasury Bills & Bonds), especially the NBFIs (LankaBangla, IPDC, and International Leasing) involved in Primary Dealer activities are bound to invest in Govt. Securities. Again some companies provide Loans and Advances to the clients against their Fixed Deposits kept to those companies.

Now I want to show the distribution of the portfolio of different NBFIs in our country to different sectors:

United Leasing Investment in 158,000,00 share 0 508700000 Lease 0 246900000 loan 0

2.05% 65.95 % 32.01 %

DBH Housing Loan Staff loan Loan against Deposits Investment in Shares Investment in 17,644,616,3 69 88,661,522 329,388,450 805,493,321 92.5% 0.5% 1.7% 4.2%

ILFSL 3,400,410,00 0 Term Loan 8,417,290,00 0 Real Estate Finance 473,890,000 Work Order 34,430,000 Short Term Investment 977,670,000 Investment in Govt. 1,248,220,00 Securities 0 Lease

22.90% 56.68% 3.19% 0.23% 6.58% 8.40%

ICB Loans & 93,645,374 0.82% Advances Lease 425531944 3.73% Capital IDLC Investment in 27,500,0005,604,572,07 25.68% 0.24% Real estate Other financeFAS Finance & Investment Institutions IFIL 5 223,711,54 31.44% Loans 6,859,850,33 10.87% MarketableInvestment in Investment in shares 10,876,753,6 37651585 10.54% 6 3 shares 0 Investment in 1,574,310 0.08% Lease 4,106,824,34 18.82% General 31968750 89.46% Bonds 5 Investment 33 Lease Finance 157,068,01 7.63% Long-term 4,206,981,25 19.28% Total 35733908 5 100.00 finance 4

Peoples Leasing Investment in 1,208,782,43 8.94% shares 4 Lease Finance 4,302,129,81 31.82% Premier Leasing 8 Loans 8,011,222,24 59.25% 6.60% Investment in 265,070,69 share 7 Lease 2,217,097,5 55.22% 81 Loan 1,532,949,9 38.18%

Prime Finance Investment in shares Lease finance Term finance Real estate finance 1,257,130,031 1,339,525,803 .00 4,198,313,791 .00 138,807,764 12.60% 13.43% 42.08% 1.39%

Union Capital Investment in share Lease Term Finance Loan 482,633,39 7 140304772 4 158587915 4,301,315,9 7.61% 22.11% 2.50% 67.78%

Phoenix Finance Investment in share 610,430,99 2 Lease 4,123,724,2 54 Term & Real Estate 4,423,522,3 Finance 49

6.67% 45.03% 48.30%

Investment in share Lease House Finance Loan

BIFS 512,071,15 8 129889400 6 5891945 3,871,846,5

9.00% 22.83% 0.10% 68.06% Uttara Finance Investment in 783,729,286 share Investment in 5000000 Bond Lease Finance 3827453281 Term Finance 3956061796 Margin Loan 1,675,447,10 1

7.65% 0.05% 37.35% 38.60% 16.35%

LankaBangla Finance Investment in Govt. 1,345,690,00 securities 0 Investment in Share 531,390,000 Lease portfolio 969,270,000 Term finance 2,183,630,00 0 Short term finance 220,080,000 Loan 6,107,990,00 0

8.93% 3.53% 6.43% 14.50% 1.46% 40.55%

MIDAS Financing Investment in 274,353,04 Securities 3 Lease & Loan 3,514,886,9 portfolio 18

7.24% 92.76%

Investment in Shares Term Finance Lease Mortgage Loan

NHFIL 110,130,00 0 868,850,00 0 708,580,00 0 2,374,420,0

2.70% 21.27% 17.35% 58.12% Bangladesh Fin. and Inv. Co. Investment in 489,369,07 14.20% Shares 7 Lease 1,078,158,1 31.29% 22 Term Finance 1,875,650,0 54.43% 40

Investment in Securities Lease Finance

Bay Leasing 785,729,22 7 2,531,843,6 53

23.68% 76.32%

IPDC Investment in Govt. securities Investment in Share 480,984,59 9.16% 9 619,678,55 11.80% 8 Lease Finance 1,280,091,8 24.38% FLFIL 18 Investment in 84,635,212 4.70% Term finance 2,500,653,2 47.62% Share 56 Lease & Loan 1,715,445,6 95.30% Short term finance 238,730,91 4.55% 32 5 Auto Loan 68,603,681 1.31%

From the above information and pie-charts we can see that the NBFIs of our country are careful about the risk existing in any investment. So, all of them own a diversified portfolio in different sectors of investment. It can be said that they are contributing remarkably to the economy of Bangladesh by making careful investment in diversified portfolio.

7.0 PERFORMANCE ANALYSIS

7.1 Size Based Analysis:
7.1.1 Asset Size:

OF

NBFIS

Asset Size Serial No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Name of NBFIs 2011 2010 2,793,353,389 4,992,456,811 5 ,222,465,566 16,385,681,157 1,611,929,042 1,648,741,433 35,381,613,912 22,681,287,226 3,525,266,589 13,276,722,659 6,267,784,954 13,435,000,000 2,647,026,329 4,571,770,000 8,622,819,456 9,633,933,033 4,659,321,100 10,373,180,515 5,860,940,080 8,718,650,920 12,607,842,802 9,484,766,070 2009 2,954,459,893 3,703,170,758 3,903,190,000 11,012,171,345 1,282,810,111 1,138,796,354 5,934,581,459 17,013,001,259 2,755,285,101 10,879,600,000 6,505,016,558 8,108,870,000 2,238,715,381 5,812,480,000 5,766,150,471 6,072,484,488 3,111,118,046 110,516,618,171 4,017,268,591 8,751,525,958 10,062,218,595 11,025,692,026 2008 2,377,377,543 2,603,853,528 3,445,379,582 9,818,926,163 1,047,698,311 993,861,382 6,855,407,595 14,762,208,632 2,270,879,164 8,590,110,000 7,187,049,745 5,782,380,000 1,468,925,980 4,464,846,844 4,018,377,236 5,597,693,795 2,396,613,215 79,618,372,628 2,969,572,350 8,274,946,715 9,194,534,590 8,749,476,905 2007 2,425,714,041 2,477,408,385 2,777,267,332 7,031,942,909 585,679,389 959,022,580 7,084,487,976 8,252,173,537 1,997,212,481 6,615,880,000 7,641,000,000 2,827,540,000 1,104,823,485 3,522,934,102 3,090,593,746 4,158,912,039 1,572,398,584 3,728,998,564 1,605,271,500 6,284,000,000 6,985,535,558 3,939,466,486 Growth Rate 16.04% 27.08% 24.48% 33.07% 51.19% 23.36% 53.13% 34.41% 22.06% 24.09% -4.25% 61.68% 39.02% 10.64% 45.88% 30.10% 33.85% 36.41% 47.58% 10.18% 23.15% 30.89%

Bangladesh Fin. and Inv.4,398,727,414 Bangladesh Industrial Fin. 6,461,289,834 Bay Leasing DBH 6,667,765,106 22,048,792,035

FAS Finance & Investment ,060,379,592 3 First Lease Fin. & Inv. Ltd. ,220,982,611 2 ICB IDLC Islamic Fin. and Inv. 38,954,917,986 26,929,990,229 4,432,816,959

International Leasing 15,685,448,385 IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average 6,422,509,475 19,322,240,000 4,127,162,529 5,279,390,000 13,997,590,098 11,913,226,387 5,047,460,000 12,911,946,872 7,614,500,171 9,259,758,909 16,066,356,261 11,563,011,945

7.1.2 Deposit Mobilization:

Seri al No.

Deposit Name of NBFIs 2011 2010 2009 2008 2007 Growth Rate

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

1,729,129,05 4 2,968,732,77 2 1,172,302,15 5 12,630,107,6 90 516,815,144 414,279,031 17,987,100,1 05 13,001,346,5 55 2,608,668,74 9 8,418,064,62 5 3,180,862,93 1 4,560,000,00 0 899,897,595 2,805,730,00 0 4,835,119,33 1 7,083,646,89 9 2,315,632,17 4 3,760,306,21 2 3,433,515,88 4 4,511,631,77 5 3,886,917,99 1 4,891,419, 365

950,155,998 2,308,566,32 9 1, 665,198,851 9,845,597,12 9 222,292,121 388,216,979 21,549,702,2 88 10,359,768,4 57 2,147,617,66 2 7,174,917,05 0 2,329,403,48 0 4,432,900,00 0 585,001,266 2,377,500,00 0 2,890,320,36 6 6,193,743,44 7 2,165,051,43 6 4,632,592,82 7 2,901,381,44 6 4,364,526,73 7 3,470,755,50 1 4,564,500,5 26

10,151,675 1,224,655,34 1 1,414,890,00 0 7,393,717,20 9 103,635,971 294,687,945 0 897,204,147 1,688,752,55 1 2,879,575,74 3 2,534,799,32 7 2,627,300,00 0 618,854,274 3,530,330,00 0 2,033,331,78 8 4,487,765,67 4 1,807,779,51 5 25,540,228,7 01 1,357,757,99 2 1,650,139,30 4 3,254,126,32 0 3,111,889, 689

598,266,046 1,072,910,37 8 1,104,114,33 9 579,056,186 153,619,452 235,557,000 833,108,388 5,165,147,53 8 850,963,664 2,086,315,34 7 3,045,166,43 6 1,818,520,00 0 321,005,500 2,917,381,41 2 1,457,381,64 7 4,068,277,43 1 1,391,449,99 1 69,399,530,3 27 1,083,080,14 9 1,084,979,73 0 3,089,208,59 6 4,874,049, 503

580,898,680 387,504,912 593,532,235 4,571,050,8 22 8,611,622 324,527,778 1,199,643,3 60 1,927,320,9 37 1,110,455,0 19 1,686,425,7 54 2,669,831,2 45 761,750,000 175,703,000 2,232,662,7 67 1,234,107,1 60 2,638,933,5 84 818,041,065 1,606,643,7 87 523,537,836 0 2,463,945,3 12 1,310,244, 137

31.35% 66.37% 18.55% 28.93% 178.33 % 6.29% 96.78% 61.16% 23.80% 49.47% 4.48% 56.42% 50.44% 5.88% 40.69% 28.00% 29.71% 23.69% 60.03% 42.80% 12.07% 39.00%

7.1.3 Loans & Advances:

Seri al No. 1 2 3 4 5 6 7 Lease, Loans & Advances Name of NBFIs Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB 2011 2,956,524,86 9 5,176,632,52 9 2,531,843,65 3 18,062,666,3 41 1,832,652,38 9 1,715,445,63 2 9,790,069,30 7 2010 2,144,058,32 9 3,767,483,17 9 2, 559,763,567 13,551,165,7 51 1,052,791,84 8 1,326,503,02 5 6,739,617,93 3 2009 630,948,921 2,518,231,62 5 2,349,330,00 0 9,234,534,84 1 955,166,623 1,518,946,78 3 0 2008 1,027,866,85 6 1,630,490,44 7 2,306,490,98 0 7,364,599,32 4 787,715,078 1,165,867,89 5 0 2007 1,097,468,35 3 1,058,927,73 7 1,647,525,68 1 5,593,707,13 5 227,692,332 856,961,661 0 Growt h rate 28.11 % 48.69 % 11.34 % 34.05 % 68.44 % 18.95 % 9.78%

8 9 10 11 12 13 14 15 16 17 18 19 20 21

IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

21,254,201,3 66 1,715,445,63 2 12,900,135,2 25 4,150,956,76 8 9,480,970,00 0 3,514,886,91 8 3,974,920,00 0 12,313,352,0 62 8,547,246,60 3 3,750,047,56 2 8,720,700,06 3 5,862,951,62 3 7,556,132,13 4 9,458,962,17 8 7,393,654,4 22

19,561,593,7 06 1,326,503,02 5 10,506,880,8 76 4,048,485,43 9 8,093,340,00 0 2,059,245,75 1 3,568,010,00 0 7,411,922,41 1 7,156,249,68 9 3,681,792,62 1 7,236,967,24 9 4,611,055,85 4 7,212,452,34 9 7,125,397,62 9 6,109,075,8 33

7,999,956,97 2 1,444,030,15 5 6,847,289,74 6 4,427,261,59 2 5,854,220,00 0 1,768,013,46 8 3,261,260,00 0 2,135,371,12 9 3,835,031,04 0 2,418,059,57 1 75,602,502,2 41 2,561,503,35 7 7,691,824,01 8 6,799,716,02 5 7,135,866,5 77

7,023,891,71 4 1,274,220,23 0 5,473,941,10 3 4,533,615,39 9 1,879,040,00 0 1,125,388,93 8 1,820,704,34 8 1,499,638,35 2 3,302,677,74 9 1,710,606,92 9 57,781,997,1 18 2,516,583,01 1 7,248,594,51 3 7,048,238,34 5 5,643,912,7 78

5,953,755,10 6 1,215,701,85 0 4,010,336,58 3 4,126,584,64 5 1,090,110,00 0 944,140,969 2,280,171,36 4 1,222,034,91 5 2,976,151,21 1 1,119,189,88 3 2,084,546,59 0 1,330,396,47 3 5,617,820,00 0 2,357,970,37 8 2,229,104,4 22

37.46 % 8.99% 33.92 % 0.15% 71.73 % 38.91 % 14.91 % 78.17 % 30.18 % 35.30 % 43.02 % 44.89 % 7.69% 41.52 % 34.95 %

7.2 Ratio Analysis:

Serial No. 1 2 3 4 5 6 7 8 9 10

ROE Name of NBFIs

Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing

2011 26.39% 27.16% 24.70% 23.56% 9.53% 17.50% 36.96% 43.64% 13.35% 27.07%

2010 14.58% 22.44% 19.50% 21.92% 15.31% 15.94% 31.40% 41.05% 27.35% 22.19%

2009 13.64% 10.30% 10.66% 20.93% 9.16% 19.39% 1.88% 28.43% 1.51% 14.93%

2008 22.40 % 18.67 % 23.22 % 21.06 % 11.36 % 22.41 % 10.43 % 27.59 % 14.21 % 17.05

2007 15.39 % 5.28% 13.48 % 20.89 % 5.29% 22.45 % 9.74% 17.45 % 14.54 % 20.14

Growth Rate 14.44% 50.59% 16.34% 3.05% 15.84% -6.04% 39.56% 25.75% -2.11% 7.67%

% 11 12 13 14 15 16 17 18 19 20 21
IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance

2.99% 35.49% 26.09% 20.01% 30.59% 7.09% 14.45% 44.42% 46.76% 26.20% 25.56% 25.21%

2.85% 35.42% 17.34% 14.08% 28.91% 4.51% 14.45% 37.40% 24.93% 13.50% 23.96% 21.38%

5.95% 40.94% 19.64% 12.59% 21.26% 17.69% 126.76 % 18.62% 17.42% 14.00% 17.52% 21.11%

7.97% 41.23 % 14.82 % 11.99 % 26.00 % 18.24 % 9.45% 26.55 % 18.31 % 14.60 % 17.63 % 18.82 %

Industry Average

% 10.62 % 19.32 % 10.98 % 16.11 % 29.00 % 19.81 % 19.80 % 20.64 % 14.60 % 13.80 % 22.04 % 13.80 %

-27.15% 16.42% 24.16% 5.56% 1.34% -22.64% -7.56% 21.12% 33.78% 17.38% 3.78% 16.26%

Seri al No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

ROA Name of NBFIs

Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix

2011 8.95% 5.00% 12.66% 3.59% 3.41% 7.80% 12.79% 5.35% 4.90% 5.33% 3.59% 8.80% 6.35% 4.79% 8.95% 4.67%

2010 4.25% 3.41% 1.15% 2.92% 7.73% 8.81% 7.01% 4.11% 3.81% 2.31% 3.46% 5.54% 3.98% 4.25% 6.00% 3.51%

2009 2.80% 3.54% 1.31% 3.42% 3.59% 9.09% 56.06% 2.50% 2.27% 1.66% 2.45% 4.66% 5.01% 2.37% 5.55% 3.88%

2008 4.20% 4.90% 2.84% 2.92% 6.71% 7.62% 48.53% 2.37% 2.73% 1.34% 2.63% 4.89% 5.94% 3.45% 5.59% 0.34%

2007 1.99% 1.66% 1.54% 3.08% 4.41% 15.02 % 9.81% 1.57% 2.96% 1.39% 2.47% 3.00% 3.15% 3.43% 5.10% 3.43%

Growth Rate 45.67% 31.76% 69.38% 3.91% - 6.22% -15.11% 6.84% 35.87% 13.45% 40.06% 9.73% 30.87% 19.21% 8.70% 15.07% 8.04%

17 18 19 20 21

Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance

4.40% 16.27% 13.24% 6.37% 7.68% 7.37%

34.05 % 7.63% 5.83% 5.13% 5.66% 6.22%

3.27% 3.50% 3.72% 2.32% 4.99% 6.09%

3.42% 4.09% 4.32% 2.41% 4.57% 5.99%

4.26% 3.33% 2.51% 2.85% 4.66% 3.89%

0.77% 48.68% 51.53% 22.30% 13.30% 17.37%

Industry Average

Seri al No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Debt Equity Ratio Name of NBFIs

Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance

2011 2.98 7.51 1.68 14.68 2.06 1.34 0.00 6.30 1.79 1.79 0.74 3.03 4.66 5.27 2.67 0.47 6.70 2.13 7.00 4.70 2.78 3.82

2010 3.36 8.03 5.50 13.27 1.88 0.99 0.00 8.48 3.18 3.18 0.66 5.40 2.56 4.95 4.87 0.61 6.91 4.05 9.21 5.90 3.73 4.61

2009 1.52 7.28 8.07 11.21 1.47 1.10 0.00 8.32 3.02 3.02 0.96 7.79 2.65 7.07 4.18 8.93 7.41 3.94 10.13 6.60 3.93 5.17

2008 2.49 5.43 8.12 2.02 1.20 1.17 0.00 9.54 4.99 4.99 1.33 8.68 1.75 6.07 3.55 8.65 6.10 4.97 8.12 6.60 2.04 4.66

2007 3.63 5.58 7.56 1.09 1.10 1.58 0.00 9.28 5.96 5.96 1.79 5.67 1.58 5.37 3.68 9.38 4.10 5.31 5.27 5.70 1.87 4.35

Growth Rate - 4.75% 7.71% 31.34% 91.64% 16.98% - 4.09% - 9.23% 25.97% 25.97% 19.66% 14.50% 31.08% - 0.47% - 7.65% 52.71% 13.06% 20.42% 7.35% - 4.71% 10.42% - 3.20%

Industry Average

Seri al No. 1 2

Financial Expense (Interest) Coverage Ratio Name of NBFIs

Bangladesh Fin. and Inv. Bangladesh Industrial Fin.

2011 1.32 0.60

2010 0.49 0.37

2009 0.32 0.38

2008 0.45 0.51

2007 0.26 0.18

Growth Rate 49.86% 35.62%

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance

2.15 0.51 1.04 1.63 3.16 2.07 0.69 1.65 0.77 2.67 1.40 0.70 2.02 0.58 0.50 2.59 2.07 1.60 1.15 1.47

0.54 0.37 1.67 1.89 1.44 1.75 0.45 1.25 0.60 1.79 0.66 0.46 1.26 0.40 3.81 1.52 0.81 1.30 0.75 1.12

0.11 0.35 0.93 1.17 96.55 1.46 0.25 1.17 0.36 1.53 0.91 0.27 1.14 0.32 0.28 0.54 0.59 1.30 0.57 5.26

0.27 0.36 5.85 0.79 29.95 1.38 0.31 1.15 0.37 1.50 1.43 0.42 0.97 0.03 0.36 0.62 0.72 1.40 0.43 2.35

0.18 0.40 2.44 2.05 6.47 1.29 0.37 1.14 0.25 1.41 0.73 0.37 0.97 0.28 0.45 0.48 0.31 1.40 0.60 1.05

86.30% 6.33% -19.08% -5.58% -16.43% 12.55% 17.02% 9.68% 33.02% 17.31% 17.83% 16.83% 20.04% 19.38% 2.52% 52.44% 60.36% 3.39% 17.57% 8.79%

Industry Average

Seri al No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Financial Expense to Total Expense Name of NBFIs Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing 2011 0.69 0.81 0.75 0.73 0.61 0.38 0.59 0.54 0.71 0.65 0.61 2.66 0.39 0.71 0.67 2010 0.77 0.85 0.87 0.85 0.52 0.53 0.73 0.64 0.89 0.67 0.76 3.99 0.60 0.76 0.69 2009 0.82 0.86 28.92 1.96 0.44 0.90 0.54 0.64 0.77 1.03 0.92 5.67 0.48 0.84 0.55 2008 0.78 0.85 0.87 0.77 0.16 1.23 0.33 3.47 0.73 0.91 0.90 0.78 0.45 0.75 0.71 2007 0.86 0.92 0.95 0.75 0.29 0.68 0.42 0.71 0.86 0.93 0.90 0.66 0.47 0.63 0.77 Growth Rate -5.17% -3.17% -5.81% -0.65% 19.76% -13.42% 8.59% -6.92% -4.74% -8.85% -9.16% 41.81% -4.75% 3.06% -3.35%

16 17 18 19 20 21

Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

0.75 0.81 0.66 0.53 0.58 0.70 0.74

0.75 0.81 0.78 0.70 0.78 0.76 0.89

0.76 0.76 0.69 0.59 0.70 0.78 2.36

0.80 3.44 0.68 0.63 0.69 0.83 0.99

0.81 0.78 0.74 0.80 0.22 0.84 0.71

-1.82% 0.69% -3.14% -9.76% 27.45% -4.44% 0.84%

Seri al No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Total Investment to Net Worth Name of NBFIs Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average 2011 3.70 7.49 1.33 14.62 2.14 2.27 1.38 5.91 1.94 40.80 1.18 3.14 5.76 5.05 4.01 2.79 4.24 2.56 5.22 4.76 3.10 5.88 2010 4.56 7.54 4.12 12.77 2.10 2.04 1.61 8.44 2.57 64.76 1.28 5.09 4.46 4.88 6.52 2.88 7.32 4.77 7.72 5.83 6.94 8.01 2009 5.03 6.74 0.97 12.89 2.01 2.37 1.35 5.79 6.97 13.26 0.35 7.45 4.34 4.70 6.06 8.73 5.63 11.61 7.34 6.86 4.13 5.93 2008 4.98 4.71 7.23 14.53 1.72 2.54 1.22 6.04 5.96 11.83 0.18 7.90 3.22 4.06 5.15 6.19 4.40 13.38 6.53 7.16 4.81 5.89 2007 7.66 3.03 6.04 12.73 0.90 2.41 1.21 6.41 5.51 13.02 2.40 5.71 3.12 4.25 5.06 7.61 3.80 6.50 5.51 6.51 5.27 5.46 Growth Rate -16.65% 25.44% -31.48% 3.52% 24.03% -1.44% 3.43% -1.98% -22.98% 33.05% -16.27% -13.86% 16.58% 4.36% -5.65% -22.22% 2.80% -20.75% -1.35% -7.52% -12.43% 1.85%

Seri al No. 1

Restated Earnings Per Share (EPS) Name of NBFIs Bangladesh Fin. and 2011 4.58 2010 1.83 2009 17.52 2008 28.35 2007 19.30 Growth Rate -30.20%

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

37.26 72.26 74.00 17.26 27.56 122.27 221.18 18.03 67.39 14.01 32.00 31.37 28.32 9.47 33.78 26.27 10.65 6.00 71.64 11.44 44.61

28.03 51.19 55.00 19.05 25.88 82.92 136.98 35.54 40.28 12.84 14.00 20.02 20.01 4.94 28.40 16.98 7.57 3.00 30.72 12.51 30.84

13.14

23.95 38.65

20.66 20.95 45.00 8.05 55.04 46.38 26.17 18.18 56.50 27.57 2.43 13.67 16.91 4.96 23.40 19.80 33.99 0.58 23.44 95.54 27.55

15.89% 36.28% 13.24% 21.01% -15.88% 27.42% 70.50% -0.21% 4.50% -15.57% 90.50% 23.08% 13.76% 17.55% 9.61% 7.32% -25.18% 79.34% 32.22% -41.18% 12.80%

47.00 12.20 48.53 157.15 67.73 17.83 38.86 13.25 9.81 23.26 18.50 3.56 31.94 12.27 44.37 2.02 28.95 92.20 35.00

56.00 13.75 49.16 60.47 50.50 18.65 46.54 18.73 5.47 19.39 14.30 4.56 39.77 13.13 42.78 2.11 27.22 81.83 31.21

Seri al No. 1 2 3 4 5 6 7 8 9 10 11

Dividend Payout Ratio Name of NBFIs Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC 2011 22.00% 25.00% 65.00% 35.00% 15.00% 25.00% 40.00% 100.00 % 16.00% 60.00% 10.00% 2010 20.00% 22.50% 50.00% 32.00% 15.00% 75.00% 105.00 % 110.00 % 25.00% 75.00% 10.00% 2009 10.00% 22.00% 0.00% 30.00% 12.00% 20.00% 110.00 % 35.00% 16.00% 30.00% 10.00% 2008 15.00% 20.00% 0.00% 0.00% 0.00% 20.00% 14.00% 40.00% 15.00% 30.00% 15.00% 2007 0.00% 0.00% 0.00% 0.00% 0.00% 20.00 % 12.00 % 38.33 % 12.50 % 0.00% 15.00 % Growth Rate 10.05% 5.74% 6.78% 3.93% 5.74% 5.74% 35.12% 27.09% 6.37% 18.92% -9.64%

12 13 14 15 16 17 18 19 20 21

LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

55.00% 35.00% 20.00% 75.00% 35.00% 20.00% 80.00% 75.00% 82.50% 40.00% 44.31 %

35.00% 17.50% 175.00 % 38.50% 30.00% 15.00% 50.00% 30.00% 107.50 % 25.00% 50.62 %

30.00% 17.50% 12.50% 20.00% 25.00% 10.00% 40.00% 20.00% 14.28% 30.00% 24.49%

25.00% 15.00% 0.00% 35.00% 22.00% 12.50% 40.00% 30.00% 30.00% 30.00% 19.45%

10.00 % 12.00 % 0.00% 30.00 % 0.00% 15.00 % 30.00 % 0.00% 20.00 % 30.00 % 11.66 %

53.14% 30.68% 12.47% 25.74% 12.31% 7.46% 27.79% 25.74% 42.51% 7.46% 39.62%

Serial No.

Name of NBFIs 2011 Bangladesh Fin. and Inv. Bangladesh Industrial Fin. Bay Leasing DBH FAS Finance & Investment First Lease Fin. & Inv. Ltd. ICB IDLC Islamic Fin. and Inv. International Leasing IPDC LankaBangla MIDAS Financing National Housing Peoples Leasing Phoenix 2010

Restated NAV Per Share 2009 2008 2007 Growth Rate -39.00% 1.40% 13.08% 11.77% 13.71% -12.21% 0.77% 40.31% 4.65% -0.65% -4.39% 65.19% -2.81% 5.07% -40.69% 4.79%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

17.36 137.2 1 262.4 0 323.0 0 186.2 7 157.4 7 330.8 4 615.0 3 134.9 9 248.9 4 208.6 3 90.18 120.2 4 141.5 6 17.69 226.7

12.53 124.93 262.50 275.00 124.49 162.38 264.03 398.85 129.95 181.55 214.08 47.44 122.15 142.06 12.33 147.98

128.43 127.63 261.00 275.00 133.26 247.97 364.08 268.55 118.02 299.31 222.65 23.96 124.90 134.55 121.39 155.55

126.55 128.33 260.15 214.00 121.05 219.38 386.86 207.91 131.21 300.09 234.88 17.07 135.77 128.90 114.74 148.77

125.42 129.81 160.47 207.00 111.40 265.12 320.86 158.67 112.57 255.50 249.65 12.11 134.78 116.16 142.93 188.08

17 18 19 20 21

Premier Leasing Prime Finance Union Capital United Leasing Uttara Finance Industry Average

5 124.2 1 21.49 18.17 307.0 0 44.77 177.8 2

117.52 20.24 12.00 239.00 52.21 145.87

115.62 142.92 11.62 217.00 526.29 191.41

113.68 137.96 11.51 196.00 434.08 179.47

113.12 144.68 11.76 177.00 458.71 171.2 3

2.37% -37.92% 11.49% 14.76% -44.11% 0.95%

9.0 LANKABANGLA FINANCE LTD. (A CASE STUDY)

9.1 Company Profile:
LankaBangla Finance Limited (LBFL) a joint venture financial institution established with multinational collaboration is in operation since 1997 having license from Bangladesh Bank under Financial Institutions Act, 1993. With institutional shareholding structure, educated & motivated human resources, friendly working environment & dynamic corporate culture has enabled LBFL to be a diversified financial services providing institution of the country. Technical support provided by Sampath Bank Limited, Sri Lanka has been working as a catalyst to emerge LBFL as most innovative financial solution provider strictly in compliance with the rules & regulations of Bangladesh Bank. The company was formerly known as Vanik Bangladesh Limited and changed its name to LankaBangla Finance Limited in April 2005. LankaBangla Finance Limited was incorporated in 1996 and is headquartered in Dhaka, Bangladesh.
LankaBangla Finance Ltd. (LBFL) At A Glance Incorporation of the Company 5 November, 1996 Commencement of Business 5 November, 1996 Licensed as Financial Institution 30th October, 1997 by Bangladesh Bank Listing on Dhaka Stock Exchange 17 October, 2006 Licensed as Primary Dealer 23rd November, 2009 Position in the Bangladesh NBFI Industry: 5th According to Market Capital 4th According to Asset Size Tk. 13,596,233,000 Market Capital (as of October 17, 2011) Total Asset (Year 2010) Tk. 19,322,240,000 LankaBangla Securities Ltd., LankaBangla Asset Management Subsidiary Companies Company Ltd., & LankaBangla Investments Ltd.

9.2 Products & Services:

LankaBangla Finance Limited provides a range of financial services primarily in Bangladesh. It offers credit and investment products, including lease finance, term finance, short term finance, working capital finance, work order finance, car finance, domestic factoring of accounts receivables, and SME finance, as well as mortgage loans comprising real estate developers finance and home loans. The company also provides corporate services consisting of syndication of lease/loan, advisory services,

and investment counseling. In addition, it offers merchant banking services, such as investors' portfolio management services, margin loan, IPO advisory, issue management, and underwriting; various deposit schemes; and stock brokerage services. One of the most important activities of LBFL is Lending Government by purchasing Treasury Bills and Bonds from Bangladesh bank through Primary Dealership.
Per

9.3 Shareholding Structure

The shareholding structure of LBFL consists of Commercial Banks, Investment Bank, Corporate & prominent Industrialists from home & abroad. The current structure is:
Sl. No 1. 2. a) b) c) 3. Details Foreign Sponsors: Sampath Bank PLC, Sri Lanka Local Sponsors: One Bank Limited, Bangladesh SSC Holdings Limited, Bangladesh Shanta Apparels Limited, Bangladesh General Shareholders: Shareholding Structure 04.86% 01.07% 01.84% Percentage 09.47%

29.30 % 61.23% 100.00%

9.3 Departments in LBFL

10.0 FINDINGS & RECOMENDATION

9.1 Present Performance of NBFIs in Bangladesh:
One important arena of NBFIs is the deployment of funds in the long term financing. By definition, banking financial institutions should not involve in the long term financing and they are the institutions related to the money market instruments and allowed to make only fully collateral short term lending. Bank business is based on the depositors money. Lending long is risky because it creates least accountability to the borrowers. Borrowing short and lending long by the BFIs create a macroeconomic stability. mismatch in the financial system and hamper the

Time lag between lending and borrowing of the commercial banks has leaded a maturity mismatch as there is about 10 months average maturity gap between the deposit fund and loan portfolio (BB, FID). Again the interest rate charged by banks does not cover the total cost of funds. Before 1990, administered the there was direct monetary control and the central bank

interest rate for both deposit and credit. After that although interest rates were not controlled by the central bank, commercial banks did not have such professionally expert personnel to assess the lending risk. Banking sector in Bangladesh felt a lack of basic expertise, which was needed for the market-oriented approaches. In the same way performance of the two public Development Financial unsatisfactory as Institutions ( DFIs) namely BSB and BSRS are very

their non-performing loan is over 50% for the last several years.These issue demanded for a

sustainable basis for long term financing which is a major part of the NBFIs business by nature. However, in Bangladesh, the BFIs are still the principal sources of long term financing, accounted to about 70-80% term loan disbursement (BB, FID). Before 80s, there was no alternative mode of long term lending other than the BFIs. So BFIs were in a tremendous pressure to provide long term financing for industrialization of the country. After 80s, there was consensus among the government policymakers and international bodies to search an alternative source. Subsequently, NBFIs have started to emerge in the financial system of Bangladesh. 3.1 Term Financing by NBFIs Term loan provided by the financial system of Bangladesh is about US$ 250-300 million per year, equivalent to amounts to around 1.5% of our GDP, while the public and private investment

about 16% of GDP (FIDP working paper, 1999). Without smooth long term lending system, industrial development of the country is not possible. Analysis of the operational activities of the NBFIs shows that many of them have strong participation in lease financing. However, though leasing is considered as an alternative mode of long term lending, NBFIs contribution to total long term financing is still very small in amount. As on December 31, 2001 total financing of 25 licensed NBFIs stood Tk. 2,1240.7 million (NBFIs-FRs). According to the statistics of BB, 2.85 percent of the outstanding amounts of loans//leases as on June 30, 2001 (BB, 2002) 3.2 NBFIs Performance in Leasing We discuss NBFIs performance in leasing specially in this section because of its some imposing was found classified as bad debt

features though leasing are analyzed under the head of long term financing in this paper for many times. One important feature is that the leasing industries in Bangladesh have grown significantly within the last 10 years. Competition among the leasing industries has been intensified and this competition in leasing business does not come only from the NBFIs but also from BFIs. Many commercial banks and other financial institutions like ICB (Investment Corporation of Bangladesh) are participating in the leasing business. The commercial banks are doing lease business as Commercial EZARA under Section 7 DA(4) of the Bank Companies Act 1991.

banks are also taking companies. In this

advantage

of

their

low

costs

of

fund

than

the

leasing

situation, leasing companies have an argument that if banks are allowed to do lease business, so they should be permitted to do banking in a limited scale. This type of agreement may not be considered as good because it would create difficulties in the smooth functioning of these two sectors. Table 2 shows the expansion of the leasing companies in lease market over the period of 1999 to 2001. During the period the number of participation of the completely local and private owned companies has increased substantially from 3 to 8, whereas the joint venture between domestic and foreign government/companies remained stagnant in 10. The total number of participation of NBFIs in leasing market has increased to 19 in the year 2001, which was 16 in 2000 and 13 in 1999. The increasing number of participation in the leasing market has made the market more competitive in last few years.

An analysis of the financial position of various NBFIs shows that about 70% of the lease asset of NBFIs is captured by 7 NBFIs namely IDLC, ULCL, PLC, UFIL, GSPFCL, IPDC, and ILFS. Table 3 shows the efficiency of asset return in terms of Return on Asset (ROA) and Return on Equity (ROE) ratios of 15 NBFIs. These 15 NBFIs are selected on the basis of the higher lease asset share among NBFIs as evident from their financial statements. In some cases half yearly data have been used due to unavailability of calendar year data. However, sufficient attention has been given to the reliability of data and its sources. Industrial averages have been calculated from the sample because these 15 NBFIs capture major market share in leasing asset (about 97%) in this sector. From the table 3 we find that in the year 2000 and 2001 all major leasing companies have ROE greater than the industry average. In terms of ROA, though some of them have the ratio lower than the market average but many of them have done very well. NBFIs like ULCL, UFIL, ILFS, GSPFCL were companies. in better position in respect of ROA and ROE among the major

Higher ROA and ROE of major leasing industries suggest higher return on their investment and shows a strong performance contribution in the economy of Bangladesh. Product diversification The imposing picture of the lease industry in Bangladesh over a short period of time built up the confidence that it could grow with our expected level. Leasing should not be confined with some in their business as well as their expansion and

selected sectors. It should come with a view to financing small and medium scale enterprises, especially taking into considerations into the manufacturing enterprises, forward and backward linkage industries liberalization of etc. The leasing companies have a changing role with the

capital and money market, with a vision to increase investment and production of the economy. Particularly, leasing sector in Bangladesh has identified the areas capital machinery, heavy construction equipment, transport vehicles, information technology (IT), energy and power

sector, air conditioning plants and equipment, tractors, trailers, power tillers, consumer durables etc. as the potential for financing (Chowdhury A, 2001). However, leasing companies in Bangladesh are confined with the less risky investment. Leasing should be expanded to more risky and higher return investment like venture capital, energy resource etc. In Japan, leasing in computers and office machinery captures more than two third of the market. In Bangladesh, leasing companies can come forward to expand the IT sector, and thereby can play a significant role in the development of the economy.

9.2 Suggested Alternative Activities of NBFIs in Bangladesh:

(a) Exploring Alternative Sources of Funds The finance and leasing companies across the world are using different sources for collecting funds.NBFIs in Bangladesh may also explore the possibilities of gaining access to new sources of funds likeissuance of commercial paper and discounting or sale of lease receivables. However, in releasing suchnew products, some regulatory changes have to be made. Another

innovative and promising sourceof funds may be the securitisation of assets. In this connection, IPDC launched first asset backedsecurities in 2004 as an alternative source of funding. This new instrument emerged as an importanttool and added a new dimension in the financial market. The core attraction of this scheme was the at the time of payment thereof, whichever is earlier, and this deduction was deemed to be finaldischarge of tax liability (Chowdhury, 2005). But changes in taxation policy in 2005 by thegovernment have made the future of this instrument less attractive for the concerned financialinstitutions. (b) Competition and Product Diversification NBFIs in Bangladesh are operating in a highly competitive environment. The competition for NBFIs is evenmore challenging as they have to compete with banks. Given the changes in the business environment, theneed for product diversification is very important. At present, lease financing constitutes 55 percent of thetotal long term assets of NBFIs. The remaining part concentrates mainly on term financing and housingfinance. Some of NBFIs are primarily engaged in leasing, some are also diversifying into other lines of business like merchant banking, equity financing etc. Currently, 22 NBFIs (out of 29) specialize in leasefinancing. NBFIs are permitted to undertake a wide array of activities and therefore should not confinethemselves to one or two types of product only. Leasing, no doubt, presents a good alternative form of termfinancing but NBFIs should also venture into diversified use of their funds such as merchant banking,venture capital financing, factoring, etc. for a healthy growth of the capital market. (c) Enhancing Capital Market Activities NBFIs around the world carry out a significant role in the development of the capital market. Stronginstitutional support is necessary for a vibrant capital market which is the core of economicdevelopment in any market based economic system. NBFIs through their merchant banking wing canact in this regard. A total of 30 companies are now listed as merchant banks in Bangladesh, of which23 are fullfledged, 6 are issue managers, and only one is a portfolio manager. Only nine NBFIs haveregistered with SEC for performing merchant banking activities. But their activities in the capitalmarket are rather limited ( Financial Sector Review , Bangladesh Bank, 2006). Active participation of merchant banks is essential to accelerate the capital market activities which can expedite the economicgrowth of the country. The success of merchant banking operations is largely linked to the developmentof the security market. So NBFIs should concentrate more on their opportunities in the capital market. (d) Issues of Taxation The financing mode of lending and leasing are totally different from one another. The concept andprocedure particularly the accounting and taxation system are also quite different. So it is advisablenot to mix up the two different operations,

otherwise it might distort the basic financial norms. As thetax treatment is totally different in leasing business, mixing up of lending and leasing in the samebusiness portfolio might create the possibility of tax evasion (Sarker, 2004). (e) Market Segmentation It has been discussed earlier that though banks and NBFIs compete with each other they can alsoperform complementary functions. As suggested by Jamal (2004) and Sarker (2004), to function ascomplementary institutions both banks and NBFIs should follow some ethical and technical norms. Banks wishing to enter in the leasing business, which is essentially a core operation of NBFIs, shoulddo so through opening subsidiaries so that a level playing field for NBFIs can be maintained. This isneeded as banks have access to lower cost funds compared to NBFIs, which puts the former in anadvantageous position. Alternatively, banks can go for joint financing under syndication arrangementswith leasing companies on any project proposal. Again, banks can concentrate on working capitalfinance and foreign exchange operations, which matches more with their asset-liability management.Long term investment like financing capital machineries can be done by NBFIs and in the event whenbanks want to engage in such activities they can place their funds with an NBFI to extend leasefacility for those machineries. Jamal (2004) mentioned that this is important for two reasons: first, incase of lease facility, the machineries will remain under the ownership of leasing companies, who willhave absolute authority and control on their assets. Second, machineries will be imported in the nameof a leasing company and letter of credit will be opened against its name. So, over invoicing or underinvoicing may be averted and thereby more transparency will be ensured and tax evasion may beplugged.

10.0 CONCLUSION
Emergence of NBFIs has created a new avenue in our bank dominance traditional financial system. Traditionally banks are doing such businesses that they are not

supposed to do. Long term lending of banks is mostly unfamiliar product for them, and has created a serious distortion in the financial market. Rather than gaining any benefit from such types of activities, the society is now carrying the load of overwhelming default loans. As leasing is

considered as an alternative of leasing business. The performance of the NBFIs in leasing business suggests that the industry can be growing up in a sustainable basis. But leasing must not be confined with selected sectors. NBFIs have to be equipped with highly professional personnel and technological advancement to chase the future opportunities and competition as well. Page 16 Strong institutional support is necessary for the development of capital market which is the core long term financing many NBFIs have strong performance in

of economic development in the market economic system. NBFIs around the world provide institutions support to the capital market. In Bangladesh, only 7 NBFIs are registered with the SEC and their activities in the capital market are very limited. So NBFIs should concentrate more on their activities in the capital market. NBFIs are suffering from high cost and scarcity of funds. high cost of fund non-banks are forced to compete with the banks those have relatively low cost of fund. This situation somewhat hampers the growth and development of NBFIs. For rapid growth and development of this sector, fund problem should be solved on a priority basis. Opening of a refinancing window even for a limited period of time may be considered after a strategic evaluation. Banking has the multifaceted own activities so that for bringing more efficiency in their own efficiency as well as the efficiency of the financial system they should not be involved with the activities that the NBFIs can do. It is recommended that government and the central bank will take initiatives to ease the fund constraint of NBFIs so that they can minimize their cost of fund and to bring their cost of fund at a market level. NBFIs from their part shall be much At present, with

more attentive in rigorous project analysis to perform the loans well. A modern and dynamic regulatory framework is required for the rapid and effective development of NBFIs. The NBFIs are now regulated by the Fiancial Institutions Act 1993 and Financial Institutions Regulations 1994. Some weaknesses of these regulations have been identified. NBFI regulations should be the classification into deposit and non-deposit takers. Those NBFIs activities are involved with the capital market that is those obtain funds through public offering of securities should be under the regulatory jurisdiction of the Security and Exchange Commission. Bangladesh Bank has formulated and declared policies for

classifying and Page 17 provisioning of investment resources of NBFIs in June 2000. The classification rule has been formulated with a view to judging quality of investment funds, strengthening discipline in lending and recovery, securing peoples deposit, having provisions for the loss of unrecoverable invested funds and imposing interest against bad investment. This classification procedure will definitely improve and promote the activities of NBFIs, but the procedure is always subject to

improvement with the diversification of products of NBFIs. Government of Bangladesh has already taken some important steps to

patronize the sector including allowance and pension and insurance fund to invest in the capital market, reduction of stamp duties and taxes of issuing cost of bonds and imposition of 10% tax on interest income arising from national savings certificate. Government has already initiated to build a secondary bond market with IMF assistance. It will be better for NBF sector if the secondary bond market could be established on an urgent basis. The NBFIs should publish their annual report following a unique system. It is good that BB have simplified the rules and procedures for submission of returns to BB. It is recommended that BB should include analysis of NBFIs sector in details in their periodical

publications. In this way, accountability on the activities of NBFIs can be established with more

efficiency to the stakeholders. NBFIs deposit and credit should be accounted in the money supply for effective monetary and credit management. In sum, this paper mainly discusses and highlights some important aspects and areas of NBF

sector of Bangladesh that could receive much attention from policymakers. There are many problems in the development process of NBFIs and consequently strengthening the financial system of Bangladesh. It is now well established that NBFIs can contribute much in strengthening the financial system as well as in the process of economic development of the Page 18 country. Since inception in 1986, NBFIs are some-what successful to draw attention of the people and establish its importance in the financial sector as well as in the economy of Bangladesh. It is hoped that in future NBFIs would be able to play more significant role in the development of economy of Bangladesh. Further research on the significance of their contribution in the economy is required.

11.0 REFERENCES
1.Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance 2.Index of economic freedom 2010, The Heritage Foundation 3.MRA (Microcredit Regulatory Authority). 2006. NGO-MFIs inBangladesh. Vol. III (June). MRA, Dhaka, Bangladesh. Available onthe Web site of Bangladesh Bank, www.bangladeshbank.org (choosePublications, then All, then NGO-MFIs in Bangladesh). AccessedAugust 2009. 4.Centre for Policy Dialogue, Website: www.cpd-bangladesh.org 5.Bangladesh Bank (2006), Financial Sector Review, Vol.1, No.1, May,Policy Analysis Unit,Research Department. 6.Bangladesh Leasing and Finance Companies Association (BLFCA)Year Book (Various Issues) 7.Barai, M. K., Saha, S., and Mamun, A. A (1999), Progress andProspects of Non-Bank Financi al Institutions in Bangladesh, BankParikrama, Vol. XXIV, No. 1 8.Chen Y.C. (2001), Lease Financing in Taiwan, In Lisa Paul ed.:World Leasing Yearbook 2001, 9.http://www.fasbd.com,http://www.ipdcbd.com, 10.http://www.gspfinanceco.com, http://www.amhajjfinance.com 11.http://www.lankabangla.com, http://www.idlc.com 12.http://www.plfsbd.com, http://www.primefinance.net 13.Bangladesh Economic Update, March 2011, www.unnayan.org

12.0 BIBLIOGRAPHY

13.0 APPENDIX