Role of banks in the socio-economic development of Bangladesh
Ever since gaining independence, Bangladesh’s banking sectors has played a crucial role in
shaping the country’s economy, and continues to do so as Bangladesh marches towards
becoming a developed nation.
It was the country’s banking industry that played a leading role in building up the economic
structure post-war. Banks, especially state-run ones, shaped our economy after independence
by providing funding to the agriculture, industrial, service and manufacturing sectors. Since
then, the banking industry has been growing year after year to keep pace with economic
development.
Bank is main stream of the financial system of a country. The financial system of Bangladesh is
dominated by the banking sector. The dominance of the banking sector makes the financial
sector vulnerable on the one hand, but highlights the crucial importance of the sector in
resource mobilization and economic growth, on the other. Commercial banks have been
playing an important role in the economic development of Bangladesh. They provide investible
funds to both the public sector, and specially the private sector. The role of banking sector in
accelerating economic growth is discussed below:
Bangladesh is an import-dependent country. It needs to import raw materials,
accessories and machineries to foster development of the industrial sector, including
RMG sector. Banks have been facilitating payment, finance and risk management
services to the sector.
Banks play a major role in facilitating remittances by migrant workers.
The importance of agriculture sector in the economy is bare describes. Government has
given highest priority to agriculture and its allied sectors for adequate credit with low
cost. Banks, specially the Bangladesh Krishi Bank, Private Commercial Banks, Specialized
Banks, State-owned Commercial Banks, and Foreign Commercial Banks accounted for
the largest share of agricultural credit. Banks disburse credit and loan to the agriculture
sector with low cost.
The Bangladesh Bank(BB) has been encouraging all banks and Non-Bank Financial
Institutions(NBFIs) to grant loans to women entrepreneurs at reduced interest rate.
To ensure adequate funding for Small and Medium Enterprises(SMEs), the Bangladesh
Bank(BB) in 2010 formulated the “SME Credit Policies and Programmes” aimed at helping
SMEs in achieving sustainable inclusive growth.
In addition, Banks have contributed considerably in the process of economic growth of
Bangladesh. However, their contribution would have been greater, if they had effectively
addressed various challenges faced by the banking sector such as weak management, poor
governance, lack of strong leadership, and non-compliance with ethical standard leading to
various types of banking scams such as money laundering and NPLs.
