Introduction

Financial sector reform in Bangladesh started in 1976 with privatization of the banks to
encourage private investment, and continue in the mid-1980s as part of Structural Adjustment
Policies (SAP), between 1992 and 1996, a Financial Sector Reform Programmed (FSRP) was
implemented. Its major aim was to improve the operations of Nationalized Commercial Banks &
(NCBs) through the development of new banking technologies, computerization of
banking operations, upgrading of skills, changing outdated internal banking practices
and corporate and credit cultures. Further reforms are underway. In Bangladesh, there are 49
banks & with 6318 branches of which there are 30 private commercial banks, 10 foreign
commercial banks and 9 nationalized commercial and specialized banks. The banking sector
employs about 110,000 people. Total deposits and loans and advances also increased
considerably. between 1990and 2005 some financial deepening has taken place as a result of
intensive reforms in the 3nancial system. Foreign joint venture banks now hold about 9.5 percent
of the total assets of commercial banks.
A financial institution is an establishment that conducts financial transactions such as
investments, loans and deposits. Almost everyone deals with financial institutions on a regular
basis. Everything from depositing money to taking out loans and exchanging currencies must be
done through financial institutions. Here is an overview of some of the major categories of
financial institutions and their roles in the financial system. A brokerage acts as an intermediary
between buyers and sellers to facilitate securities transactions. Financial markets (bond and stock
markets) and financial intermediaries (banks, insurance companies, pension funds) have the
basic function of getting people like Inez and Walter together by moving funds from those who
have a surplus of funds (Walter) to those who have a shortage of funds (Inez). More realistically,
when IBM invents a better computer, it may need funds to bring it to market. Similarly, when a
local government needs to build a road or a school, it may need more funds than local property
taxes provide. Well-functioning financial markets and financial intermediaries are crucial to
economic health.
To study the effects of financial markets and financial intermediaries on the economy, we need to
acquire an understanding of their general structure and operation. In this chapter, we learn about
the major financial intermediaries and the instruments that are traded in financial markets as well
as how these markets are regulated.
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Financial institution
In financial economics, a financial institution is an institution that provides financial for its
clients or members. Probably the most important financial service provided by financial
institutions

is

acting

as financial

intermediaries.

Most

financial

institutions

are

highly regulated by government.

Broadly speaking, there are three major types of financial institutions:
1. Deposit-taking institutions that accept and manage deposits and make loans,
including banks, building

societies, credit

unions, trust

companies,

and mortgage

loan companies
2. Insurance companies and pension funds; and
3. Brokers, underwriters and investment funds.

Standing settlement instructions

Standing Settlement Instructions (SSIs) are the agreements between two financial institutions
which fix the receiving agents of each counterparty in ordinary trades of some type. These
agreements allow traders to make faster trades since the time used to settle the receiving agents is
conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud. SSIs are used by
financial institutions to facilitate fast and accurate cross-border payments.
The financial system of Bangladesh consists of three broad sectors. They are
1. Formal sector
2. Semi-formal sector
3. Informal sector
The sectors have been categorized in accordance with their degree of regulation. The formal
sector includes all regulated institutions like banks, non-bank financial institutions (FIs),
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insurance companies, capital market Intermediaries like brokerage houses, merchant banks etc.;
micro finance institutions (MFIs).
The semi formal sector includes those institutions which are regulated otherwise but do not fall
under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange
Commission or any other enacted financial regulator.
This sector is mainly represented by Specialized Financial Institutions like House Building
Finance Corporation (HBFC), Palli Karma

Sahayak Foundation (PKSF), Samabay

Bank, Grameen Bank etc., Non-governmental organizations (NGOs) and discrete government
programs.

Formal sector
The sectors have been categorized in accordance with their degree of regulation.
The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions
(FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant
Banks etc.; Micro Finance Institutions (MFIs).
The formal sector of the financial system of Bangladesh comprises two sub-sectors
1. Financial Market
2. Regulators & Institutions

Financial market
There are three types of financial markets in Bangladesh. They are:
1. Money Market : Banks, Non-bank Financial Institutions, and Primary Dealers
2. Capital Market : Investment Banks, Credit Rating Companies, and Stock Exchanges
3. Foreign Exchange Market : Authorized Dealers.

Regulation
Financial institutions in most countries operate in a heavily regulated environment because they
are critical parts of countries' economies, due to economies' dependence on them to grow the
money supply via fractional reserve lending. Regulatory structures differ in each country, but
typically involve prudential regulation as well as consumer protection and market stability. Some
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countries have one consolidated agency that regulates all financial institutions while others have
separate agencies for different types of institutions such as banks, insurance companies and
brokers.
Countries that have separate agencies include the United States, where the key governing bodies
are the Federal Financial Institutions Examination Council (FFIEC), Office of the Comptroller of
the Currency - National Banks, Federal Deposit Insurance Corporation (FDIC) State "nonmember" banks, National Credit Union Administration (NCUA) - Credit Unions, Federal
Reserve (Fed) - "member" Banks, Office of Thrift Supervision - National Savings & Loan
Association, State governments each often regulate and charter financial institutions.

Semi-formal sector
The semi-formal sector includes those institutions which are regulated otherwise but do not fall
under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange
Commission or any other enacted financial regulator. This sector is mainly represented
by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli
Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non-Governmental
Organizations NGOs and discrete government programs.
The semi formal sector comprises some Specialized Financial Institutions:
1. House Building Financial Corporation(HBFC)
2. Palli Karma Sahayak Foundation(PKSF)
3. Samabay Bank
4. Grameen Bank
Function of Financial Markets
Financial markets perform the essential economic function of channeling funds from households,
firms, and governments that have saved surplus funds by spending less than their income to those
that have a shortage of funds because they wish to spend more than their income. Those who
have saved and are lending funds, the lender-savers, are at the left, and those who must borrow
funds of finance their spending, the borrower-spenders, are at the right. The principal lenderPage | 4

savers are households, but business enterprises and the government (particularly state and local
government), as well as foreigners and their governments, sometimes also find themselves with
excess funds and so lend them out.
Financial markets perform the essential economic function of channeling funds from households,
firms, and governments that have saved surplus funds by spending less than their income to those
that have a shortage of funds because they wish to spend more than their income Those who have
saved and are lending funds, the lender-savers, are at the left, and those who must borrow funds
to finance their spending, the borrower-spenders, are at the right. The principal lender-savers are
households, but business enterprises and the government (particularly state and local
government), as well as foreigners and their governments, sometimes also find themselves with
excess funds and so lend them out.
Why is this channeling of funds from savers to spenders so important to the economy? The
answer is that the people who save are frequently not the same people who have profitable
investment opportunities available to them, the entrepreneurs. Lets first think about this on a
personal level. Suppose that you have saved $1,000 this year, but no borrowing or lending is
possible because there are no financial markets. If you do not have an investment opportunity
that will permit you to earn income with your savings, you will just hold on to the $1,000 and
will earn no interest. However, Carl the Carpenter has a productive use for your $1,000:
He can use it to purchase a new tool that will shorten the time it takes him to build a house,
thereb earning an extra $200 per year. If you could get in touch with Carl, you could lend him the
$1,000 at a rental fee (interest) of $100 per year, and both of you would be better off. You would
earn $100 per year on your $1,000, instead of the zero amount that you would earn otherwise,
while Carl would earn $100 more income per year (the $200 extra earnings per year minus the
$100 rental fee for the use of the funds).
The existence of financial markets is also beneficial even if someone borrows for a purpose other
than increasing production in a business. Say that you are recently married, have a good job, and
want to buy a house. You earn a good salary, but because you have just started to work, you have
not yet saved much. Over time, you would have no problem saving enough to buy the house of
your dreams, but by then you would be too old to get full enjoyment from it.
Well-functioning financial markets also directly improve the well-being of consumers by
allowing them to time their purchases better. They provide funds to young people to buy what
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they need and can eventually afford without forcing them to wait until they have saved up the
entire purchase price. Financial markets that are operating efficiently improve the economic
welfare of everyone in the society.
Financial banks in Bangladesh

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
state-owned commercial banks, five specialized banks, thirty eight private
commercial banks, one land development bank and nine foreign commercial
banks. The Nobel Prizewinning Grameen Bank is a specialized micro-finance
institution, which revolutionized the concept of micro-credit and contributed
greatly towards poverty reduction and the empowerment of women
in Bangladesh.

Central bank

Bangladesh Bank

Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka
branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh
Bank with retrospective effect from 16 December 1971.

Banks

After the independence, banking industry in Bangladesh started its journey with 6 Nationalized
commercialized banks, 2 State owned Specialized banks and 3 Foreign Banks. In the 1980s
banking industry achieved significant expansion with the entrance of private banks. Now, banks
in Bangladesh are primarily of two types:
Scheduled Banks:

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The banks which get license to operate under Bank Company Act, 1991 (Amended in 2003) are
termed as Scheduled Banks. State-owned commercial banks, private commercial banks, Islamic
commercial banks, foreign commercial banks and some specialized banks are Scheduled Banks.
Non-Scheduled Banks:
The banks which are established for special and definite objective and operate under the acts
that are enacted for meeting up those objectives, are termed as Non-Scheduled Banks. These
banks cannot perform all functions of scheduled banks. Graeme Bank, Probate Kalian Bank,
Karmasangsthan Bank, Promote Co-operative Land Development Bank Limited (promote Bank)
and Answer VDP Unna an Bank are Non-Scheduled Banks.

Commercial Bank
A financial institution that provides services, such as accepting deposits, giving business loans
and auto loans, mortgage lending, and basic investment products like savings accounts and
certificates of deposit. he traditional commercial bank is a brick and mortar institution it
tellers, safe deposit boxes, vaults and ATMs. over, some commercial banks do not
have and physical branches and require consumers to complete all transactions by phone or
Internet. Interchange, the$ general higher interest rates on investments and deposits, and charge
lot referees.

There are eight private Islamic Commercial Banks in Bangladesh:

1. Islami Bank Bangladesh Limited
2. Al-Arafah Islami Bank Limited
3. Export Import Bank of Bangladesh Limited
4. Social Islami Bank Limited
5. Shahjalal islami Bank Limited
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6. First Security Islami Bank Limited

7. Union Bank Limited
8. ICB Islamic Bank Limited

Investment Banks
The stock market crash of 1929 and ensuing Great Depression caused the United States
government to increase financial market regulation. The Glass-Seagull Act of 1933 resulted in
the separation of investment banking from commercial banking.While investment banks may be
called "banks," their operations are far different than deposit-gathering commercial banks. An
investment bank is a financial intermediary that performs a variety of services for businesses and
some governments. These services include underwriting debt and equity offerings, acting as an
intermediary between an issuer of securities and the investing public, making markets,
facilitating mergers and other corporate reorganizations, and acting as a broker for institutional
clients.
They may also provide research and financial advisory services to companies. As a general rule,
investment banks focus on initial public offerings (IPOs) and large public and private share
offerings. Traditionally, investment banks do not deal with the general public.
However, some of the big names in investment banking, such as JP Morgan Chase, Bank of
America and Citigroup, also operate commercial banks. Other past and present investment banks
you may have heard of include Morgan Stanley, Goldman Sachs, Lehman Brothers and First
Boston. Generally speaking, investment banks are subject to less regulation than commercial
banks. While investment banks operate under the supervision of regulatory bodies, like
the Securities and Exchange Commission, FINRA, and the U.S. Treasury, there are typically
fewer restrictions when it comes to maintaining capital ratios or introducing new products.

Insurance Companies

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Insurance companies pool risk by collecting premiums from a large group of people who
want to protect themselves and/or their loved ones against a particular loss, such as a fire,
car accident, illness, lawsuit, disability or death. Insurance helps individuals and companies
manage risk and preserve wealth. By insuring a large number of people, insurance
companies can operate profitably and at the same time pay for claims that may arise.
Insurance companies use statistical analysis to project what their actual losses will be within
a given class. They know that not all insured individuals will suffer losses at the same time
or at all.

Brokerages
A brokerage acts as an intermediary between buyers and sellers to facilitate securities
transactions. Brokerage companies are compensated via commission after the transaction has
been successfully completed. A brokerage can be either full service or discount. A full service
brokerage provides investment advice, portfolio management and trade execution. In exchange
for this high level of service, customers pay significant commissions on each trade. Discount
brokers allow investors to perform their own investment research and make their own decisions.
The brokerage still executes the investor's trades, but since it doesn't provide the other services of
a full-service brokerage, its trade commissions are much smaller.
1. Southeast Bank Limited[3]
2. Meghna Bank Limited
3. Bangladesh Commerce Bank Limited
4. Bank Asia Limited
5. AB Bank Limited
6. Dhaka Bank Limited
7. Dutch Bangla Bank Limited
8. Eastern Bank Limited
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9. IFIC Bank Limited

10.Jamuna Bank Limited
11.Mercantile Bank Limited
12.Midland Bank Limited
13.Modhumoti Bank Limited
14.Mutual Trust Bank Limited
15.National Bank Limited

Investment Companies
An investment company is a corporation or a trust through which individuals invest in
diversified, professionally managed portfolios of securities by pooling their funds with those of
other investors. Rather than purchasing combinations of individual stocks and bonds for a
portfolio, an investor can purchase securities indirectly through a package product like a mutual
fund.
There are three fundamental types of investment companies: unit investment trusts (UITs), face
amount certificate companies and managed investment companies. All three types have the
following things in common:

An undivided interest in the fund proportional to the number of shares held

Diversification in a large number of securities

Professional management

Specific investment objectives

Let's take a closer look at each type of Investment Company.

Unit Investment Trusts (UITs)

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A unit investment trust, or UIT, is a company established under an indenture or similar

agreement. It has the following characteristics:

The management of the trust is supervised by a trustee.

Unit investment trusts sell a fixed number of shares to unit holders, who receive a
proportionate share of net income from the underlying trust.

The UIT security is redeemable and represents an undivided interest in a specific

portfolio of securities.

The portfolio is merely supervised, not managed, as it remains fixed for the life of the
trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates

A face amount certificate company issues debt certificates at a predetermined rate of interest.
Additional characteristics include:

Certificate holders may redeem their certificates for a fixed amount on a specified date,
or for a specific surrender value, before maturity.

Certificates can be purchased either in periodic installments or all at once with a lumpsum payment.

Face amount certificate companies are almost nonexistent today.

Management Investment Companies

The most common type of investment company is the management investment company, which
actively manages a portfolio of securities to achieve its investment objective. There are two types
of management investment company: closed-end and open-end. The primary differences between
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the two come down to where investors buy and sell their shares - in the primary or secondary
markets - and the type of securities the investment company sells.

Closed-End Investment Companies: A closed-end investment company issues shares in

a one-time public offering. It does not continually offer new shares, nor does it redeem its
shares like an open-end investment company. Once shares are issued, an investor may
purchase them on the open market and sell them in the same way. The market value of
the closed-end fund's shares will be based on supply and demand, much like other
securities. Instead of selling at net asset value, the shares can sell at a premium or at a
discount to the net asset value.

Open-End Investment Companies: Open-end investment companies, also known

as mutual funds, continuously issue new shares. These shares may only be purchased
from the investment company and sold back to the investment company. Mutual funds
are discussed in more detail in the Variable Contracts section.

Non-bank Financial Institutions

Non-banking financial institutions which are not banks.These institutions cannot perform all
functions of banks, which get license to operate under Financial Institution Act, 1993 are termed
as Non-banking financial institutions.

Emergence of Non-Bank Financial Institutions in Bangladesh

Initially, NBFIs were incorporated in Bangladesh under the Companies Act, 1913 and were
regulated by the provision relating to Non-Banking Institutions as contained in Chapter V of the
Bangladesh Bank Order, 1972. But this regulatory framework was not adequate and NBFIs had
the scope of carrying out their business in the line of banking. Later, Bangladesh Bank
promulgated an order titled Non Banking Financial Institutions Order, 1989 to promote better
regulation and also to remove the ambiguity relating to the permissible areas of operation of
NBFIs. But the order did not cover the whole range of NBFI activities. It also did not mention
anything about the statutory liquidity requirement to be maintained with the central bank. To
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remove the regulatory deficiency and also to define a wide range of activities to be covered by
NBFIs, a new act titled Financial Institution Act, 1993 was enacted in 1993 (Barai et al. 1999).
Industrial Promotion and Development Company (IPDC) was the first private sector NBFI in
Bangladesh, which started its operation in 1981. Since then the number has been increasing and
in December 2006 it reached 29.1 Of these, one is government owned, 15 are local (private) and
the other 13 are established under joint venture with foreign participation.
The following institutions are not technically banks but provide some of the same services
as banks.

Name of Non-banking financial institutions

Investment Corporation of Bangladesh (ICB)

Uttara Finance and Investments Limited.

United Finance.

Union Capital Limited.

The UAE-Bangladesh Investment Company Limited.

Saudi-Bangladesh Industrial & Agricultural Investment Company Limited

(SABINCO)
Reliance Finance Limited.

Banks Entry in Non-Bank Financial Activity

The activities of NBFIs witnessed an impressive growth during the last five years. As per
Section 7 of the Banking Companies Act 1991, commercial banks also started different activities
offered by NBFIs, specially leasing. The entry of banks in this sector is expected to brace the
growth momentum and will fill the gap in acquiring the institutional finance and serve the needs
of the industrial sector in the acquisition of capital assets. Commercial banks worldwide are
directly or indirectly involved in activities such as leasing, hire purchase, term lending, house
financing and capital market operation. In developed countries commercial banks are also
actively involved in different activities other than banking.

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In Turkey, banks are empowered to arrange lease finance by virtue of special laws relating to this
particular activity. Following the deregulation of the local banking system as well as
diversification of business, a number of banks in Taiwan established their own independent
leasing companies (Chen 2001). In India, commercial banks are permitted to transact leasing
business through subsidiaries. In Bangladesh, commercial banks started their leasing operation
effectively in 1995 (Banarjee and Mamun, 2003). At present, almost all major private
commercial banks are involved in non-bank financial operations. Operation by banks in what
have been traditional non-banking areas is often questioned by NBFIs

Savings and Loans

Savings and loan associations, also known as S&Ls or thrifts, resemble banks in many respects.
Most consumers don't know the differences between commercial banks and S&Ls. By law,
savings and loan companies must have 65% or more of their lending in residential mortgages,
though other types of lending is allowed.
S&Ls emerged largely in response to the exclusivity of commercial banks. There was a time
when banks would only accept deposits from people of relatively high wealth, with references,
and would not lend to ordinary workers. Savings and loans typically offered lower borrowing
rates than commercial banks and higher interest rates on deposits; the narrower profit margin was
a byproduct of the fact that such S&Ls were privately or mutually owned.

Credit Unions
Credit unions are another alternative to regular commercial banks. Credit unions are almost
always organized as not-for-profit cooperatives. Like banks and S&Ls, credit unions can be
chartered at the federal or state level. Like S&Ls, credit unions typically offer higher rates on
deposits and charge lower rates on loans in comparison to commercial banks.In exchange for a
little added freedom, there is one particular restriction on credit unions; membership is not open
to the public, but rather restricted to a particular membership group. In the past, this has meant
that employees of certain companies, members of certain churches, and so on, were the only ones
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allowed to join a credit union. In recent years, though, these restrictions have been eased
considerably, very much over the objections of banks.

Shadow Banks
The housing bubble and subsequent credit crisis brought attention to what is commonly called
"the shadow banking system." This is a collection of investment banks, hedge funds, insurers and
other non-bank financial institutions that replicate some of the activities of regulated banks, but
do not operate in the same regulatory environment.
The shadow banking system funneled a great deal of money into the U.S. residential mortgage
market during the bubble. Insurance companies would buy mortgage bonds from investment
banks, which would then use the proceeds to buy more mortgages, so that they could issue more
mortgage bonds. The banks would use the money obtained from selling mortgages to write still
more mortgages.Many estimates of the size of the shadow banking system suggest that it had
grown to match the size of the traditional U.S. banking system by 2008.
Apart from the absence of regulation and reporting requirements, the nature of the operations
within the shadow banking system created several problems. Specifically, many of these
institutions "borrowed short" to "lend long." In other words, they financed long-term
commitments with short-term debt. This left these institutions very vulnerable to increases in
short-term rates and when those rates rose, it forced many institutions to rush to liquidate
investments and make margin calls.
Moreover, as these institutions were not part of the formal banking system, they did not have
access to the same emergency funding facilities. (Learn more in The Rise And Fall Of The
Shadow Banking System.

State-owned commercial banks

State-owned banks are functioning as nationalist. Among the state owned banks, six are
commercial and two are specialized. Here is the list:

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State-owned Commercial Banks

1. Sonali Bank Limited http://www.sonalibank.com.bd/
2. Janata Bank Limited http://www.janatabank-bd.com/
3. Agrani Bank Limited https://www.agranibank.org/
4. Rupali Bank Limited https://rupalibank.org/en/
5. BASIC Bank Limited http://www.basicbanklimited.com/
6. Bangladesh Development Bank Limited[1]
State-owned Specialized Banks
1. Rajshahi Krishi Unnoyon Bank (RKUB)
2. Bangladesh Krishi Bank Limited

Expansion of Branches:
The TBL has taken up a programme to expand its branches. The bank has already 13 branches
in many different places in Bangladesh; most of them are inside the different cantonments.
The management is filling that they need more branches all over the Bangladesh. So very
recent they will open a branch in Dhanmondi. As per Bangladesh Bank circular that if any
bank opens a branch in Dhaka then they have to be open a branch in out side Dhaka.
Information Technology & Automation:
All the branches of the TBL are fully computerized. New software is now in use to provide
faster, accurate and efficient service to the clients. The bank is continuously striving for better
services through extensive automation of its branches. We are soon going to launch One
Branch Banking through on-line connectivity. The bank has set up a full-fledged IT division
to keep abreast of the latest development of IT for better service in the days to come.

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Foreign commercial banks

Foreign correspondent relationship facilities foreign trade operation of the bank, mainly in
respect of export, import and foreign remittance. The number of foreign correspondents and
agents of the bank in the year 2002 stood at 244, which covers important business and trade
centers of the world. The bank maintains excellent relationship with the leading international
banks, for handling all foreign correspondent and maintaining all foreign business there is
an International Division, which is called ID.
There are nine foreign commercial banks currently operating in Bangladesh. These are:
1. Bank Al-Falah
2. Citibank NA
3. Commercial Bank of Ceylon
4. Habib Bank Limited
5. HSBC (The Hong Kong and Shanghai Banking Corporation Ltd.)
6. National Bank of Pakistan
7. Standard Chartered Bank
8. State Bank of India
9. Woori Bank
Specialized banks
Specialized banks were established for specific objectives like agricultural or industrial
development. These banks are also fully or majorly owned by the Government of Bangladesh.
Scheduled Specialized Banks:
1. Bangladesh Krishi Bank
2. Rajshahi Krishi Unnayan Bank
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Non-Scheduled Specialized Banks:

1. Karmasangsthan Bank
2. Probashi Kallyan Bank
3. Palli Sanchay Bank
4. Ansar-VDP Unnayan Bank

Micro-Finance Organizations (Semi-Formal):

1. Grameen Bank
Co-Operative Banks:
1. Bangladesh Samabaya Bank Ltd
2. The Dhaka Mercantile co-operative Bank Ltd
3. Progoti Co-operative Land Development Bank Limited (Progoti Bank)
NPSB Member banks
1. AB Bank Limited
2. Al-Arafah Islami Bank Limited
3. Bangladesh Krishibank
4. Bank Asia Limited
5. BASIC Bank Limited
6. BRAC Bank Limited
7. Dutch-Bangla Bank
8. Eastern Bank Limited
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9. EXIM Bank Limited

10.First Security Islami Bank Limited
11.ICB Islamic Bank Limited
12.IFIC Bank Limited
13.Islami Bank Bangladesh Limited
14.Jamuna Bank Limited
15.Meghna Bank Limited

Conclusion
The financial sector of Bangladesh is general$ small and underdeveloped. This sector consists
of a banking segment and an emerging but still nascent capital market segment. The banking
segment in the country$ is relatively$ more developed than the equity$ market segment, even
though both are unite underdeveloped in international comparison. The root causes of the
Bangladeshi financial sector problem are the lack of market discipline due to lack of competition
in the banking industry. cassava government intervention and political connections, economic
and political corruptions, operational and managerial inefficiency and ineffectiveness result
invidious circle that inhibits economic development, industriali8ation, and social progresses
in poor and developing countries in general and in Bangladesh in particular. The ombudsman
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can act independently to investigate an$ complaints regarding financial services and must or
freely and independently. Better financial services and diversified financial products old bathe
natural consequence of competitive financial industry.
Banks and Non-Bank Financial Institutions are both key elements of a sound and stable
financial system. Banks usually dominate the financial system in most countries because
businesses, households and the public sector all rely on the banking system for a wide range of
financial products to meet their financial needs. However, by providing additional and alternative
financial services, NBFIs have already gained considerable popularity both in developed and
developing countries. In one hand these institutions help to facilitate long-term investment and
financing, which is often a challenge to the banking sector and on the other, the growth of NBFIs
widens the range of products available for individuals and institutions with resources to invest.
Through their operation NBFIs can mobilize long-term funds necessary for the development of
equity and corporate debt markets, leasing, factoring and venture capital. Another important role
which NBFIs play in an economy is to act as a buffer, especially in the moments of economic
distress. An efficient NBFI sector also acts as a systemic risk mitigator and contributes to the
overall goal of financial stability in the economy. NBFIs of Bangladesh have already passed
more than two and a half decades of operation. Despite several constraints, the industry has
performed notably well and their role in the economy should be duly recognized. It is important
to view NBFIs as a catalyst for economic growth and to provide necessary support for their
development. A long term approach by all concerned for the development of NBFIs is necessary.
Given appropriate support, NBFIs will be able to play a more significant role in the economic
development of the country.

References:
Money, Banking And financial Market ( Frederic S. Mishkin )
https://en.wikipedia.org/wiki/Financial_institution
http://www.investopedia.com/walkthrough/corporate-finance/1/financialinstitutions.aspx
https://en.wikipedia.org/wiki/List_of_banks_in_Bangladesh
http://www.academia.edu/10894583/Overview_of_Financial_Institutions_in
_Bangladesh
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 http://siteresources.worldbank.org/PSGLP/Resources/WP0709Final.pdf
http://www.assignmentpoint.com/business/finance/report-on-bangladesheconomy-and-financial-institutions.html

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