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Capital Market of

ID: 082-12-0043

The driving force of an economy is the capital market. Capital market is for borrowing
and lending long-term funds for more than one year. Capital market has to parts:
security segments and non-security segments. The securities segment is concerned
with the process by which distribute securities. The non securities segments are
those where banks and other financial institutions provide loans. The deficit units or
the business farms need money to pay the production factors like: land, labor, capital
and entrepreneur. And the surplus units or house holds have outstanding earnings.
Here capital works as a financial intermediary that pools the money from a wide
number of people and channels it to the ultimate user.
The regulatory organization of Bangladesh Capital Market is the Security Exchange
Commission in short SEC. Under the Security and Exchange Commission act 1993, it
was formed as a capital market regulator. It ensures proper issuance of securities,
protection of the interest of investors in securities, development of the capital and
security market and regulation of the capital and securities markets in Bangladesh.
There are two Stock Exchange in Bangladesh: Dhaka Stock Exchange (DSE) and
Chittagong Stock Exchange (CSE).

Problem Statement
Bangladesh is a small country with huge population. But the capital market
of Bangladesh is small, incompetent and underdeveloped. In our country
non securities part accounts for more than ninety percent of the total
financial activities. There are 3000 public limited companies. But only 263
companies are enlisted their name in Securities and Exchange Commission
(SEC). So the large numbers of companies are not listed in Securities and Exchange
Commission. As a result percentage of GDP in our country is only 5%
whereas the ratio in India 46% Pakistan 17% and in Malaysia 324%. The
rate of Industrial investment is also very Low in our country, where the other
developing countries average rate of GDP is 50%. Our capital market has
not yet reached the reliability. The most visible problems of capital market in
Bangladesh are serious death of risk-free assets in the secondary market to
individual buyer, unfair treatment of the investor (Maltreating and
Manipulation), lack of market information, absence of variable tradable
financial instrument.

Objective of the Study

To identify the problems faced by the capital
market in Bangladesh is the main objective of the
study. However the major objectives of the study
are as follows:
To explore

the present situation of Bangladesh capital

market and its development.
To identify the cause of the backwardness of the
capital market.
To suggests ways of expanding the size and scope of
the capital market of Bangladesh.

The Present Situation of the

Capital Market of Bangladesh
There are different segments of the capital
market of Bangladesh and it has different
component parts and one controlling body.
Here is a chart showing the different
segment of capital market is presented

Financial Market

Money Market

Capital Market

Security Market

Primary Market


Secondary Market

The chart shows that capital market, which is composed with

securities and non-securities market. The securities market is again
composed with primary market and secondary market.

Securities and Exchange

Commission of Bangladesh
The Securities and Exchange Commission (SEC) was established
on 8th June, 1993 under the Securities and Exchange Commission
Act, 1993. The Chairman and Members of the Commission are
appointed by the government and have overall responsibility to
administer securities legislation. The Commission, at present has
two full time members, excluding the Chairman. The Commission is
a legal body and attached to the Ministry of Finance. The main
mission of SEC is: Protect the interests of securities investors,
Develop and maintain fair, transparent and efficient securities
markets and Ensure proper issuance of securities and compliance
with securities laws.

Dhaka Stock Exchange

Dhaka Stock Exchange (Generally known as
DSE) is the main stock exchange of
Bangladesh. It is located in Motihheel at the
heart of the Dhaka city. It was incorporated in
1954. Dhaka stock exchange is the first stock
exchange of the country. As of 31 December
2007, the Dhaka Stock Exchange had 350 listed
companies with a combined market
capitalization of $10.8 billion.

Chittagong Stock Exchange

Chittagong Stock Exchange is a stock
exchange located in the port city of
Chittagong in southeastern Bangladesh. It
was established in 1995 as the second
stock exchange of the country. The
exchange is located in the Agrabad
commercial area of the city.

Common Issues of Backwardness of

the Capital Market

of various financial instruments

The supplies of securities market both quantity

and qualities have always been a major
limitation of the capital market. Only the share,
Debenture, Bond and Mutual funds are treated
in capital market. The supply of securities can be
increased if government enterprises are allowed
to operate though stock exchange.

Common Issues of Backwardness of

the Capital Market

of Security Market

Most of the people of our country do not have

much knowledge about the securities market.
They do not know how to invest in the capital
market or the rules and regulation of capital
market. In the other way two stock exchanges
are located in Dhaka and Chittagong. So the
other areas people of the country deprive of
facilities of trading in stock exchanges.

Common Issues of Backwardness of

the Capital Market


of Multinational Companies in Capital

Another main reason is the Multinational

companies are doing business in our country
without enlisting in securities market. In the
developed country it is not possible. Multinational
companies are profitable company and they
transferring their profits to their own countries
from our country. So if they enlisted on capital
market government can get share of profit.

Prospects or the Suggestions for

the Capital Market
To know

the company validity we have to

accommodate credit rating. Because credit rating help
the investor to know the validity of a company.
There are some members of stock exchange who
also serve as a director of a listed company. This lead
to change of inside trading especially in such a poorly
regulated market.
There are some members who are actually sleeping
member. They have to work hard; otherwise they
have to give up their membership.