Aside for two or three institutions, all are in vulnerable condition 
as the number of clients has dropped, experts say

Staff Correspondent:

Clients are shying away from keeping their money in non-bank financial institutions (NBFI) due to irregularities, corruption and lack of good governance in the country.

Such institutions have lost 47,000 clients in the April-June quarter, according to a Bangladesh Bank report on NBFIs.

Currently, the number of NBFIs in the country stands at 35, including three government institutions.

Experts in the sector said that, aside from two or three exceptions, all the institutions were in a vulnerable state as the number of clients had dropped.

The Bangladesh Bank report published on Thursday said that 35 financial institutions in the country had 380,000 clients at the end of June, down from 427,000 at the end of the March quarter.

However, the total money deposited in NBFIs rose to Tk 451.16 billion at the end of June, up from Tk 443.05 billion in March.

Bangladesh Finance and Investment Company (BD Finance) Managing Director and CEO Kaiser Hamid acknowledged the seriousness of the situation.

“In our sector, we have a lot of small DPS (deposit pension scheme) accounts. As the number of such accounts has dropped, the number of depositor accounts also decreased,” he said.

Toufique Ahmed Chowdhury, former director general of the Bangladesh Institute of Bank Management (BIBM), saw a lack of trust as the cause for the situation.

“Clients lost their trust in these institutions and so their numbers have droppd. This is because many crimes occurred in this sector and that diminished people’s trust. Besides, clients have more trust in the banks.”

“Apart from two or three financial institutions, all the others are in a vulnerable state,” he said.

A senior official in the central bank also noted the vulnerability of the financial institutions. They also said that some clients were withdrawing their deposits as the cost of daily expenses had shot up.

“A few good financial institutions are seeing a rise in the number of clients and deposits. But others are in bad shape. Their clients are not depositing anymore and are withdrawing their deposits instead,” they said.

“There are some institutions who haven’t been able to repay the clients for the last few years. Besides, some clients are withdrawing deposits to meet their daily expenses amid the skyrocketing inflation.”

The financial institutions are suffering as there were irregularities in loan disbursement and lack of good governance, the official believes.

The NBFI sector had deposits of Tk 7.62 trillion at the end of June 2021, according to Bangladesh Bank data. Within the three months, the amount dipped to Tk 5.51 trillion.

Then there was an uptick in the deposits over the next year before it started dropping every quarter since September 2022.

IPDC Finance Limited Managing Director Mominul Islam explained the reason behind the major change in the number of clients since 2021. “A few hundred thousand new DPS accounts were opened at that time. We expected at least 10-15 percent of those accounts would be permanent. But it never happened. Usually, the number of clients changes significantly when such a campaign ends” he said.

The ‘extremely conservative approach’ of the central bank following the coronavirus pandemic caused the NBFI sector to suffer, he believes.

“Some of the institutions which were doing well are struggling now due to the policies of Bangladesh Bank. The central bank should bring changes to the policies to allow the NBFI sector to survive,” the expert said.

The number of accounts having deposits of more than Tk 10 million was 5,228 at the end of June, Bangladesh Bank data showed. The number of such accounts at the end of March was 5,204.

This means the number of such accounts has actually gone up slightly over these months.