D-8 Supports Bangladesh Bank Decision to Prioritize Credit to SMEs and Farms

Dhaka, Bangladesh | June 01, 2009 by D-8 Secretariat

Bangladesh Bank Governor Dr Atiur Rahman (middle) speaks at a dialogue on Rethinking Trade Finance 2009: An ICC Global Survey organised by International Chamber of Commerce-Bangladesh in Dhaka last week (Photo: STARStar Business Report)

Bangladesh Bank (BB) will prioritise credit flows for productive sectors like small and medium enterprises and agriculture, said its governor last week, as quoted by Bangladesh media, STARStar Business Report. “Be innovative to give a boost to the economy,’ Dr Atiur Rahman urged the banks and entrepreneurs while speaking at a dialogue in Dhaka. The Bangladesh chapter of International Chamber of Commerce (ICC-B) organised the dialogue on Rethinking Trade Finance 2009: An ICC Global Survey.

According to the survey findings, increased risk perception and tight credit condition have been identified as major threats to the access to trade finance. When the central bank’s chief’s attention was drawn by some discussants at the dialogue to Bangladesh’s policymakers’ failure to reach any decision in the face of global recession because of the lack of data and poor analytical capability, Dr Atiur made an assurance that officials’ capability in this regard would be enhanced.

Admitting that BB officials could not utilise full potential of its immense statistical database, he said, “The officials do not have the capacity. I’ll take steps to increase their capacity, including strengthening the existing policy analysis unit of the BB.”

He said his role, as a regulator, would be to boost business confidence based on well-informed data. “We’ll invest more on knowledge and analysis,” he added.

When asked, BRAC Bank Chairman Muhammad A (Rumee) Ali, also a former deputy governor of the central bank, told The Daily Star after the function, “During my tenure in the BB I got everything (data) whatever needed.”

“But we have to know how to utilise those data for analysing the economy”, Ali added.

The BB governor, who dwelt on various issues like remittance, bank credit, exports, domestic demand and trade, called upon the commercial banks to open more exchange houses abroad to net more remittances. Dr Atiur said, “The remittance may rise to $9.5 billion in 2009 providing stronger cushion to the current account balance and exchange rate stability.”

The governor believed Bangladesh has to boost domestic demand to sustain the global financial crisis fallout.

“If internal demand goes up, we’ll stand on our own feet,” he said. “But it doesn’t mean that export will be given less priority,” he noted.

He credited the BB for a healthy financial sector despite prevailing a negative situation in the world’s banking sector.

The survey, conducted by the ICC Banking Commission, covered 130 banks in over 60 countries across the globe to analyse the trade finance issue. Vincent O’Brien, member of ICC Banking Commission, Paris presented a keynote paper on the survey.

The survey found that 47 percent of the banks reported a decline in export LC, while 43 percent banks reported a fall in LC value of aggregate transactions.

Mahbubur Rahman, the ICC-B president who chaired the dialogue, hoped that the survey would provide bankers and other stakeholders with some basic data and useful information for their strategic planning in conducting foreign trade.

Professor Mustafizur Rahman of the Centre for Policy Dialogue, Professor MA Taslim of Bangladesh Foreign Trade Institute, Dr Toufiq Ali, a former ambassador to UN in Geneva and WTO, Zaidi Sattar of Policy Research Institute and Mamun Rashid of Citibank NA took part in the discussion.

Dr Atiur Rahman also called upon the banks and financial institutions not to be unnecessarily overcautious in dealing with trade finances. “It’s better to be cautious in averting a possible collapse, but you should not be unnecessarily overcautious,” he told a dialogue at Bangladesh China Friendship Conference Centre.

“Trade is the engine of growth and trade finance is the lubricant of the engine,” Dr Atiur said, responding to a criticism that the central bank’s expansionary monitory policy might increase default loans, leading to a financial sector collapse in the country like elsewhere in the world.

Governor Dr Atiur mentioned that Bangladesh Bank has been pursuing a prudent monetary policy and that is the reason the country is doing very well despite the global financial crisis. “We should not be over complacent, however,” he said, adding that the central bank needs to take a realistic approach to build confidence in the trade sector.

In response to the apprehension of increasing default loans, he said: “there is nothing to be worried as our net default loan is only 3 percent while we’re acting prudently.”

Dr Atiur said the country is doing well in the area of remittance inflow while the central bank is trying to bring more. He expected that the remittance would increase to US$ 9.5 billion during the current year from US$ 9.0 billion in 2008. “I want to make sure that there will be no barrier to investment by the NRBs in the productive sector. Bangladesh Bank and BOI will work together on the issue.”

He said the central bank would continue to promote domestic demands through the monetary policy, but that does not mean the central bank would undermine export sector (external demand).

The Governor stressed the need for an innovative approach in the coining public-private partnership (PPP) projects. It would help shape up the country in a manner that the international community would cite Bangladesh as a success story as soon as the global recession gets over, he added.

D-8 is currently also embarking upon cooperation programs to foster public-private partnership within the governments and private sectors of D-8, which among other reflects through CSR programs. In Nigeria, Dufil Prima Foods, manufacturer of children’s favourite meal, Indomie Instant Noodles emerged as the Most Socially Responsible in Child Centered Corporate Social Responsibility last year. For over 12 years, Dufil Prima Foods has consistently demonstrated its social responsibility by supporting various activities in the areas of education, sports, women empowerment and youth development; the company has partnered various governmental and non-governmental organizations to promote causes that have direct bearing on the lives of its consumers.

Another project which is presently worked on by D-8 is in remittance sector. In collaboration with the Indonesian Business Links (IBL), D-8 is submitting a project titled “Improving Remittance Transmission Channels and Maximizing the Use of Overseas Remittances of Indonesian Migrant Workers for Productive and Development Purposes.” The project seek to introduce better remittance systems and will help the workers to make savings that they could possibly use for production purposes when they return from their overseas employment.

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