Part-01
Black paws push Banking in immense challenge
There is a truth that low income society has a tendency of polarization of inputs of resources to the rental basis economic activities, which pushes the economy with lower outcome in the long run.
For example, in Bangladesh, a quick rental method has been taken for an immediate solution of electricity inadequacy.
Afterward, it has increased the electricity costs and solicited energy demand as part of economic rise. Precisely, short term policies may have quick measures to show equilibrating position of costs and benefits.
However, it has less equilibrium circumstances in the long run. Undeniably, a banking system involves tremendous stresses in engaging with the hustle and bustle states resulting from a rental basis short term economy.
Recent economic strain is turned out from the Russia-Ukraine war that has waved world economy terribly after COVID-19. The dollar price has been hiked overnight. Economic fear and tension has grown unexpectedly.
A global impact tending impeded production, risen inflation and trade imbalance is observed across the world. In Bangladesh, banks have been facing countless difficulties in this volatile situation. Arranging foreign currency and making trade payments are in trouble. “20 (twenty) banks do not have enough dollars to meet their liability.” reported by a Bengali business daily ‘Banik Barta’ on November, 02, 2022.
Meanwhile, the government claimed, ‘reserve is fine’, to calm the people, which was published in a renowned Bengali daily ‘The Prothom Alo’ on November 24, 2022. It is appreciating that government tried to give some hope to its people. However, the actual scenario has been reflecting afterwards. US dollar exchange rate against BDT has been increased by 28% in 20 months i.e. the USD rate was taka 85.80 on 01.01.2022 and stood taka 110.00 on 05.09.2023 as per Bangladesh Bank website. Simultaneously, during the same time line inflation has been raised from 6% to 9.63%, reported by The Business Standard on 4th October, 2023.
The daily also reported on 05th October, 2023, “Net reserve now below $18b” which was estimated by Zahid Husssain, a former lead economist of World Bank. Overall consequences comprehend to a deemed economic recession in Bangladesh that added difficulties to the growing crisis in the banking sector as well as other sectors.
Despite money laundering an old issue, it changes its color in a relatively turbulent economic cum political situation. Economic interest is hold technically by the launderers, whether businessmen or not, money launderers try to pay less tax or avoid tax; find ways of over invoicing and under invoicing; support Hundi business someway which is illegal; intend to push black money to cross-border; announce themselves as voluntary bankruptcy and claim for rescheduling the loans & dues.
In consequence, public money gone, white money depreciated, public sentiment stimulated that fuels uncertainty & unfaithfulness to the banking system.
People withdraw deposits massively from the banks at times. Bankers fall in a trap of laundered money and withdrawn deposits. In culmination, it becomes a relentless struggle for bankers to regain the stability. “Defaulters have become powerful figures within govt”, said by Prof. Rehman Sobhan, reported in The Business Standard on 10 Oct, 2023.
It is clear that defaulters maintain political connections directly or indirectly to uphold their interests. Unsurprisingly, they get large loans and rescheduling facilities. For their activities, they can be called ‘The quicksand for the economy’. A senior architect of Bangladesh, Faiz Ahmad Taiyeb stated, “If defaulting, looting and laundering of a bank’s loans continue, as is happening in Bangladesh, the bank should, in theory, go bankrupt, useless it is artificially kept alive – that is, it’s bailed out with public money.”, on his writing ‘Fourth industrial revolution and Bangladesh’ and ’50 years of Bangladesh economy.’
Part-02
Conscious governance can broaden banking and economic horizon
During 1950’s to 1960s, Japan got a boomer generation after world war-2. Japanese economy and its political prosperity were highly influenced by its ‘Baby Boomer’ generation which has been continuing subsequently. Bangladesh got an opposite scenario after its liberation war. It is however, in contrast, gives us a lesson that ‘Not always a win ensure all future wins’. It is more a political and administrative question than judging emotion. Whether an economy as well as a banking system would be influenced by the obstacles mentioned in part-01or not, except the force majeure, growth depends on conscious decisioning. The pioneers of good governance are the law makers, the politicians and the administrators who already know what to do.
Nonetheless, something gets stuck with some black magic existed in socio-political culture. For a healthy banking system, there is no alternative of applying ‘Ethics’ in action followed by the intention grown in people, state and government along with its compliance of laws, rules, regulation, technology, globalization and green economy. Corruption occupant political practice to be discouraged which pulls all sectors and make vulnerable, where banking may be disrupted for a natural growth and show an artificial growth. However, in question of resolution, some other questions are lying in. Can we agree with when the decision makers apply ethics and maintain rules, the general people will follow them? Can the decision makers consider themselves as part of general people, not VIP (Indeed, the way is more respectable)? If yes, how cans a system stops to be enlightened by prospective good governance?
As mentioned in part one, wide range of planning with holistic, prudent and ideal utilization of inputs of resources is prerequisite besides good governance for a sustainable growth. Rental basis short term policy is a curse for the citizens of Bangladesh. To make a fundamental change, a slow -steady natural growth is expected that may lead a sustainable banking system. Germany, Canada, UAE and many other developed countries have taken long term diverse economic ideas for meeting sustainable growth.
Besides, Citizens require being aware and knowledgeable for their economic activities and duties. A conscious community adds economic values to the society, fights money laundering likewise corruption. Media and channels can also play significant role regarding this issue. The good thing is bankers are highly elastic for the sake of their good banking in any situation. They are resilient at their highest level to serve their customers, show unwillingness to the malpractices, maintain compliance of banking rules and regulations, serve long hours with patience, raise deposits, hunt businesses and combat money laundering & terrorist financing persistently.
However, regardless the efforts, as something remains in a loop of vicious cycle in connection with defaulter’s facts as mentioned, permitting loans advance and facilities to the defaulters, politicians cum businessmen, powering practitioners whoever has past records in connection with money laundering and voluntary bankruptcy, Govt. stringent actions are desirable. Also, state crime is to be stopped of turning black money to white money in the name of encouraging investment. Bangladesh Bank, as a top regulator, has always acted as a responsible authority. It is appreciating that Bangladesh Bank has been trying to hold up the banking system positively in all adverse situations of the country.
Green economy is an emerging issue. There is no alternative of saving the world such as the environment, human and nature from adverse economic activity that are harmful to those. We have to go back to green energy to resolve energy inadequacy issue at the end as of scarcity of material wealth.
Many banks nowadays follow a fast paced green banking practice. However, it needs widespread knowledge and use of green economic practice in every sector including government sectors. A collaborative and wide range of research and development may need to be involved.
Bottom line is however the hindrance, bankers are happy in putting efforts in returns with acceptance, praise and acknowledgement. On top, conscious act from all ends can make a true change in banking and economy of Bangladesh.
Md. Mourshed Uddin
Certified Expert in Trade Service (CETS),
Bangladesh Institute of Bank Management (BIBM). And
Works at NCC Int'l Trade Services (NITS),
National Credit and Commerce (NCC) Bank Ltd., Head Office, Dhaka, Bangladesh
BDST: 1537 HRS, NOV 22, 2023
MN
