Hajee Mohammad Danesh Science and Technology University, Dinajpur-5200
A Term Paper
On
Role of financial markets and institution for the economic development of
Bangladesh.
Course Title: Financial Markets and Institutions
Course Code: FIN 503
Submitted
By
SHADMAN SHAKIB RIYADH
MBA 14th Batch
Student ID: 1703008
Faculty of Business Studies
Dept. of Finance and Banking
HSTU, Dinajpur-5200
Submitted
To
SHAHNAZ PARVIN
Associate Professor (Chairman)
Dept. of Finance and Banking
Faculty of Business Studies
HSTU, Dinajpur-5200
Abstract
Bangladesh, a South Asian nation, has witnessed substantial economic development in recent
decades, largely attributed to the dynamic role of its financial markets and institutions. This term
paper explores how these financial systems have facilitated the nation's economic progress while
identifying future challenges and opportunities. The financial system comprises institutions,
instruments, and markets, collectively supporting savings encouragement and allocation for
productive purposes. Financial markets in Bangladesh play pivotal roles such as capital raising,
risk transfer, price discovery, global integration, liquidity transfer, and international trade. They
connect borrowers and lenders, with intermediaries like banks streamlining the process. The
stock market, exemplified by the Dhaka Stock Exchange and Chittagong Stock Exchange,
significantly aids capital formation, creating wealth and opportunities for businesses. The paper
also elucidates the essential contribution of stock markets to raising capital, creating wealth, and
enhancing financial inclusion. Furthermore, it highlights the role of money markets, with a focus
on instruments like Treasury Bills, Commercial Papers, and Repurchase Agreements. The capital
markets, governed by regulatory bodies like the Securities and Exchange Commission (SEC),
encompass various participants, including stock exchanges, intermediaries, and institutions.
These markets offer a platform for organizations to raise funds by issuing securities such as
bonds and stocks. Financial institutions in Bangladesh, including commercial banks, NBFIs, and
microfinance institutions, cater to diverse financial needs, promoting economic growth and
stability. Finally, the paper discusses capital formation and financial inclusion as critical aspects
of the financial system's functioning, emphasizing the role of financial institutions and markets
in driving economic progress and reducing income inequality.
Introduction
Bangladesh, a South Asian nation, has made remarkable progress in its economic development
over the past few decades. This progress can be largely attributed to the dynamic role played by
financial markets and institutions in the country. This term paper aims to investigate how
financial markets and institutions have facilitated Bangladesh's economic development and
identify the challenges and opportunities they face in the future.
Structure of Financial System:
The main constituents of financial system are:
1. Financial Institutions
2. Financial Instruments, and
3. Financial Markets.
Financial Institutions
The modern name of Financial Institution is Financial Intermediary (FI), because it mediates or
stand between ultimate borrowers and ultimate lenders and helps transfer funds from one to
another.
The Financial system helps production, capital-accumulation and growth by

encouraging savings and

allocating them among the alternative uses and users.
Financial Instruments
Financial Instruments are of two types:
 Primary (or Direct)
 Secondary (or Indirect)
Financial Markets in Bangladesh:
Financial markets play a pivotal role in facilitating the allocation of funds to finance investments
undertaken by governments, corporations, and individuals. They serve as the conduit for
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transferring funds from surplus units (those with excess funds) to deficit units (those in need of
funds). The functions of financial markets encompass:
 Capital Raising (Capital Markets): Financial markets provide a platform for entities to
raise capital by issuing securities such as stocks and bonds, enabling them to obtain the
necessary funds for their projects and ventures.
 Risk Transfer (Derivatives Markets): Derivatives markets facilitate the transfer of risk,
allowing market participants to hedge against price fluctuations, interest rate changes, and
other uncertainties.
 Price Discovery: Financial markets establish fair and transparent prices for various assets,
ensuring that market participants have access to relevant information for informed decisionmaking.
 Global Integration: Financial markets enable seamless global transactions by integrating
various markets, fostering cross-border investments, and promoting international trade.
 Liquidity Transfer (Money Markets): Money markets serve as platforms for short-term
borrowing and lending, enabling corporations to manage their liquidity needs efficiently.
 International Trade (Currency Markets): Currency markets facilitate international trade
by providing a mechanism for the exchange of different currencies, supporting global
commerce.
In essence, financial markets act as intermediaries, connecting those seeking capital with
potential lenders or investors. Typically, borrowers issue securities (e.g., bonds) as receipts to
lenders, committing to repay the borrowed capital. These securities are freely tradable, and in
return for providing funds, lenders expect compensation in the form of interest or dividends. This
return on investment is an essential aspect of financial markets, as it incentivizes the flow of
funds.
Financial markets play a critical role in attracting funds from investors and directing them toward
corporations, enabling the latter to finance their operations and pursue growth opportunities.
Money markets offer short-term borrowing options, while capital markets provide access to
long-term funding required for expansion and sustained development.
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Without the presence of financial markets, the process of matching borrowers with lenders would
become cumbersome. Intermediaries such as banks, investment banks, and boutique investment
banks facilitate this process. Banks accumulate deposits from individuals and institutions with
surplus funds, subsequently lending these funds to those in need. This lending often takes the
form of loans and mortgages, helping borrowers access capital.
For more intricate financial transactions that extend beyond simple deposits, financial markets
offer a platform where lenders and their representatives can connect with borrowers and their
agents. These markets also allow existing lending commitments to be transferred to other parties.
A prominent example of a financial market is a stock exchange, where companies can raise
capital by issuing shares to investors and existing shares can be bought or sold on the secondary
market.
In summary, financial markets are the lifeblood of the modern economy, serving as the catalyst
for the efficient allocation of capital, risk management, and the facilitation of economic growth
and development.
2.1. Stock Market:
The stock market, also known as the equity or share market, is a vital financial platform where
both individuals and institutions trade ownership shares of publicly traded companies. This
global financial hub plays a critical role in allocating capital, fostering economic growth, and
creating wealth. Key elements of the stock market include:
 Ownership Shares: Public companies issue shares representing ownership in the
company, which are traded in the stock market.
 Stock Exchanges: Stock markets are organized into stock exchanges, like NYSE,
NASDAQ, LSE, and TSE, where trading occurs.
 Market Participants: Diverse participants include individual and institutional investors,
traders, and market makers.
 Stock Indices: Indices, e.g., S&P 500, gauge the performance of specific groups of stocks,
serving as market benchmarks.
 IPOs: Companies go public through Initial Public Offerings (IPOs), issuing new shares to
raise capital.
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 Secondary Market: Post-IPO, shares are traded on the secondary market, where most
trading occurs.
 Liquidity: The stock market offers liquidity, enabling quick buying and selling of shares.
 Price Determination: Stock prices reflect supply and demand dynamics, rising with
increased demand and falling with increased supply.
 Corporate Financing: Companies raise capital for expansion, research, and acquisitions
via the stock market.
 Economic Indicator: Stock indices reflect economic health and investor sentiment,
mirroring broader trends.
 Market Volatility: Stock markets can be volatile due to economic data, geopolitics, and
market sentiment.
 Regulation: Government oversight ensures fair trading practices and investor protection.
Investors seek returns through capital appreciation and dividends. The stock market provides
opportunities for diversification and long-term wealth creation, but it carries risks, necessitating
careful research and risk assessment.
Overview of the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).
The Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) are the two
primary stock exchanges in Bangladesh, each serving as a vital platform for trading securities
and facilitating capital formation within the country. Here's an overview of both exchanges:
1. Dhaka Stock Exchange (DSE):
 Establishment: The Dhaka Stock Exchange was established on April 28, 1954, as the first
stock exchange in Bangladesh. It is located in the capital city of Dhaka.
 Size and Importance: The DSE is the largest and most prominent stock exchange in
Bangladesh. It is home to a significant number of listed companies, including many of the
country's leading corporations.
 Trading Hours: The regular trading hours at DSE typically run from 10:30 AM to 2:30 PM
local time, Sunday to Thursday.
 Indices: DSE has its main stock price index known as the "DSE General Index" (DGEN).
It also has sector-specific indices and other indices tracking market performance.
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 Listed Companies: DSE lists a wide range of publicly traded companies from various
sectors, including banking, manufacturing, telecommunications, and more.
 Market Operations: DSE facilitates trading in various financial instruments, including
stocks, bonds, mutual funds, and treasury bonds. It provides an efficient platform for both
retail and institutional investors.
 Regulation: The Dhaka Stock Exchange operates under the regulatory framework set by
the Bangladesh Securities and Exchange Commission (BSEC) to ensure fair and
transparent trading practices.
2. Chittagong Stock Exchange (CSE):

Establishment: The Chittagong Stock Exchange was established on April 10, 1995. It is
located in the port city of Chittagong, the second-largest city in Bangladesh.

Size and Importance: While not as large as the DSE, the CSE is a significant stock
exchange in Bangladesh and plays a crucial role in the country's financial markets.

Trading Hours: The regular trading hours at CSE typically run from 10:30 AM to 2:30
PM local time, Sunday to Thursday, in line with DSE.

Indices: CSE has its primary index, known as the "CSE All Share Price Index" (CASPI),
which tracks the performance of all listed companies on the exchange.

Listed Companies: CSE lists a diverse group of companies, including those based in
Chittagong and surrounding regions, representing various sectors of the economy.

Market Operations: CSE provides a platform for trading in stocks, mutual funds, and
other securities. It facilitates investment opportunities for both local and international
investors.

Regulation: Like DSE, CSE operates under the regulatory oversight of the Bangladesh
Securities and Exchange Commission (BSEC) to maintain market integrity and protect
investor interests.
Both the Dhaka Stock Exchange and the Chittagong Stock Exchange are critical components of
Bangladesh's financial infrastructure, promoting investment, capital formation, and economic
growth within the country. Investors can access a wide range of investment opportunities through
these exchanges, and they play a pivotal role in the development of the country's capital markets.
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The role of stock markets in raising capital for businesses.
Stock markets play a crucial role in raising capital for businesses, both for established
corporations and for newer companies seeking funding. This process of raising capital through
stock markets is primarily achieved through the issuance of shares of stock. Here are key aspects
of how stock markets facilitate capital raising for businesses:
Initial Public Offerings (IPOs): One of the primary ways in which stock markets help
businesses raise capital is through Initial Public Offerings (IPOs). An IPO is the first sale of a
company's shares to the public. When a company decides to go public, it offers a portion of its
ownership (equity) to external investors in exchange for capital. This capital injection can be
used for various purposes, including expanding operations, research and development, debt
repayment, or acquisitions.
Secondary Offerings: Even after the initial IPO, companies can continue to raise capital by
issuing additional shares in secondary offerings. These offerings can take various forms, such as
follow-on stock offerings, rights issues, or convertible bond offerings. Secondary offerings
provide a means for companies to secure additional funding to support growth initiatives or
address financial needs.
Liquidity and Share Repurchases: Stock markets provide liquidity to existing shareholders,
including company founders, employees, and early investors. This liquidity allows them to sell
their shares when needed, which can free up capital for reinvestment in other ventures or
personal financial goals.
Debt-to-Equity Conversion: In some cases, companies may convert debt into equity and then
offer those equity shares to investors in the stock market. This debt-to-equity conversion can
help companies reduce their debt burden and improve their financial position.
Attracting Investment: Being publicly traded on a stock exchange can make a company more
attractive to a broader range of investors, including institutional investors and mutual funds. This
increased visibility can lead to greater interest from potential investors, thereby increasing the
company's access to capital.
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Market Valuation: Stock markets provide a mechanism for assigning a market value to a
company. This valuation is based on supply and demand dynamics and reflects investor
sentiment about the company's future prospects. A higher market valuation can make it easier for
a company to raise capital by issuing new shares at a favorable price.
Access to Diverse Funding Sources: Stock markets offer access to a diverse pool of investors,
including retail investors and institutional investors, both domestic and international. This
diversity of funding sources can help businesses secure capital under various market conditions.
Long-Term Capital: Unlike some forms of financing that have fixed repayment terms, equity
capital raised through stock markets does not have a predetermined repayment schedule. This
provides companies with more flexibility in managing their capital and growth plans.
In summary, stock markets provide businesses with a critical avenue for raising capital that can
be used for expansion, innovation, debt reduction, and other strategic initiatives. Going public
through an IPO or issuing additional shares on the secondary market allows companies to tap
into the financial resources of a wide range of investors, driving economic growth and
development. However, it's essential for companies to consider the implications of equity
ownership and transparency requirements associated with being publicly traded.
Contribution to wealth creation and financial inclusion.
Stock markets make significant contributions to wealth creation and financial inclusion by
providing individuals and institutions with opportunities to grow their wealth and by extending
access to financial products and services. Here are key ways in which stock markets contribute to
these objectives:
Wealth Creation:
Capital Appreciation: Investors who participate in the stock market have the potential to
benefit from capital appreciation. As the value of stocks increases over time, investors can see
the value of their investments grow, leading to wealth creation.
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Dividend Income: Many publicly traded companies distribute a portion of their earnings to
shareholders in the form of dividends. This income stream provides investors with regular cash
flows, contributing to their wealth accumulation.
Portfolio Diversification: Stock markets offer a wide range of investment options, allowing
investors to diversify their portfolios across different industries, sectors, and asset classes.
Diversification can reduce risk and enhance wealth creation potential.
Long-Term Growth: Historically, stock markets have demonstrated long-term growth trends,
which can benefit investors who take a long-term investment horizon. Over time, investments in
well-performing stocks can substantially increase in value.
Financial Inclusion:
Access to Investment Opportunities: Stock markets open up investment opportunities to a
broader population, allowing individuals to participate in the growth of businesses and the
economy. This is particularly important for those who may not have access to traditional
investment vehicles.
Savings and Retirement: Stock markets enable individuals to save and invest for their
retirement. Through retirement accounts and pension funds, people can participate in the stock
market to secure their financial future.
Small Investors: Stock markets are accessible to small investors who can buy shares with
relatively modest amounts of capital. This inclusivity allows individuals with limited resources
to build wealth gradually.
Financial Education: The participation of a diverse range of investors in the stock market
encourages financial education and literacy. As individuals engage with investments, they often
seek to understand financial concepts and make informed decisions.
Wealth Distribution: Stock markets can contribute to wealth distribution by allowing
individuals to invest in companies' growth and profit-sharing, reducing income inequality over
time.
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Economic Growth: As more individuals invest in the stock market, the capital raised by
businesses can be used to fund expansion, research and development, and job creation,
contributing to overall economic growth.
Institutional Involvement: Financial institutions and funds that participate in the stock market
also play a role in financial inclusion by managing investments on behalf of individuals who may
not have the expertise or resources to do so independently.
2.2. Money Market:
The money market is used by a wide array of participants, from a company raising money by
selling commercial paper into the market to an investor purchasing CDs as a safe place to park
money in the short term. The money market is typically seen as a safe place to put money due the
highly liquid nature of the securities and short maturities, but there are risks in the market that
any investor needs to be aware of including the risk of default on securities such as commercial
paper. The primary money market is comprised of banks, FIs and primary dealers as
intermediaries and savings & lending instruments, treasury bills as instruments. There are
currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only active secondary
market is overnight call money market which is participated by the scheduled banks and FIs. The
money market in Bangladesh is regulated by Bangladesh Bank (BB), the Central Bank of
Bangladesh.
Overview of the money market and its functions.
Money Market Instruments:
Common types of money market securities traded in Bangladesh include:

Treasury Bills (T-Bills)

Repurchase Agreements (Repo or Reverse Repo)

Commercial Papers

Certificate of Deposit

Banker's Acceptance
Treasury Bills (T-Bills):
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Treasury Bills, recognized as one of the safest money market instruments, are short-term
borrowing instruments issued by the Central Government through the Central Bank of the
country. They are considered zero-risk instruments and are available in both the primary and
secondary markets. T-Bills have short maturities, typically ranging from three months, six
months, to one year.
The Central Government Issues T-Bills at a price lower than their face value (par value) and
promises to pay the full-face value upon maturity. When T-Bills reach maturity, the government
reimburses the holder for the face value, and the difference between the purchase price and the
maturity value represents the interest income earned by the instrument holder.
T-Bills are issued through auction processes, where bids can be prepared either competitively or
non-competitively. In competitive bidding, the bidder specifies the desired return on maturity,
and if the return is deemed too high, the T-Bill may not be issued. In non-competitive bidding,
the return is not specified, and the rate determined at the auction is applied upon maturity.
Commercial Papers:
Commercial paper comprises short-term debt instruments issued by reputable and creditworthy
firms. While it is not commonly issued in Bangladesh, the available types of commercial papers
include bills of exchange, promissory notes, and mutual funds.
Negotiable Certificates of Deposit (NCDs):
NCDs are certificates issued by major commercial banks to serve as a short-term funding source.
Nonfinancial corporations often purchase NCDs. The denomination for NCDs is not fixed in
Bangladesh, and their maturities typically range from 15 days to one year. NCDs provide returns
in the form of interest, along with the difference between the redemption price and the purchase
price.
Repurchase Agreements (Repo or Reverse Repo):
Repurchase Agreements, commonly known as repo or reverse repo, involve one party selling
securities to another party with a mutual agreement to repurchase them at a specific date and
price. Financial institutions are frequent participants in repo agreements.
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Banker’s Acceptance:
Banker's Acceptance is a financial instrument indicating that a bank accepts responsibility for a
future payment, commonly used in international trade transactions. The maturity period for
banker's acceptance ranges from 30 to 270 days, and it typically offers returns higher than T-Bill
yields.
Capital Markets & Their Instruments
Capital markets are financial markets where individuals and institutions engage in the trade of
financial securities. These markets serve as a platform for organizations, both public and private,
to raise funds by issuing securities. Capital markets encompass both primary and secondary
markets, including stock and bond markets. For instance, when a company conducts an Initial
Public Offering (IPO), it accesses the capital markets by seeking investments from the public.
Similarly, governments issue Treasury bonds in the bond market to finance various initiatives.
A. Regulatory Bodies
The Securities and Exchange Commission (SEC) in Bangladesh exercises its regulatory powers
under several key acts, including the Securities and Exchange Ordinance 1969, the Securities and
Exchange Commission (SEC) Act 1993, and the Depository Act 1999. The SEC's primary role is
to regulate institutions involved in capital market activities.
B. Participants in the Capital Market
The SEC grants licenses to institutions to participate in the capital market. As of now, 52
institutions are licensed as Merchant Bankers & Portfolio Managers, 16 as Asset Management
Companies, and 9 as Security Custodians. Additionally, the SEC issues registration certificates
to 9 Credit Rating Companies.
C. Stock Exchanges
Bangladesh has two stock exchanges:
a) The Dhaka Stock Exchange (DSE)
b) The Chittagong Stock Exchange (CSE)
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Both of these exchanges operate in the secondary capital market. DSE was established as a
Public Limited Company in April 1954, followed by the establishment of CSE in April 1995. As
of June 15, 2012, DSE had 237 enlisted securities, including 237 listed companies and 41 mutual
funds, while CSE had 204 enlisted securities.
The functions of stock exchanges include:
 Regulating the business of the Stock Exchanges and other securities markets.
 Registering and regulating various intermediaries in the securities market, such as stockbrokers, sub-brokers, and merchant bankers.
 Monitoring and regulating collective investment schemes, including mutual funds.
 Promoting investor education and providing training for intermediaries.
 Prohibiting fraudulent and unfair trade practices.
 Regulating the acquisition of shares and takeovers.
 Conducting investigations, inspections, inquiries, and audits.
D. Intermediaries
Various types of capital market intermediaries in Bangladesh include:
 Stock Exchanges: Dhaka Stock Exchange and Chittagong Stock Exchange are the
primary stock exchanges in the country.
 Central Depository: Central Depository Bangladesh Ltd (CDBL) is the sole depository
system facilitating the transaction and settlement of financial securities.
 Stock Dealers/Stock Brokers: Licensed entities operating under SEC rules and members
of stock exchanges.
 Merchant Banker & Portfolio Manager: Licensed institutions operating under SEC rules.
 Asset Management Companies (AMCs): Authorized to act as issue and portfolio
managers for mutual funds.
 Credit Rating Companies (CRCs): Licensed entities that provide credit ratings.
 Trustees/Custodians: Accredited institutions required for asset-backed securitizations and
mutual funds.
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 Investment Corporation of Bangladesh (ICB): A specialized intermediary empowered to
perform various capital market functions under the SEC's jurisdiction. ICB has three
subsidiaries: ICB Capital Management Ltd., ICB Asset Management Company Ltd., and
ICB Securities Trading Company Ltd.
Capital Market Instruments
Bonds: Long-term debt securities issued by corporations and government agencies to support
their operations.
Mortgages: Long-term debt obligations created to finance real estate purchases.
Stocks: Also known as equity securities, stocks represent ownership in issuing corporations.
They offer potentially higher returns but come with a higher degree of risk.
Financial Institutions in Bangladesh:
Financial institutions in Bangladesh form a crucial part of the country's economic landscape,
providing various financial services and support for individuals, businesses, and the government.
These institutions play a vital role in facilitating economic growth, financial stability, and access
to financial services for a diverse population. Here is an overview of the key types and functions
of financial institutions in Bangladesh:
 Commercial Banks: Commercial banks in Bangladesh are major players in the financial
sector. They offer a wide range of services, including accepting deposits, granting loans,
facilitating payments, and providing various financial products to both individuals and
businesses.
 Non-Banking Financial Institutions (NBFIs): NBFIs, including microfinance
institutions, leasing companies, factoring firms, and housing finance companies, specialize
in catering to specific financial needs and underserved segments of the population. They
play a vital role in promoting financial inclusion and supporting economic development.
 Central Bank: The Bangladesh Bank serves as the central bank of the country. It is
responsible for monetary policy implementation, regulating and supervising financial
institutions, managing the country's foreign exchange reserves, and maintaining overall
financial stability.
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 Development Banks: Development banks in Bangladesh, such as the Bangladesh
Development Bank Limited (BDBL), focus on financing and supporting various
development projects, including infrastructure, agriculture, and industrial development.
 Cooperative Banks: Cooperative banks serve as community-based financial institutions
that offer banking services and support to cooperatives and local communities. They play
a role in grassroots economic development.
 Specialized Banks: Specialized banks like the Rajshahi Krishi Unnayan Bank (RAKUB)
are designed to cater specifically to the agricultural sector, providing financial assistance
to farmers and promoting agricultural development.
 Insurance Companies: Insurance companies offer a range of insurance products,
including life insurance, general insurance, and health insurance, providing risk mitigation
and financial protection for individuals and businesses.
 Capital Market Institutions: Capital market institutions, such as the Dhaka Stock
Exchange (DSE) and the Chittagong Stock Exchange (CSE), facilitate trading of
securities, including stocks and bonds, contributing to capital formation and investment
opportunities.
 Microfinance Institutions (MFIs): MFIs target micro-entrepreneurs and low-income
individuals, offering microloans, savings accounts, and financial literacy programs to
promote financial inclusion and poverty reduction.
 Remittance Services Providers: Given the significant volume of remittances from
overseas Bangladeshi workers, remittance service providers play a crucial role in
facilitating international money transfers and supporting the country's economy.
 Asset Management Companies: Asset management companies manage investment
portfolios on behalf of clients, including individuals, institutions, and pension funds, with
a focus on optimizing returns and managing risk.
 Government Financial Institutions: Government-owned financial institutions, like the
Investment Corporation of Bangladesh (ICB), participate in capital markets, provide
financing for various sectors, and support economic development initiatives.
4.1. Capital Formation:
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Capital formation, the process of accumulating and directing financial resources toward
productive investments, relies on financial institutions and markets. Institutions like banks and
mutual funds collect savings and channel them into investments. They also act as intermediaries,
connecting capital providers with borrowers through loans and bonds issued in financial markets.
Efficient capital allocation directs funds to projects with growth potential, while risk
management instruments reduce investment concerns. Liquid markets ensure easy asset
transactions, promoting investor confidence. Financial innovation attracts capital to emerging
sectors, and government financing supports infrastructure and social programs. Ultimately,
capital formation fuels economic growth and stability, orchestrated by effective financial
systems.
4.2. Financial Inclusion:
Expanding access to financial services in rural and underserved areas:
Expanding financial services in rural and underserved areas is vital for financial inclusion and
poverty reduction. Key strategies include establishing physical banking outlets, leveraging digital
financial services, promoting microfinance institutions, fostering community banking, providing
financial literacy, government initiatives, public-private partnerships, fintech solutions, credit
guarantee schemes, specialized Agri-finance, mobile banking agents, alternative credit scoring,
customer-centric approaches, and diligent monitoring and evaluation.
Reducing income inequality and poverty:
Financial institutions and markets can significantly contribute to reducing income inequality and
poverty through mechanisms like expanding access to credit, promoting financial inclusion,
supporting microcredit, facilitating social impact investing, and providing financial education,
ultimately fostering economic empowerment and financial well-being for underserved
populations.
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Conclusion:
Bangladesh has demonstrated remarkable progress in its economic development over the past
few decades, and this success can largely be attributed to the dynamic role played by financial
markets and institutions within the country. This term paper has investigated how these financial
systems have facilitated Bangladesh's economic development and identified the challenges and
opportunities they face for the future.
The financial system in Bangladesh comprises financial institutions, financial instruments, and
financial markets, all of which play crucial roles in encouraging savings, allocating funds
efficiently, and fostering economic growth. Financial markets, including the stock market and
money market, are pivotal in raising capital for businesses, enabling them to expand, innovate,
and create wealth. Stock markets, in particular, serve as platforms for individuals and institutions
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to trade ownership shares of publicly traded companies, promoting capital formation and
economic growth.
Furthermore, stock markets contribute significantly to wealth creation and financial inclusion by
offering opportunities for individuals and institutions to grow their assets and providing access to
a wide range of financial products and services. They also help distribute wealth and promote
economic growth.
The money market in Bangladesh, regulated by the Bangladesh Bank, plays a vital role in
facilitating short-term borrowing and lending, ensuring liquidity in the financial system. Various
money market instruments, such as Treasury Bills and Repurchase Agreements, are used to
manage short-term financial needs.
Capital markets, encompassing both primary and secondary markets, provide opportunities for
organizations to raise funds by issuing securities. The Securities and Exchange Commission
(SEC) regulates capital market activities, and various intermediaries, including stock exchanges,
central depositories, stock dealers, and asset management companies, facilitate these markets.
Financial institutions in Bangladesh, such as commercial banks, non-banking financial
institutions, and microfinance institutions, offer diverse financial services and support,
contributing to economic growth and financial stability. These institutions, along with
government financial institutions, play key roles in capital formation and supporting various
sectors of the economy.
Finally, capital formation and financial inclusion are two critical aspects of the financial system's
role in Bangladesh's economic development. Efficient allocation of capital resources, coupled
with expanding access to financial services, can drive inclusive growth, reduce income
inequality, and alleviate poverty.
In summary, Bangladesh's financial markets and institutions have been instrumental in the
country's economic progress, and their continued development and adaptation to emerging
challenges will be essential for sustaining this growth and fostering a more inclusive and
prosperous future for the nation.
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