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The government is the purveyor of the financial resources. It harnesses the available resources by way of taxation and duties, maximises the capital and its utilisation by encouraging and regulating certain non-banking financial engines like the stock and bond market. The central bank maintains fiscal discipline and supervises the banking and non-banking financial institutions. Besides banking institutions, it is necessary to create non-banking financial institutions for making funds available so that the entrepreneurs can have access to funds.
Improving the service sector to bring quick thrust to development is the current buzzword. Malaysian and Indonesian economies have tried to offer services to tourists and support to off-shore institutions of foreign countries. Non banking financial companies such as private fund managers and investment-oriented companies, service sector companies like international chain shops, manufacturing units of multinational companies have all found space in these tiger economies. This has come about, even though both Malaysia and Indonesian have large agricultural sector. The market in Bangladesh is quite different because the pace of development has been slow and bedraggled, bogged down by innumerable factors that are borne out of negligence, corrupt practice and other kinds of negative factors. In such a situation, non-banking financial institutions have been slow to develop specially in urban areas.
Leasing companies satisfy the need for ownership of assets on the basis of hire purchase. A whole group of development financial institutions (DFI) with their operational base in Dhaka combines functions like leasing, direct investment by offering short term loans and share market activities etc. These offices are based in the urban areas though they may and have projects in the rural areas. But non-banking micro-finance bodies have been making major contributions in the rural areas. These institutions, including. Brac, Grameen Bank have been playing an important role in rural development, both economic and social.
According to Bangladesh bank, twenty-eight financial institutions are now operating in Bangladesh. "Of these institutions, 1(one) is govt. owned, 15 (fifteen) are local (private) and the other 12(twelve) are established under joint venture with foreign participation. The total amount of loan & lease of these institutions is Tk. 29,729 million as on 30 April, 2003. Bangladesh Bank has introduced a policy for loan & lease classification and provisioning for FIs from December 2000 on half-yearly basis. To enable the financial institutions to mobilise medium and long-term resources, Government of Bangladesh (GOB) signed a project loan with IDA, and a project known as ``Financial Institutions Development Project (FIDP)`` has started its operation from
February 2000. Bangladesh Bank is administering the project. The project has established ``Credit, Bridge and Standby Facility (CBSF)`` to implement the financing program with a cost of US$ 57.00 million". This project would help facilitate other instruments like Collateralised Loan/Lease Obligation (CLO) and other Asset Backed Securities.
Non banking financial institutions can play a vital role in infrastructural, social development as well as economic development by financing small and medium as well as large industrial projects also. Consumer driven economic activity is vital for instilling business sense amongst the populace. In developed countries one can walk into a private office and hire purchase anything, from washing machines to cars and buses though banking companies have offered consumer loans to offer similar facilities. Non banking financial institutions, specially leasing companies can and do play an absolutely vital role. The quicker pace of paper work, smaller offices and more accessible operating method allow for a confidence building environment. Businessmen can go for purchase and ownership or hire purchase therefore hiring first and then giving transfer money to attain the ownership later. This is so helpful to entrepreneurs who may not have large collateral to give. It is expected that the non-banking financial institutions could get all help form the government to bring in economic activity from the bottom up, turn consumers into businessmen, and, therefore, be the smaller but, in some cases, more friendly and effective conveyor belt for economic upliftment.
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