E-Bangladesh Desk
Bangladesh’s economy is currently facing a combination of persistent inflation, pressure on foreign exchange reserves, liquidity shortages in the banking sector, high lending rates, sluggish private investment, and growing global economic uncertainty. Against this backdrop, economists and policymakers believe that relying solely on bank financing will not be enough to support the country’s long-term industrialization and investment ambitions.
According to experts, Bangladesh needs to develop the banking sector and the capital market as complementary pillars of the financial system rather than treating them as competing sources of finance.
Unlike advanced economies, where capital markets provide a significant share of long-term financing for industries and infrastructure projects, Bangladesh continues to depend heavily on bank loans. This dependence has increased pressure on the banking sector while limiting access to long-term capital for businesses.
Experts argue that a transparent, efficient, and confidence-based capital market would help mobilize domestic savings, reduce reliance on bank borrowing, attract foreign investment, and create new opportunities for employment and sustainable economic growth.
However, restoring investor confidence remains the biggest challenge. Years of weak corporate governance, poor financial disclosures, market manipulation, insider trading allegations, inconsistent policy decisions, and limited participation by institutional investors have significantly weakened market confidence. The shortage of quality listed companies and limited investment products have also restricted market expansion.
To address these challenges, the Bangladesh Securities and Exchange Commission (BSEC) has launched a series of reform initiatives aimed at strengthening corporate governance, modernizing market surveillance, improving digital monitoring systems, introducing new investment products, and encouraging greater participation from institutional investors. Discussions are also underway to provide policy incentives for well-performing companies to enter the stock market.
Finance Minister Amir Khasru Mahmud Chowdhury said Bangladesh must strengthen both the banking sector and the capital market to achieve sustainable economic growth. He said the government intends to transform the capital market into a major source of long-term financing by improving the investment climate, simplifying business regulations, enhancing governance, ensuring transparency and accountability, and rebuilding investor confidence.
BSEC Chairman Masud Khan said restoring confidence is currently the commission’s highest priority. According to him, BSEC is modernizing market supervision, taking strict action against market manipulation, improving corporate governance standards, and strengthening financial disclosure requirements. He emphasized that the capital market should not be viewed merely as a stock trading platform but as a long-term financing mechanism capable of supporting large-scale industries and infrastructure projects.
Chairman of the Center for Strategic and Economic Research (CSER) and Managing Director of Labaid Hospital Group, Sakif Shamim, said sustainable industrialization cannot be achieved without a strong capital market. He stressed the need for policy consistency, tax stability, stronger regulatory institutions, and the expansion of corporate bonds, venture capital, and alternative investment opportunities to restore investor confidence and channel domestic savings into productive investments.
City Bank Managing Director Masrur Arefin said banks should primarily focus on providing short- and medium-term financing, while the capital market should become the primary source of funding for large industries and infrastructure projects. He highlighted the importance of strengthening pension funds, insurance funds, mutual funds, and the corporate bond market to expand long-term financing and reduce pressure on the banking sector.
CSER Recommends Comprehensive Capital Market Reform
In its latest analysis, CSER said Bangladesh’s capital market remains significantly below its potential despite multiple reform initiatives introduced after the 2010 stock market crash. Although the market experienced temporary recovery in 2021, rising inflation, liquidity shortages, higher interest rates, foreign exchange pressures, and policy uncertainty reversed that momentum and further weakened investor confidence.
The think tank identified several structural weaknesses, including poor corporate governance, weak auditing standards, inadequate financial disclosures, market manipulation, limited institutional participation, and a lack of diversified investment products.
CSER recommended comprehensive reforms focused on strengthening governance, adopting internationally accepted financial reporting standards, improving minority shareholder protection, and enhancing coordination among BSEC, the stock exchanges, Bangladesh Bank, CDBL, and the National Board of Revenue (NBR).
The report also emphasized technology-driven modernization by proposing a fully integrated digital investment platform featuring e-KYC, online IPO applications, digital dividend payments, tax services, and AI-powered market surveillance capable of detecting suspicious transactions and market manipulation in real time.
To diversify the market, CSER recommended expanding corporate bonds, green bonds, Sukuk, infrastructure bonds, municipal bonds, Exchange-Traded Funds (ETFs), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and strengthening the SME board to support startups and emerging businesses.
The report further called for greater participation from institutional investors, including pension funds, insurance companies, provident funds, and mutual funds. It also recommended policies to attract foreign portfolio investment through stable regulations, simplified capital repatriation procedures, and internationally recognized governance standards.
In addition, CSER emphasized improving financial literacy by incorporating investment education into academic curricula, launching nationwide awareness campaigns, and providing free online investor education.
The think tank concluded that Bangladesh urgently needs a 10–15 Year Capital Market Development Master Plan to guide structural reforms, product diversification, technological modernization, institutional participation, and global market integration.
According to CSER, restoring investor confidence through transparency, policy consistency, and strong governance will be essential for transforming the capital market into one of the primary drivers of Bangladesh’s long-term economic growth.