Equal Access Equals Greater Financial Freedom

Dr. Rehnuma Karim and Aninda Osman from COLORS Magazine and IBTV bring an exclusive interview with one of the 4 esteemed Commissioners of the BSEC Dr. Shaikh Shamsuddin Ahmed. Dr. Rehnuma discusses the role of BSEC in encouraging more women investors, how technology can revolutionize trading to improve transparency, and features of new bonds and services that can attract investors from home and abroad.

Although generally, the number of traders is increasing, upon closer inspection we see an unequal distribution when it comes to the male-to-female ratio. Despite women having a greater propensity to save than men, their gap in knowledge and information reduces their confidence to invest. Thus the participation rate of women in the capital market is relatively low overall, but an upward trajectory has been observed over the years as more women are expressing their interest in the capital market. One of the main barriers that are being addressed by the BSEC is financial literacy. Dr. Shamsuddin mentioned, “Female investors should be equipped with financial literacy training in order to make more informed investment decisions. In that regard, BSEC has its own training division and has also partnered up with the Bangladesh Institute for Capital Market (BICM) and Bangladesh Academy of Security Market (BASM) where training is provided to around 50-100 women every month”. The commissioner added, “Alongside the training sessions in Dhaka, workshops are being conducted outside city to encourage women to participate in the market. The BSEC has plans to expand the workshops to 64 districts in the future”. In order to increase female inclusivity in the Bond market, BSEC has decided to come up with new women-centric products such as the “Pink Bond”. Venture capitalist products and tokenized mutual funds catered towards women are in the pipeline. The mutual funds are proposed to be provided in small denominations for low-income earning women such as garment workers. e price, expected to be at 10 takas will allow this segment of people to invest and participate in trading which they otherwise could not have done before since it was out of their reach. Mobile banking service providers such as BKash, Nagad, and Rocket will be in collaboration with BSEC in order to make trading more convenient and smoother. These two-pronged approaches of BSEC, of enhancing financial literacy and providing products for women, aim to bring more women under the umbrella of the capital market.

The commissioner mentioned that, unlike banks that can provide some degree of insurance to borrowers, there are no such incentives in place in the capital market yet. He explained, “There is a deposit insurance scheme in the country that runs under the directive of the Bangladesh Bank. The scheme was enacted in the year 2000 by the central bank. It enables banks to protect their customers up to BDT 1 lakh. We would like to introduce a similar policy in the capital market so that we can also provide some insurance and security to the investors to some extent. We are working with IDRA, brokerage firms, and other agencies so that we can bring that product to the market.” If this policy is implemented then it will boost investor confidence and with it the volume of trading.

Introducing technology on a large scale will enable people in rural and urban areas to easily gain access to the market and trade simultaneously through the digital platform.

Another catalyst to increase the volume of trading is adopting the latest Technology and popularizing E-Trade. Comparing and contrasting with the New York Stock exchange or the Hong Kong Stock Exchange we are grossly falling short in terms of the level of activities. e primary reason behind this is because most of the trading is digitized and can be easily done online and through apps, which is not the case in the Bangladeshi Capital market. The BSEC aims to address this issue by introducing technology on a large scale that will enable people in rural and urban areas to easily gain access to the market and trade simultaneously through the digital platform. One of the initiatives is the “Fin-Tech Inter Operability Project”, the BSEC has proposed the project and applied for aid from the World Bank. The project will provide stakeholders with Fin-Tech tools that can be easily accessed online so that they can be connected to the market and make informed decisions in an efficient and cost-effective manner. This will enable people to tap into new products with ease such as the Real Estate Investment Trust (REIT). Real Estate market products can be popularized even more and have a much wider reach to shareholders across the country. Similarly, Exchange Rate Fund is going to be introduced gradually. Hong Kong has already digitized the Initial Public Offering (IPO), it is possible for Bangladesh to follow suit and take the entire process online starting from the applications, and verification to the launching itself.

Implementation of digitization will enhance efficiency by considerably bringing down a large amount of time and money wasted through the laborious manual process that’s in place today.

Transparency between shareholders and the companies is extremely important for trading to take place successfully. In that regard, people rely largely on the websites of companies to get information and help them make informed decisions. Unfortunately, however, we nd that 162 out of 300-350 companies listed in the market have not updated their websites. This paints a poor image of their performance as well as gives misleading information which is risky for investors. Investors can take advantage of the tools from the website nlitbd.com. Inaugurated by the honorable prime minister in 2017, the website provides people with a wide set of necessary tools and calculators online which can help investors make proper decisions. In order to promote transparency, the BSEC has proposed to implement blockchain technology in the future. This way information cannot be easily altered and will be vital in improving investor confidence. In other countries, even if stakeholders cannot be present physically at the Annual General Meetings (AGM), they can gain access to the LIVE telecast on their devices or view the video recordings and short clips later on from the website. Once the operations go online stakeholders in Bangladesh can also virtually access the information disclosed in the AGM remotely keeping themselves updated and thus simultaneously improving transparency.

The BSEC has expressed their openness to consider innovative bond ideas and invited stakeholders to come forward with creative products. The Municipal bond is planned to be introduced in Bangladesh. Historically, the municipal bond has secured a vital place in successful bond markets of developed nations. If the finance to construct buildings, culverts, bridges, etc at a municipal level can be raised through these bonds, then it will effectively reduce the nancial pressure on the government’s budget and empower people at the local level. e commissioner added, “A lot of opportunities remain unexplored for instance, in Mymensingh, a research organization discovered a way to transform waste materials into electricity. In order to nance this idea if the companies issued bonds rather than appealed to the government for funds then they can raise the capital much more effectively and efficiently. BSEC can provide full support to these businesses provided that they come forward with their ideas.”

A surge of foreign demand and interest to trade products in the capital market of Bangladesh has been observed in recent years. If any Non-Resident Bengalis (NRB’s), want to invest, they must first open a NITA account. However, it since the process has not been fully automated yet, it is very time-consuming to process the documents, for verification and nally the creation of the account. This is why Bengalis living abroad used to turn away from investing despite their interest. In order to cut across the bureaucracy and the hassle BSEC has brought down the paperwork required for opening up a NITA account to only 6 documents. Dr. Shamsuddin said, “We are hoping to implement this soon, so that foreign remittance, foreign investment, and NRB’s interests can be addressed easily. Within the next few days we are expected to receive a new directive from the Bangladesh Bank and by the end of 2022 it will be fully functional for investors all over the globe to participate.”

 The capital market can be expanded if more women are made aware of financial literacy and given the opportunity to invest in women-centric products in rural and urban Bangladesh. Technological development is essential to accommodate this growth in trade volume. Although the Capital market of Bangladesh has evolved at different stages since its inception it still has a long way to go. To implement the aforementioned policies and projects the active cooperation of the National Board of Revenue (NBR) the Bangladesh Bank (BB) and the BSEC as well as local and international agencies is pivotal.

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