RETREAT #6 - INCLUSIVE AND INNOVATIVE FINANCING FOR SUSTAINABLE DEVELOPMENT - BB EXPERIENCE

Transcription

1 1 RETREAT #6 - INCLUSIVE AND INNOVATIVE FINANCING FOR SUSTAINABLE DEVELOPMENT - BB EXPERIENCE TARRYTOWN HOUSE ESTATE AND CONFERENCE CENTER TARRYTOWN, NEW YORK FEBRUARY 2015 Md. Habibur Rahman, Bangladesh Bank

2 Outline 2 n n n n n A Brief Overview of BB s Developmental Approach BB mandate, inclusivity and stakeholders responses Growth and Stability Outcome Resilient Economic Growth Robust External Sector Sustained Financial Stability Improved socioeconomic conditions Concluding Remarks

3 3 A Brief Overview of BB s Developmental Approach Mandate Financial inclusivity Supportive macro-prudential policies Stakeholders responses

4 4 Mandate to manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary value and maintaining a competitive external par value of the Bangladesh Taka towards fostering growth and development of country s productive resources in the best national interest 1. 1 THE BANGLADESH BANK ORDER, 1972 substituted by the Bangladesh Bank (Amendment) Act, 2003

5 Financial inclusion initiatives of BB reaching the unreached 5 o Investment Gap? o Availability of Fund? o QE and persistent instabilities and economics weakness? v o Policy support initiatives Concessional refinance against three major sectors: o Agriculture v v Motivational initiative o Road shows/fair/campaign; o CSR initiatives; o Own need based assessments. Technology driven initiatives o Digitization/modernization of payment system. o o o o o SME lending and green financing Rural bank branch expansion Off branch agent based financial services delivery using MFIs and Mobile phone/smart card based banking; No- frill accounts for farmers and disadvantaged people.

6 Agriculture contributing about a fifth of GDP gets less than 6% share of total bank credits q Policy initiatives of ensuring adequate financing for agriculture include: ü Mandatory minimum 2.5% agricultural lending target for all banks ü Government interest subsidy on loans for specified higher value exotic crops and spices ü Banks with inadequate rural branch presence can lend through local MFIs ü Credit needs of tenant farmers supported by lending through a large reputed MFI ü Bank accounts for farmers available at nominal deposits; 10 million accounts opened so far

7 Small and medium enterprises (SMEs) q Contribute to 22.5% of GDP and 40% of employment q SME financing supported by refinance lines funded partly by development partners (IDA, ADB and JICA) and partly by BB q Taka 3.45 billion disbursed from refinance window q 21.9% of the SME credit distributed to women entrepreneurs q New Entrepreneurs Fund and Jute Sector Fund launched in 2014

8 8 Deliberate directional bias for agriculture and SMEs credit % share FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Aggriculture and SME Credit as % of Total Domestic Credit SME % of Domestic Credit

9 Green financing o Macro prudential policy support for green financing includes: ü Banks & financial institutions must allocate 5% of loan portfolio to green finance by ü Better supervisory (CAMELS) rating for good performers ü Differential equity margin and loan pricing requirement according to environmental risk grading o Green financing supported by refinance lines funded by BB & ADB o Refinance line covers 47 green products

10 Green financing..(cont d) Refinance supported green financing covered: Amount (million Taka) Number Solar home system 154 4,867 Irrigation pumps Solar PV module plants 421 3* Biogas plants 524 1,578 * Total capacity of 53 MW/year o Taka billion invested so far as green finance Source: Bangladesh Bank

11 Other financial inclusion programs q Bank accounts for ü school children ü itinerant wage labourers ü street children ü 850 thousand school bank accounts opened so far q 5 million 10 Taka accounts opened to distribute financial aid to: ü social security program beneficiaries ü hardcore poor, freedom fighters ü destitute beneficiaries under Hindu Welfare Trust

12 Supportive macro-prudential policies 12 BB has continued strengthening the financial sector regulatory and supervisory regime in line with evolving global best practices interalia in capital adequacy, liquidity, solvency, corporate governance, risk management, disclosures. Macro-prudential policies like lower risk weights on green output options, higher equity margins on loans for private cars than say for mass transit vehicles, etc.

13 Stakeholders responses 13 q The entire financial sector has responded enthusiastically, with their own innovative approaches in reaching out with financial services to new inclusion client bases. q Helped upholding domestic output and demand, compensating for weak export demand in global growth slowdown. q Green financing promotion has yielded substantial gains in solar and biomass based energy generation, industrial effluent treatment, replacement of polluting output options with efficient low emission alternatives, e.g., in brick baking.

14 14 Growth and Stability Outcome Resilient economic growth Robust external sector Sustained financial stability Improved socioeconomic condition with lower inequality and poverty incidences

15 15 Resilient Economic Growth against all odds q Sustained and stable GDP growth with moderate single digit inflation. q Nominal GDP in USD terms have grown more than eighteen-fold, while population has grown about twofold during the last four decades. q The semi-feudal agrarian economy of the 1970 s has transformed vastly over the decades into a predominantly manufacturing and services driven open economy.

16 Growth and stability outcomes o o o o Incremental domestic output stabilizing domestic prices ü sound macroeconomic fundamentals ü sustained 6% plus economic growth over the last decade ü downward edging inflation ü moderate fiscal deficits Robust and viable external sector Inclusive financing stabilizing the financial sector by bringing large and diverse bases of small loans and deposits Inclusive growth strategy generating strong internal demand

17 17 Stable output growth with moderate inflation Socially responsible financing policies have upheld output growth along with single digit moderate inflation in Bangladesh economy Real GDP growth trend CPI inflation trend Six-plus percent annual average real GDP growth for over a decade Infla%on moderate at single digit 6.5 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15P FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15P

18 Robust and improving external sector 18 q Trade deficit has narrowed on the back of strong export performance. q Quadrupling of exports over the past decade is an indication of Bangladesh s improving trade integration with the rest of the world. q Key strength continues in export competitiveness of its apparel and textiles sector.

19 19 Robust and improving external sector Openness in external trade has widened from around 20% of s to around 47% now, a level typical for middlesized open economies integrated with the global economy. Record high foreign reserves, competitive exchange rate and steady inflows of workers remittances provide a buffer against external shocks.

20 20 Sustained financial stability q q q q BB s thrust for socially responsible financing has served well in inducing financing flows to output ini%a%ves of all popula%on segments in all economic sectors. Small holder agriculture and MSMEs in Bangladesh suffered no credit crunch during or aber the last global financial crisis. Inclusive financing has upheld real sector output and employment growth momentum while also at the same %me enhancing financial stability. This approach has stimulated new output activities in the economy and has also helped banks broaden their deposit and asset bases, making the sector more resilient.

21 21 Improved social development indicators with lower inequality and poverty incidences. q Poverty is receding faster with sustained spell of inclusive growth; per capita GNI rose to USD 1190 in Bangladesh is on course for coming out from the low income and least developed country groups in near term. q Bangladesh is outperforming higher income neighbors in socio-economic development indices in areas of health, primary education and poverty.

22 Progress in Human Development Indicators (HDI) Bangladesh shows remarkable progress in recent years, outperforming regional peers in several key social indicators / Latest Bangladesh (BB-) Bangladesh (BB-) India(BBB-) Sri Lanka (B-) Fertility rate, total (births per woman) Immunization, DPT (% of children mths) Life expectancy at birth, total (years) Literacy rate, adult total (% of people ages 15 and above) Malnutrition prevalence, height for age (% of children under 5) Mortality rate, infant (per 1,000 live births) % 96% 72% 99% % 57.7% 48.2% 91.2% 76.7% 41.4% It is to huge credit of Bangladesh that despite the adversity of low income, it has been able to do so much so quickly - Nobel Laureate AK EN Source: World Bank (WDII) December 2013

23 Substantial poverty decline evidences inclusiveness of growth Poverty declined substantially in the preceding decades but more remains to be done, especially for the extreme poor % of population below the upper poverty line % of population below the lower poverty line National Rural Urban National Rural Urban Population in poverty fell from 61.6 million in 2000 to 44.8 million in 2010 Consumption Gini coeff. unchanged at 0.33 over ten years, evidencing social cohesion Source: HIES 2005, 2010

24 Concluding remarks 24 Despite our noteworthy achievements in terms macro and socio-economic developments through inclusive growth initiatives, there are a lot of issues that are considered to negative affecting our long term sustainability outcome, such as: governance weaknesses, lack of adequate longer term funds and saving instruments, absence of diverse capital, secondary bond and derivatives markets Political conflicts, appearance of frequent and severe natural calamities, and prolong instability in the international commodity markets

25 25 Many Thanks