Bangladesh: The New Frontier for Banks

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Bangladesh is also a pioneer in the field of microfinance services and we were honoured to have led the world's first micro credit securitisation for BRAC in 2007, allowing BRAC to diversify its funding sources and help develop the microfinance sector in Bangladesh.

What are some of the challenges?
Let me give you a vision. It is the year 2021, the golden jubilee of independence. Bangladesh has just become a poverty-free, middle-income nation with a per capita income exceeding $3,000. Bangladesh is well on its way to become the 22nd largest economy in the world and a globally integrated regional economic and commercial hub. Economists around the world are at awe at the overwhelming success of this South-Asian nation. It seems just a few years ago in fact, that it used to be called the poorest of the poor. The recent track record of the country certainly gives us hope that we will indeed be able to see this vision materialise.

The World Bank calls the phenomenon the Bangladesh Paradox. The Bangladesh economy has steadily accelerated in recent years, with growth reaching almost 7% in fiscal 2006-2007. In spite of the country's troubled political environment and poverty, it has scored particularly well on socioeconomic indicators. Global banks and multilateral institutions present a highly optimistic outlook. Points they highlight: This impressive growth has occurred in a climate of political restructuring. The government is implementing reforms toward privatising many state-owned enterprises. The Dhaka Stock Exchange Index is at a 10-year high, up 66% this year, making it Asia's top performer after China. And the stock market is expected to double in size in 2008.

However, Bangladesh has failed to realise the full potential of its development prospects. Despite the major socioeconomic progress made in recent years, obstacles like political instability, poor resource mobilisation and a weak capital market are impeding the attainment of economic emancipation. Government revenues, at only 10.7% of gross domestic product, remain far too low to meet growing demand for infrastructure and social services. The country's primary foreign exchange earner—the garment industry—is now more constrained by poor infrastructure, including ports, roads, rail, and power supply, than by inadequate trade access.

Some of these issues need to be addressed in the coming years if Bangladesh is to reach its full potential.

How easy is it to convince some of your seniors to visit Bangladesh when they come to Asia?
Most of my colleagues in Asia realise that Bangladesh has always had potential and this potential is now turning into reality so it is certainly getting easier. In the last 12 months, we have had more than 20 visits from our Asian senior management team and once they have come once, they want to come back—we do also have some excellent restaurants in the country, which helps. Global management is the next challenge and I am confident as our business grows and develops in Bangladesh, it will not be too long before Dhaka will be on the agenda of senior visits as the likes of Mumbai and Shanghai are now.

What is the outlook for the Bangladesh economy and what plans do you have to grow in Bangladesh?
We expect GDP to moderate in the coming year to 6% on the back of lower agricultural growth, rising inflation and political uncertainty. 2007 was a difficult year for Bangladesh with rising food prices, the floods and the devastating cyclone. Double digit inflation persists and remains a danger but the central bank has stated that growth is also a priority which should leave in place an accommodative monetary stance. On the external front, we expect the trade balance to widen further on the back of rising food imports and lower exports given the US slowdown.

But Bangladesh's endurance in the face of growing adversity is well known. In spite of all the recent history, the economy maintained a growth rate of well over 6% in 2007. Similar to most developing economies, consumption continues to be a key driver for growth, comprising as much as 80% of GDP. I am confident that while the next 12 months will not be smooth, there is certainly every reason to be optimistic. As such, we will continue to invest and grow our business in the country to help Bangladesh and its companies develop further.

Wozniak is an editor at FinanceAsia.com.