Bangladesh Bank (BB) has increased the interest rate for green banking aiming to encourage the commercial banks to strengthen disbursement of the loan under its refinance scheme, officials said.

Under the new provisions, the interest rate on bio-gas and cattle farming has been fixed at 11 per cent from the previous 9.0 per cent.

"The decision on raising the interest rate will help to bring a positive impact on disbursement of the environment-friendly loan," General Manager of the Agriculture Credit and Financial Inclusion Department of BB Nirmal Chandra Bhakta told the FE Saturday.

The central bank has, so far, disbursed around Tk 600 million loans under the refinance scheme from the total fund worth Tk 2.0 billion.

BB launched the Tk 2.0 billion scheme on August 3, 2009 to facilitate renewable energy and environment-friendly projects.

A single commercial bank can borrow up to Tk 500 million from the central bank's revolving fund.

BB is advising the banks to take more loans from the revolving fund and finance the green and environment-friendly projects like bio-gas plants.

The BB has directed chief executive officers (CEOs) and managing directors (MDs) of all scheduled banks and non-banking financial institutions (NBFIs) to implement the new interest rate immediately through its circular Thursday last.

The disbursement of loan under the scheme slowed down as per the previous interest rate arrangement due to apathy from the commercial banks.

"The decision of interest rate increase will hamper not only loan disbursement but the sector as well," a stakeholder said.

The banks will now disburse the loans at 11 per cent interest instead of 9.0 per cent if they do it directly to clients, said the circular.

The circular said the increase of interest rate is mainly to promote bio-fuel production and the expansion of the sector by setting up bio-gas plants in rural areas. The bio-gas plants will be set up by taking a comprehensive cattle farming initiative.

The circular also said that the commercial banks would not be able to charge in addition to the interest rate from the clients in the name of any service charge.

The government wants to meet up 5.0 per cent of total power demand from the green energy by 2015 and 10 per cent by 2020.

Under the scheme, banks and financial institutions can get loans at 5.0 per cent interest from the central bank.

The Financial Express/ Bangladesh/ 20th May 2012

The World Bank (WB) has suggested for inclusion of a new guideline by the Bangladesh Bank (BB) on government bailout funds under the proposed Bank Company Act (BCA)-2012, to help cope with any emergency situation in the economy, a top official in the BB said.

The multilateral lending agency has also underlined the need for incorporating a set of minimum criteria for licensing new banks and about selection and duties and responsibilities of bank directors and their accountability under the BCA (amendment), 2012.

The WB has also urged the BB to incorporate proper measures under the BCA pertaining to cross-border insolvency of any Bangladesh-origin bank company.

Besides, the WB has recommended for resolving a good number of banking issues and incorporating those under the BCA (amendment), 2012, sources said.

It has suggested that the central bank should take measures to help minimize legal conflict between willful defaulters and defaulting debtors, outline the structure of the banks and non-banking financial institutions to avoid regulatory arbitrage, ensure resource allocation for supervision, expand the role and linkage of the banking system with the capital market -- from margin lending to financing of shares, and specify rules on cross holdings and optimum structure for growth of financial system under the BCA (amendment), 2012.

Furthermore, the bank has called for BB's having adequate measures under the BCA, 2012 to protect consumer and for incorporation of cross border insolvency principles and necessary changes in foreign branch operations.

The observations of the WB, along with its specific proposals, were recently submitted to the Bangladesh Bank (BB), sources said.

Earlier, the BB prepared the draft of the amended act and submitted it to the Ministry of Finance (MoF) for completion of all the necessary formalities.

Experts said, the term bailout refers to the practice of injecting liquidity to a business when it is bankrupt or close to the point of bankruptcy. There are multiple ways through which this could be acted upon, they added.

The money could be given as a loan to the company which needs the same to repay for maintaining its solvency. Alternatively, the bank can buy the distressed assets of the company and give it in cash in return.

The US in recent years and the European Union (EU) lately announced billions of US dollars and euros respectively for bailout programmes to salvage their large private companies from any collapse.

Top bankers in the BB said, bailout is not a relevant issue for Bangladesh, unlike countries like the US and those of EU. The bailout package can be devised if it becomes inevitable under any complex economic situation, they observed.

"It is not necessary that the BCA, 2012 will incorporate provisions and procedures on bailout mechanism. Rather, as far as our knowledge goes, no country in the globe has similar provisions in their respective BCA," a Deputy Governor of BB told the FE on Saturday.

"Any emergency in an economy, if it really emerges, should be dealt with under an emergency regulation," he added.

He said the criteria for new banks, tests on fitness and eligibility for bank directors, their duties and accountability -- are very much elaborate and in existence in the country -- in the form of separate regulations.

He said it is not a prudent idea that everything about how to run banking companies has to be incorporated in the BCA.

"We have separate guidelines on almost each and every issue, raised by the WB and the International Monetary Fund (IMF)," an Executive Director of BB said.

Earlier, the IMF expressed its reservations over a number of provisions, including those relating to acquisition of problem banks and the tenure of bank directors that were incorporated in the proposed amendments to the Bank Company Act (BCA).

The IMF also raised questions on the proposed regulation about maintenance of capital adequacy and suggested that the authorities concerned should specify appropriate and relevant criteria for directors and officials of banks and also for establishing new banks.

Officials in the MoF said a high-powered committee, headed by former secretary, Mr Abdul Mubin, was formed about two months back to scrutinise the proposed amendments.

Upon the completion of this examination, the amendment would be placed before the cabinet and then before the parliament for its enactment.

The Financial Express/ Bangladesh/ 20th May 2012

Finance Minister AMA Muhith on Saturday identified corruption and lack of proper enforcement of law as the main to ensuring good governance in Bangladesh.

He said reducing corruption is possible through ensuring involvement of people in every spheres of the governance and ensuring accountability and transparency of the government.

The minister was addressing a roundtable meeting on good governance in Dhaka as chief guest.

The Cabinet Division of the government and the Asian Development Bank (ADB) jointly organised the daylong roundtable, which was attended by representatives from India, the Philippines and Korea along with the senior officials from different ministries of the government.

Cabinet Secretary Mohammad Mosharraf Hossain Bhuiyan presided over the meeting, also addressed by Resident Representative of ADB M Teresa Kho.

Muhith pointed out that reducing corruption was possible in every level of the governance through ensuring wider use of the information technology.

Corruption exists in almost every sector in Bangladesh, he said. He termed the police department as the most corrupt body where he said corruption exists in its system, field level and in other areas.

Similarly there is allegation of corruption in land administration, judiciary, tax administration, health and many other sectors, he added.

In Bangladesh about 75 percent cases are related to land disputes and proper land survey system and digitisation of land related data could reduce such legal battles remarkably, he added.

In the function, Teresa Kho said Bangladesh suffers from infrastructural constraints which is the main hurdle to good governance. ADB wants to extend technical support in this regard, she added.

She also suggested bringing a change into the mindset of people who are serving people. She also emphasised on the reconstitution of administration to this effect.

Cabinet Secretary Mosharraf Hossain pointed out what the government has done in last three years to ensure good governance.

The government has formed an independent Anti Corruption Commission, ensured separation of Judiciary from the executive, passed the rights to information act, formed Information Commission and National Human Rights Commission, strengthened Election Commission and also working to enact Consumers’ Rights Protection Act to establish good governance, he added.

Chairman of ACC, Golam Rahman, Chief Information Commissioner, Mohammad Jamir, among others, were also present on the occasion.

The Daily Sun/ Bangladesh/ 20th May 2012

The Asian Development Bank has recently concluded its 45th annual meeting of board of governors in Manila. Established in the mid-sixties, ADB has grown in size and prestige over the decades.

It has more than doubled its membership from 31 to 67, provided loans, grants and other forms of development assistance amounting to a quarter of a trillion dollars, raised its capital base five times to $165 billion, and maintained consistently highest ratings from international credit rating agencies.

The Bank has justifiably earned a reputation as an efficient financial institution.

Yet the more important question is: how has the bank fared in its role as a development institution? It is true that ADB provides only a tiny fraction of financing even for countries that are most aid-dependent. It is also true that its lending to its member countries has achieved at best mixed results.

According to the Bank's evaluation department, the performance of its sovereign lending kept on declining since 2000 after reaching a peak success rate of 70 percent, though the performance of its non-sovereign lending is somewhat better.

Nevertheless, the Bank played a laudatory role in providing finance to poorer countries with few financing options or in offering liquidly to distressed economies that were in financial turmoil.

During the last half century, Asia has attained spectacular economic success that brought more people out of poverty than any comparable period in human history.

Despite this enormous success, a large swathe of humanity in developing Asia remains trapped in abject poverty, with 1.8 billion people subsisting on less than two-dollars a day.

This spectre of human deprivation manifests itself in many forms -- pervasive hunger, ubiquitous illiteracy, widespread malnutrition and high infant and maternal mortality rates. Two thirds of the world's hungry, three-fourths of the world's illiterates and two-thirds of the world's malnourished children live in Asia.

The magnitude and complexity of the human development challenge facing Asia far exceeds that of the rest of the world combined. The Bank, whose motto is to fight poverty in Asia and the Pacific, has its work cut out for it.

Moving forward, the Bank needs to further improve on its past performance. This would require ADB to embrace changes in its operations, internal governance and current personnel practices, research and evaluation.

First, the Bank needs to adopt a more holistic approach to development that goes beyond a single-minded pursuit of growth to incorporate -- more directly -- concerns of sustainability, equity, and other human development dimensions.

It needs to be more innovative and strategic in its development assistance. The Bank should maintain -- except in two areas -- a hands-off policy while allowing borrowing countries a freer hand in planning and implementing investments and formulating policies.

The first relates to corruption that it should pursue aggressively when it suspects of malfeasance; the second relates to policy advice, which it should offer generously, only when sought.

Second, in a recent op-ed in the Wall Street Journal, the former US ambassador to ADB Curtin Chin has noted about a governance deficit at the Bank. The top leadership of the bank is currently determined by an unwritten quota-system.

According to this system, the president of the bank is selected among its senior officials by the ministry of finance of Japan, which -- along with the United States -- is the single majority shareholder of the Bank.

While the president is supposed to be elected by a simple majority, it is currently conducted through a mock consensus, where a senior official from the ministry of finance of Japan is selected without any alternative candidates from other countries.

Not only is the president selected in an uncompetitive and nontransparent way, senior positions from vice presidents to department heads are similarly rationed. It is a quota system where other considerations often override merit.

As Ambassador Chin has summed up, the Bank's personnel practices have been "less than world class".

Abandoning the current practices for a transparent, competitive and merit-based system will augur well for ADB.

The quota system is an antithetical to a competitive, globalised world and is incongruent with the concept of good governance that the bank so eloquently advocates to its member countries.

As a development institution, the Bank can organizationally reinvigorate itself from its bureaucratic torpor by having development professionals with actual development experience at its helm.

The Bank may consider introducing a ¡°double majority ¡°system to select its president, whereby a candidate for the president will have to earn the majority from both donors and borrowers. A similar double majority system, which preserves the interests of both groups, has been in vogue in other regional development banks.

Third, the Bank needs to strengthen its role as a knowledge center. Asia offers an interesting narrative of development -- its successful Asian economies have not always followed the playbook of orthodox economics.

This heterodox, pragmatic approach to economic development requires careful review and analysis, which the Bank is at a vantage position to offer.

In the past, the Bank's research and analysis work has been both fragmented and deficient -- it has been more of an aggregator than a generator of research.

Through revamping research, the Bank should contribute to a sophisticated understanding of the development process in Asia, something from which the global development community can benefit.

Finally, discussion of foreign aid has become increasingly contentious -- much of it has to do with the relative scarcity of aid resources and the murky evaluation issues surrounding the assessment of aid.

In recent years, to garner an aura of objectivity, most international development institutions have gone on to create in-house, ¡°independent ¡°evaluation departments.

Truth be told, the idea of in-house, independent evaluation is essentially an oxymoron.

To overcome the cloud of suspicion on the objectivity of evaluation, truly independent, external evaluation entities -- akin to independent credit rating agencies -- would be desirable.

As a premier development bank, perhaps the Bank can take a lead in this initiative.

MG Quibria is a professor of international development at Morgan State University, USA. He could be reached at: mgquibria.morgan@gmail.com.

The Daily Star/ Bangladesh/ 20th May 2012

The Performance Review Meeting for the managers of Exim Bank was held at the Exim Bank Head office Saturday for evaluating the total performance and financial situation of the bank.

Chairman of the Exim Bank Md. Nazrul Islam Mazumder was present at the meeting as chief guest while Managing Director Fariduddin Ahmed presided over the conference, said a press release.

Members of the Board of Directors Md. Nazrul Islam Swapan, AKM Nurul Fazal, Md. Habib Ullah Dawn, Mohammed Shahidullah, Al-haj Md. Nurul Amin Farook, Mohammad Omar Farooque Bhuiyan, Lt Col (retd) Serajul Islam, Ranjan Chowdhury, Md. Fakhrul Islam Mazumder, Additional Managing Director Dr. Haider Ali Miah, Deputy Managing Directors Abdul Latif Barabhuiya, M Sirajul Islam and Sirajul Haque Miah, all branch managers and executives attended the conference.

News: The Daily Sun/ Bangladesh/ 20-May-2012