Central Bank Governor of the Year 2015, Asia Pacific

The ‘Green Governor’ has a reputation for innovative thinking and problem solving. He is renowned for his support of the agriculture sector and his focus on SME as well as green banking. As one of the most progressive and well-respected Central Bank Governors in the world, United World discusses Bangladesh’s economic growth outlook and the opportunities and challenges for the banking sector.

Across the region we have seen recent growth downgrades. How do you see the growth prospects for Bangladesh this year?

The economy of Bangladesh has maintained a dynamic growth trend in the midst of repeated external shocks like the East Asian crisis and the subsequent global financial crisis. Bangladesh Bank (BB), as the monetary and financial sector regulator, has engaged the country’s financial sector in the promotion of inclusive and environmentally sustainable financing of output activities, with cautious, restrained monetary programs consistent with price and macroeconomic stability. This has helped Bangladesh economy achieve six plus percent annual average real GDP growth for well over a decade. Declining lending interest rates and rising foreign exchange reserves along with stable exchange rate are also enhancing the investment climate for foreign investors.

In terms of BB initiatives to ensure sustainable growth, we have guided an expansion of agricultural and rural credits, not only to enhance poverty reduction and food security, but also to contribute price stability through lessening domestic food supply volatility. Moreover, BB is able to influence inflation indirectly through maneuvering the intermediate target of broad money growth. BB’s monetary policy stance has already sensitized the banks and financial institutions towards socially responsible lending, accelerating a directional bias favoring lending for productive pursuits. These measures are insulating the economy from becoming overheated.

With regards to currency stability, do you feel that there is confidence in the market regarding the Taka?

The Taka has appreciated against major foreign currencies barring the US dollar. Through cautious monetary policy, we have ensured strong external sector gains with more than fivefold increase in the foreign exchange reserves since 2009. Rapidly growing reserves are strengthening the value of Taka. With intensive surveillance and market based supervision, the value of Taka remains strong and stable compared to other South Asian economies.

You are renowned for some initiatives and policies that are very innovative, like green banking. Why are these policies so important?

Bangladesh Bank is committed to promoting socially and environmentally responsible financing without compromising macroeconomic stability. BB has been pursuing an array of policies for mainstreaming socially responsible business like green banking. We strongly believe that these inclusive policies are a very effective means not only for sustainable growth but also to uplift the “missing middle.”

There has been a lot of talk about non-performing loans and high interest rates in Bangladesh. What is your to combat this and what is your policy towards corporate governance?

As elsewhere, the banking sector in Bangladesh faces multiple challenges moving forward, including adjusting to rapid technological changes, risk management, and stability challenges posed by increasing financial globalization. We at BB have gone about setting the incentives, as well as overseeing compliance with corporate governance related laws, regulations and guidelines. Setting up a world class Centre for Leadership Excellence in the Financial Sector (CLEFS) in Chittagong is in progress, which will primarily focus on issues related to better corporate governance in the financial sector. We hope to bring in world-class experts to raise the quality of discourses on the desired corporate governance excellence.

What do you believe the IMF and the World Bank can contribute to Bangladesh’s Development?

In the recent IMF-World Bank Annual Meetings, I raised the issue that we should not just go on creating money, rather we should help the smaller groups of people to produce goods and services. Therefore, my suggestion for the WB and the IMF would be to emphasize a financial inclusion strategy, focusing more on green and socially responsible growth systems. The corporations should share part of their income with the poor and their workers. The Financial Times magazine, The Banker, chose me as the ‘Central Bank Governor of the Year 2015: Asia Pacific’, recognizing that these innovative steps are adding significant values to the economy.

Is there room for more banks to enter the sector to continue this inclusive growth strategy?

Indeed there is still a significant part of the rural population that is under-banked due to banks’ low penetration in rural areas. To ensure the outreach of banking services to the masses, 9 commercial banks have been given licenses, of which 6 are from local entrepreneurs and others from Non-Resident Bangladeshis. The rule for new bank branches has been set at 1:1 ratio, which is expected to deepen financial inclusion further. All scheduled banks are doing online banking, mobile banking, agent banking, offshore banking etc. leaving little room for new foreign banks in Bangladesh.

You have spoken about agriculture, but there are other sectors like the industrial and telecommunication sectors that may need certain requirements from their banks. How would you assess the level of competitiveness of the banking sector in terms of technical capacity?

Technology has brought about a complete paradigm shift in the delivery of banking services in Bangladesh. Over the past few years, in line with the government’s vision of “Digital Banlgadesh,” Bangladesh Bank has been encouraging and implementing IT based financial services in the overall banking sector. The implementation of Bangladesh Automated Cheque Processing System (BACPS), Bangladesh Electronic Fund Transfer Network (BEFTN), Enterprise Resources Planning (ERP), CIB online facilities, Mobile Banking Service, establishment of the Data Warehouse facilities, adoption of core banking software are all very important in ensuring technical capacity.

Bangladesh has transformed in the years since independence in 1971. How do you see the financial sector moving into the future?

The banking sector in Bangladesh has grown several‐fold since independence in 1971, in tandem with country’s uninterrupted spell of steady, stable economic growth. Beginning as almost wholly state‐owned sector making directed loans at prescribed interest rates, our banking sector has undergone successive rounds of major structural and regulatory reforms; transforming it to a vibrant private sector led market based banking system. I strongly believe BB’s movement towards sustainable banking, including financial inclusion ethos with green banking and mobile banking initiatives, will continue to bring prosperity in the years ahead.

How would you like the banking sector, or the Central Bank itself, to contribute to the image of Bangladesh internationally?

To spread the success stories of Bangladesh Bank and Bangladesh itself, we at central bank are working on the branding of Bangladesh Bank. We have an excellent, structured and secured website. With the assistance from a locally reputed agency, we have already developed a strategic plan to communicate and highlight various initiatives and landmarks of Bangladesh Bank through social electronic media (Facebook, YouTube, LinkedIn, Twitter etc.).

You are Asia’s ‘Central Bank Governor of the Year 2015, Asia Pacific’ and this is certainly one among many achievements. You started from humble beginnings and there are many of the younger generation who are in a similar situation. What is your advice to the next generation of young people?

“No pain, no gain.” This famous maxim reminds me of the toiling journey I have had to reach this stage. In this era of rapidly changing economic environment, the students must work relentlessly to keep up to date with today’s changing job requirements. I would advise the students to prepare themselves and change their mindset of chasing not only jobs, but also to explore their potential for entrepreneurship. The recognition I have achieved for promoting socially and environmentally responsible initiatives will be enhanced with innovative ideas of our young generation.