chittagong stock exchange
PART ONE
A. Introduction
Capital market is the most important part of national economy of Bangladesh. A well-managed and active capital market may help the development processes in many ways such as growth of savings, ensuring efficient allocation of investment resources and better utilization of existing resources.
There is a considerable debate in the academic literature on development as to whether a soundly functioning capital market is precondition for economic development or the former follows the latter. At the early stages of development in most countries, it is the banking sector which plays the leading role in intermediating savings into investment. However, it is generally acknowledged that excessive reliance on the banking system is fraught with serious risks for the financial sector. Such reliance over an extended period inevitably creates a mismatch between assets and liabilities as the banking system typically mobilizes short term deposits to finance long term projects. The risks faced by the financial sector can easily contaminate the real sector with deleterious consequences for economic development.
It is, therefore, an imperative that attention should be paid to the development of capital market as an alternative channel for intermediate function. Capital market is also beneficial for the entrepreneurial classes not merely because it provides access to surplus savings of investors, including many small ones, but also because they do not incur fixed repayment obligations, as is the case with bank financing. Besides an orderly and transparent capital market enables the small savers to participate in the fruits of economic development. Capital market is yet to play its potential role in Bangladesh. Against this backdrop, the report provides a brief description of the evolution of capital market in Bangladesh, where it stands now and the measures under way to enhance its role.
B. Statement of the problem
A. Introduction
Capital market is the most important part of national economy of Bangladesh. A well-managed and active capital market may help the development processes in many ways such as growth of savings, ensuring efficient allocation of investment resources and better utilization of existing resources.
There is a considerable debate in the academic literature on development as to whether a soundly functioning capital market is precondition for economic development or the former follows the latter. At the early stages of development in most countries, it is the banking sector which plays the leading role in intermediating savings into investment. However, it is generally acknowledged that excessive reliance on the banking system is fraught with serious risks for the financial sector. Such reliance over an extended period inevitably creates a mismatch between assets and liabilities as the banking system typically mobilizes short term deposits to finance long term projects. The risks faced by the financial sector can easily contaminate the real sector with deleterious consequences for economic development.
It is, therefore, an imperative that attention should be paid to the development of capital market as an alternative channel for intermediate function. Capital market is also beneficial for the entrepreneurial classes not merely because it provides access to surplus savings of investors, including many small ones, but also because they do not incur fixed repayment obligations, as is the case with bank financing. Besides an orderly and transparent capital market enables the small savers to participate in the fruits of economic development. Capital market is yet to play its potential role in Bangladesh. Against this backdrop, the report provides a brief description of the evolution of capital market in Bangladesh, where it stands now and the measures under way to enhance its role.
B. Statement of the problem