Bangladesh Bank Training Academy Journal

Abstract: This paper explores the relationship between banks' liquidity and profitability by considering four types of banks (State-owned Commercial Banks, Private Commercial Banks,Foreign CommercialBanks andDevelopmentFinancialInstitutions) operating in Bangladesh. We apply fixed effects model (FEM) by using data of these banks for the period 1997-2014. Thepaperfinds that the expenditure-incomeratio and excess liquidity ratio have negative impacts on banks' profitability (return on asset). The negative relationship of expenditure-incomeratio and excess liquidity with bank'sprofitability is a major concernfor the policy makers of the banking industry of Bangladesh.

Citation: Begum, M. N., Mily, N. N., Islam, M. E., & Alam, M. M. (2017). Relationship between bank's liquidity and profitability in Bangladesh: An empirical analysis. Thoughts on Banking and Finance, 6(2), 9–28.

Abstract: This study examined the monetary policy effectiveness in Bangladesh with a vector autoregression (VAR) approach. Recursive identification was used to evaluate the dynamic responseof macroeconomic variables to apositive nominal interestrate shock. Theresults show that over theperiod 2000-2013, the monetarypolicy was effective in influencing aggregate output,price level, exchange rate and stockprices. Thispaper alsofinds that money supply doesnotperform well as a monetarypolicy instrument to influence thereal variables. Results from the Bangladesh model imply that output and prices are more sensitive to changesin theshort term interestrates.

Citation: Chowdhury, R., & Alam, M. M. (2017). The effectiveness of monetary policy in Bangladesh: A VAR approach. Thoughts on Banking and Finance, 6(2), 29–41.

Abstract: The major objective of this study is to explore the dynamic causal linkages between foreign capital inflows (FCI) and economic growth in Bangladesh usinga long span of time series datafrom 1981 to 2014. Though there are a lot ofpiecemealstudies dealt separately on the linkage between one or two components offoreign capital inflows and economic growth, the present study consider the joint impact of all the components of FCls (namely, official developmentassistance, overseasremittances,foreign directinvestmentandexternaldebt) on economicgrowthinBangladesh. Thoughtheearlier studiesbearsignificancethepresentstudy is an improvementof theearlier studiesin termsdatausedandmethodologicalpoint of view. Thestudy examines the time seriesproperties of the data using the widely usedADF unit root tests, which is again recheckedby thePhillips-Parron test. Theunit root testresults show that all thedataseries areofI(1) processes.Hence, weutilize theJohansen-Juseliusmultivariate cointegrationtest to examinethelongrun equilibriumrelationshipamongthevariablesin the model.Existence of a single co integrating vector was detectedand all theconsideredvariables belongto thecointegratingspaceimplying that thereis a stablelongrun relationshipamong them. The estimation of error-correction modelfurther confirms the existence of long run stable equilibrium among the variables in the modeland there is bidirectional causality all components of FCls (except official development assistance) and economic growth and there is a unidirectional causalityfrom official development assistance to economic grwoth. The resultis supportedbothby theF test(basedonGrangercausalrelationship)andalsothet test (based on error correction model). The implication of the result is that the role offoreign capital can't be ignored to achieve long run economic growth of Bangladesh. The empirical result also shows thatforeign direct investment, in thepresence of improvedhuman capital, canbemuchmorebeneficialfor the longrun growth and development of the economy.

Citation: Hossain, M. A. (2017). Foreign capital inflows and economic growth in Bangladesh: An empirical analysis. Thoughts on Banking and Finance, 6(2), 42–67.

Abstract: Simultaneously thesources and the uses of funds play an imperative role in maximizing the worth of an enterprise. This paper investigates the necessity of effective sourcing as well as usage of funds of SMEs. Primary as well as secondary data have been utilized in the present research work. The collected data have been analyzedusing some financial and statistical tools.Sample SME enterprises face problems in obtaining funds in terms of asset based collateral and high cost structure offunds from banks andfinancial institutions; in using funds in terms of insignificant investment in fixed assets, lack of investment opportunities, shortage of investable funds and in general low opportunityfor expansion of their business. However, their dependency on inefficient finance service usually from informal sources is more. Accurate credit assurance scheme should be developed for the lending institutions in order to coverboth the credit risk and additional loan management cost. Accessible investab e funds along with investment opportunities infixed assets should be developed for SMEs in Bangladesh.

Citation: Chaudhury, N. J. (2017). Sources and uses of funds of SMEs in Bangladesh: An empirical study on Chattagram metropolitan area. Thoughts on Banking and Finance, 6(2), 68–81.

Abstract: The idea of green Bankingis comparatively new in Bangladesh. This paper presents the green banking real practices and prospects in Bangladesh. The study is mainly based on secondary data that highlights the online and green financing guidelines for green banking practices as well as green banking unit. Green Banking is a new way of conducting the banking business by considering the ethical and environmental issues as well as corporate social responsibility (CSR). It is inevitable to practice greenbanking through banks because of globalization and to face the competition. Onaverage, bank allocated Tk. 657.67 million for greenbanking in 2012. Since October2012, Tk.838.4 million has been allocated to the green projects. For 2018, banks have allocated Taka101,190 million for green finance of which Taka 76,150 million has been utilized. The study concludes the green safety and security measures. Green banking is one of the major mechanisms to achieve SDGs and to be listed as a developed country.

Citation: Nazimuddowlah, M. (2017). Green banking real practice and prospects in Bangladesh. Thoughts on Banking and Finance, 6(2), 82–98.

Abstract: The paper analyses the relationship among poverty, inequality and economic growth and treats the growth as a remedy measure of poverty reduction in Bangladesh. This discusses distributional pattern of growth, definition of pro-poor growth and growth incidence curve (GIC) as a measure of pro-poor growth. By using the survey data (HIES, 1995, 2000 and 2010) this study explains the nature of incidence of growth for Bangladesh, based on anonymity axiom. This paper reveals that over last two decades thegrowth incidence curve was regressive and weak absolute pro-poor in nature for Bangladesh. Policy recommendation suggests that there is scope for further study to explain the non-anonymous GIC for Bangladesh.

Citation: Sutradhar, R. R. (2017). Pro-poor growth: The distributional effects of economic growth in Bangladesh. Thoughts on Banking and Finance, 6(2), 99–119.