Bangladesh Bank Training Academy Journal

Abstract: This paper reviews the monetary transmission mechanism in low-income countries (LICs). We use the standard description of monetary transmission as a benchmark to identify aspects of the transmission mechanism that may operate differently in LICs. In particular, the paper focuses on the effects of financial market structure on monetary transmission. The weak institutional framework prevalent in LICs drastically reduces the role of securities markets. Consequently, traditional monetary transmission through market interest rates and market-determined asset prices are weak or nonexistent. The exchange rate channel, in turn, tends to be undermined by heavy central bank intervention in the foreign exchange market. The weak institutional framework also has the effect of increasing the cost of bank lending to private firms. Coupled with imperfect competition in the banking sector, this induces banks to maintain chronically high excess reserves and to invest in domestic public bonds or (when possible) in foreign bonds. With the financial system not intermediating funds properly, the bank lending channel also becomes impaired. These factors undermine both the strength and reliability of monetary transmission, which has important implications for the conduct of monetary policy in LICs.

Citation: Prachi Mishra, Peter J. Montel, & Antonio Spilimbergo. (2013). Monetary transmission in low-income countries: Effectiveness and policy implementations. Thoughts on Banking and Finance, 2(1), 11–41.

Abstract: There are mainly three types of Deposit Money Banks (DMBs) operating in Bangladesh, such as; Nationalized Commercial Banks (NCBs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs). Among the DMBs four NCBs have been selected to compare their performances. The main objective of this study is to find out most efficient banks and how much inefficient the other banks are compared to most efficient banks. In the present study Data Envelopment Analysis (DEA) technique has been applied which is nonparametric in nature. Input oriented three models namely, Constant Returns to Scale (CRS), Variable returns to Scale (VRS) and Cost Efficiency DEA have been applied. In each of the models attempts have been made to work out Technical Efficiency (TE), Scale Efficiency (SE), Allocative Efficiency (AE) and Cost Efficiency (CE) of each bank separately. After applying these measures Agrani bank has been found as the most efficient bank and Somali bank has been found as the least efficient bank during the period of study.

Citation: Hossen, M. A. (2013). Efficiency analysis of nationalized commercial banks operating in Bangladesh: A DEA approach. Thoughts on Banking and Finance, 2(1), 42–53.

Abstract: The paper presents an overview of calculations of global inequality, recently and over the long-run ax well as main controversies and political and philosophical implications of the findings. It focuses in particular on the winners and losers of the most recent episode of globalization, from 1988 to 2008 suggests that the period might have witnessed the first decline in global inequality between world citizens since the Industrial Revolution. The decline however can be sustained only if countries' mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would also reduce the huge "citizenship premium" that is enjoyed today by the citizens of rich countries.

Citation: Milanovic, B. (2013). Global income inequality by the numbers: In history and now—An overview. Thoughts on Banking and Finance, 2(1), 54–73.

Abstract: This paper discusses the issue and dispute in Bai BirhamanAjil (BBA) which ended in court cases. It attempts to define the issues and dispute that arisedin the practice of BBA and the practical case of BBA in the context of Malaysia and Shariah perspective in regards to BBA practices. Critical analysis from the existence literature is employed to answer the objective of the paper, It shows that the dispute arised due to customer's less understanding of the contract in BBA. The court cases that occurred between the bank and the customer were always won by the barik because the bank has more legality and the judge won the bank in order to maintain the good image of Islamic bank in the eye of public.

Citation: Nurrachmi, R., Nazah, N., & Mohamed, H. (2013). The dispute between bank and customer in the case of Bai Bithaman Ajil (BBA): Malaysian experience. Thoughts on Banking and Finance, 2(1), 74–84.

Abstract: Non-bank Financial Institutions (NBFIs), involved mainly with long-term financing, have earned significant changes in terms of both number and list of their activities. Thus, performance evaluation of NBFIs, considering this changed environment, is a time demanding issue. The study aims to analyze the revenue and expense compositions of listed NBFIs in Bangladesh and examine the impacts on their profitability. The study covers all 20 NBFIs listed on DSE and data have been collected from the annual reports during the year 2008 to 2011. Data have been presented through table and graphs for better visual understanding. For the purpose of the analysis, the revenues composition has been classified into interest revenue and non-interest revenue whereas the expenses are classified as interest expense and operating expense. Profitability has been measured by return on assets. It is found that revenues are not well diversified and they are heavily dependent on their interest revenues. On the other hand, the interest cost against borrowing is the major source of expense and NBFIs are heavily dependent on the banking financial institutions for borrowing. NBFIs are suggested to increase their product diversification with value added services along with efficient and skilled manpower to reduce their interest expenditure in ruising high cost fund unlike the banking institutions on the way to magnify their profitability.

Citation: Hossain, M. M., Mizan, A. N. K., & Rahman, T. (2013). A critical examination of revenue and expense components of listed NBFIs in Bangladesh. Thoughts on Banking and Finance, 2(1), 85–100.