Bangladesh Bank Training Academy Journal

Abstract: This paper explores an empirical investigation on the main factors at work for causing food inflation in Bangladesh which takes into account both the demand and supply-side factors that affect food prices in Bangladesh. However, most of the supply-side factors would not be possible to include in quantitative estimation due to either paucity of data or lack of observable proxies.Therefore,while we explain argumentally with economic rationale, we use those quantitatively unobservable supply-side variables.We have done empirical exercise by using monthly secondary data from January 2001 to December 2013 of only four factors like Broad Money (M2), Wage Rate in Agriculture Sector (WRA), Food Stock (FS) and Indian Food Price Index (WPIF).The results of estimated regression analysis indicate that demand-side factors, such as Broad Money (M2)and Wage Rate in Agriculture Sector (WRA) have significant impacts on food prices whereas, supply-side factors such as Food Stock (FS) and Indian Food Prie Index (WPIF) play insignificant role. This paper also highlights pattern of food inflation and proper policy recommendations that have helped a lot to arrest the overall inflation at a tolerable level.

Citation: Akhtaruzzaman, M., Biswas, B. P., & Sutradhar, R. R. (2014). Key determinants of food inflation: Bangladesh perspective. Thoughts on Banking and Finance, 3(2), 11–24.

Abstract: Though exchange rate was stable in the initial stage of floating regime in Bangladesh, sharp depreciations occurredduringAugust2004 toApril 2006and again in July 2010 to January 2012. As excessivefluctuation of exchange rate can be an obstacle to macroeconomic stability, it is important to know the sources offluctuations in both thephases. In this context, thispaper tries to investigate theprobable reasonsbehindsharp depreciationofBangladesh Taka (BDT) against US dollar (USD) in these twophasesusingStructural VectorAuto-regression (SVAR)modelfollowing Clarida and Gali (1994) and uses datafrom January 2003 to June 2012. Thepaperfinds that both the demandshocks mainly arisingfrom external sector and the supply shocks were responsible behind such deprecierions.However, thesupply shocks were less effective than demandshocks in exchange rate fluctuations and the money supply shock also had a negligible effect on the depreciation ofBDT during theperiod of this study.

Citation: Akther, M., Sarker, M. M. I., & Saidjada, K. M. (2014). Sources of exchange rate fluctuations in Bangladesh. Thoughts on Banking and Finance, 3(2), 25–41.

Abstract: Keeping pace with the global initiatives for green banking and environmental risk management Bangladesh is also marching towards sustainable development by adopting dynamic banking. Relation between economic development and environmental issues are sometimes termed as paradoxical however both are complementary. This paper attempts to review the present regulatory framework for the promotion and implementation of green banking and ERM in Bangladesh. In this study the current implementation status of green banking and ERM in banks and FIs are examined with a view to recognize the level of the financial sector in adopting these policies. The findings of this paper are that remarkable progress has been evident in bank and FIs’ in-house green practices and online banking performance compared to their initiative for effective green finance by following ERM guidelines. Developing bank’s own ERM guidelines, green products and green business models are yet to take a considerable shape. Finally,Policy recommendations are indicated in this paper on the need for further study to develop a revised framework of green banking and ERM suitable for the financial sector of Bangladesh.

Citation: Rahman, N., & Zareen, A. (2014). Review of policy and regulation on green banking & environmental risk management in Bangladesh. Thoughts on Banking and Finance, 3(2), 42–65.

Abstract: Islamic shariah principles are the foundations of Islamic banking. Islamic banking is responsible not only to avoid riba, but also to avoid unethical practices and participate actively in achieving the welfare goals in an Islamic economy. In the process of offering Islamic banking services, the practitioners have been facing several challenges. Addressing some of these challenges is critical for improving the efficiency of Islamic banking activities in the country. As opined in the survey, while operating in conventional environment, Islamic finance requires a different legal and supervisory framework appropriate to its nature of business. Absence of separate act and comprehensive standards covering all areas for the Islamic Banking activities in Bangladesh are creating difficulties in a number of ways on Shariah compliance issues. Apart from this, the human capital involved in Islamic banking must be trained in the relevant field in accordance with the demand of the sector. The study dentifies the dearth of standard and harmonized guidelines and tools for expansion of Islamic banking in the country. Many of these may be required to address country and society specific need. There is no doubt that in certain areas global common standards may be drawn from the globally recognized standard setters of Islamic banking. It is also important to activate interbank money market of the country. Islamic banks in Bangladesh need more Shariah compliant bonds to manage their liquidity effectively. The policy makers of the country may think of having bonds like Sukuk and potential of introducing Commodity Murabaha may also be explored.

Citation: Almgir, M. (2014). Development of Islamic banking in Bangladesh: Issues and challenges. Thoughts on Banking and Finance, 3(2), 66–91.

Abstract: The use of ATM is increasing rapidly in the country. This article is the outcome of an attempt to trace how ATM service plays out in Bangladesh. Based on a primary survey, the study shows that customers generally are satisfied with the automated teller service. The most serious problem coming up in the survey is network unavailability, trailed by operation failure and card stuck problem; other problems are minor. Customers are dissatisfied regarding security at booth surrounding and inadequate number of terminals around the locality—amounting to little less than nuisance to them. It is heartening that the nuisances are sporadic and not the usual order of the industry. These issues warrant immediate resolution to have delighted customers.

Citation: Abdullah, S. A. (2014). From manual to mechanical: Do ATMs convey convenience? An insight into how automated teller service fares. Thoughts on Banking and Finance, 3(2), 92–106.

Abstract: The call money rate or short-term inter-bank borrowing and lending rate is generally the rate that a large number of banks use to borrow and lend from one another in the overnight market for a short period of time. This study has been attempted to forecast short-term inter-bank borrowing and lending rate of Bangladesh up to 2021. The month-wise data for the years 1997-2013 has been used to forecast the rates for each month-wise of the next eight years. This data has been obtained from Bangladesh Bank. Box-Jenkins ARIMA model have been deployed to forecast the rates. During the perod 1997 to 2013, data series shows that there were some differences in pattern of movement (trend) between borrowing rate and lending rate but after the end of 2006, the trend of rates are same. Results suggest that both the borrowing and lending rates indicate a cyclical pattern till 2013, it will be remained same till 2016 and after that fluctuation between the rates will be seen but at a slowly decreasing rte. In December 2014, short-term inter-bank borrowing rate will be at 7.78 and lending rate will be 7.82. In December 2021, short-term inter-bank borrowing rate will be lowest at 6.95 and lending rate will be 7.01.The study also recommends to provide appropriate environment through necessary incentives and facilities to the lenders and borrowers ensuring the removal of bottlenecks of money market.

Citation: Tabassum, P., & Ghosh, S. K. (2014). Forecasting short term borrowing and lending rate in inter-bank market. Thoughts on Banking and Finance, 3(2), 107–122.