Volume 16 l Issue 7 l July 2020

1 of 26
 contents

03 08-09 16-17
Economy at a Glance Research in Focus New Idea!
Banking models after covid-19: taking • Moner Bondhu

04
model-risk management to the next level

Month In Brief
10-14 18-19
IDLC News
Cover Story
05 MFS sector of Bangladesh
• IDLC Finance Limited won the
“Asiamoney Best Bank for SMEs
For the Record safeguarding currency Award 2020”
mobility during pandemic

20-26
MFS has been a significant and

06 successful part of BB’s financial inclusion

program which is one of our key
World Economic pathways towards Digital Bangladesh. Capital Market Review
Indicator The necessity of which was strongly
realized during the countrywide lock
down period when banks could hardly

07
run their financial activities in both urban
and rural areas. From general payment,
salary disbursement to financial aid
Idea Watch distribution, mobile financial service
Covid-19 provides banks with a unique providers were saviors. However, till
opportunity to reframe their customer now given the need for social distancing,
Design & Printing: nymphea l www.nymphea-bd.com

relationships MFS is playing a vital role by including

almost all necessary payments inside one
screen and one touch away.

All rights reserved. No part of this journal may be reproduced in any form, by print, photoprint, microfilm or any other means without written permission from the publisher.
FROM THE
EDITOR

The flying MFS Sector of Bangladesh

Growth can only be sustainable when the whole a life-savior. Not all banks have a strong infrastructure
population is benefitted from that. to facilitate MFS. Aside from balance transfer, banks
now must work on managing payment mechanism on
The value addition of Mobile Financial Services (MFS)
mass scale, for loan or deposit products. It is high time,
in a pandemic-hit vibrant economy like Bangladesh
banks should collaborate with MFS providers and reap
has been remarkable. Till March 2020, the scope of
the most benefit out of their payment infrastructure.
MFS was only confined in cash-in, cash-out, bill and
Rocket by Dutch Bangla Bank Limited, uCash by United
other payments, remittance and some other ancillary
services. However, the great pandemic broadened the Commercial Bank Limited and many more have jumped
horizon of MFS service, starting from disbursing wage on the MFS bandwagon sensing the breakneck growth
to 4,000 RMG workers to disbursing government cash opportunity. In the “new-normal” era, digital payments
support to 50 Lac families. MFS is discerned to be the will take the lead and reaching mass population is only
game-changer in payment landscape, with players like possible with the help of MFS.
Nagad, bKash, Rocket and Surecash.

Banks are seeing immense possibilities of mobile

money for financial inclusion. In a time when cash Sushmita Saha
transactions pose near life-threatening risk due to Assistant Manager
containment of deadly virus, mobile money is acting like IDLC Finance Limited

INDUSTRY & EQUITY ANALYSIS TEAM

ASIF SAAD BIN SHAMS ADNAN RASHID SUSHMITA SAHA
Email: [email protected] Email: [email protected] Email: [email protected]

BONNISHIKHA CHOWDHURY MD. DELOWAR HOSSAIN

Email: [email protected] Email: [email protected]
 ECONOMY
AT A GLANCE
Prepared by IDLCSL Research Team

EXPORT-IMPORT
Growth in Export Imort Trade (Last 7 Years) Export-Import Growth- 2019-20 (Y-O-Y)
30.00% 11%
20%
25.23% -13% 0%
25.00%
0% -14% -13%
3%
20.00% -2% -2% -2%
-20% -31%
-11%
-18% -44%
15.00%
11.22% 11.69% -40%
10.55%
9.77%
10.00%
-60%
3.39% 9.00%
5.00% 8.92%
5.94% -62%
0.82% 5.81% 1.87% -80%
0.21% 1.16%
0.00% -83%
-100%
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 November December January February March April May June

Export Import Export Import

REMITTANCE
Remittance Growth of Last 7 years Remittance Growth-2019-20 (Y-O-Y)
20.00% 17.32%
50.0%
40.2%
15.00% 40.0% 32.3% 31.7% 33.9%
10.83%
9.39% 29.2%
10.00% 7.65% 30.0%

5.00% 20.0%
10.2%
-1.61% -2.52% 10.0% 2.4% 2.6%
0.00%
0.0%
-5.00% -12.5% -13.9%
-10.0%
-10.00% -23.8%
-14.48% -20.0%

-15.00% -30.0%

-20.00%
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20

PRIVATE SECTOR CREDIT GROWTH

Private credit growth of last 7 years Private sector credit growth -2019-20
19.0% 11.5% 11.3%

18.0% 18.1%
11.0% 10.7%
10.7%
17.0%
16.0% 10.5%
15.6% 10.0%
15.0% 9.9% 9.8%
10.0%
14.0% 14.2%
13.5% 13.3% 9.5%
13.0% 9.2%
9.1%

12.0% 8.9% 8.9%

9.0% 8.8%

11.0%
10.6%
10.0% 8.5%
9.8%
9.0% 8.0%
Dec'13 Dec'14 Dec'15 Dec'16 Dec'17 Dec'18 Dec'19 July August September October November December January February March April May

3 of 26
 MONTH IN BRIEF

Money transactions 75 companies, CRR drops

including some 100 basis points
through mobile financial large groups, for NBFIs but
services dropped by 27% in have secured
SLR remains
approval from the
April compared with that of the unchanged
central bank to
previous month. receive low-cost
loans under the
stimulus package
dedicated to big
borrowers in the
industrial and
service sector
The Bangladesh World Bank 5,161 more Bangladesh
Bank has drafted a forecasts 1.6% Bangladeshi received USD
Credit Guarantee 2.87bn in Foreign
GDP growth products
Scheme Manual Direct Investment
for Bangladesh will get zero (FDI) in 2019, down
to support small
and medium
in FY’20 and tariff facility in by 20.46% on last
enterprises that 1% in FY’21 the Chinese year’s overseas
market from investment inflows
lack adequate
as per Bangladesh
assets to pledge July
Bank
for bank loans

The net sales of national Foreign The overall

savings certificates turned e-commerce trade gap
entities now narrowed by $123
negative BDT 6.21 bln in April mln, or 1.01%
can invest
this year against BDT. 37.4 bln in in July-March
alone, won’t period of FY20
the same month last year. have to form from $12.20
joint venture bln in the same
period of the last
fiscal year

4 of 26
 For the Record

“BANKS HAD STARTED “Without fiscal incentives for

DISBURSING LOANS AND issuers, investors and the
OPENING AND SETTLING THE groups engaged in making
LETTERS OF CREDIT ON A bonds tradable, a vibrant
LIMITED SCALE SINCE MAY, bond market would be
WHICH ALSO HELPED PUSH impossible”
THE CREDIT GROWTH” Ershad Hossain, Managing Director of City Bank Capital
Resources Limited on fiscal incentive in zero coupon bonds
MA Halim Chowdhury, Managing Director of Pubali Bank on
private sector credit growth

“CHINA USED TO
“A “As banks did
not remain fully PROVIDE US DUTY FREE
significant
operational ACCESS FOR 60% ITEMS
number of
migrant
during the OF ALL THE TARIFF
government- LINES UNDER ITS LDC
workers will declared
lose their SCHEME THROUGH WTO
general
job and NOTIFICATION, AND I
holidays, it
return to became very THINK THIS HAS BEEN
the country difficult for EXTENDED TO 98%
because of us to prepare SINCE THE FORMALITIES
the stress the balance of WERE GOING ON FOR
payment data” QUITE SOME TIME”
of Covid-19
pandemic
Md Serajul Islam, Executive Rubana Huq, President of Bangladesh Garment
Director of the Bangladesh Manufacturers and Exporters Association on new

in the near Bank on raising trade deficit. export potential in Chinese market’

future” “AFTER A ROBUST PERFORMANCE IN THE FIRST NINE

MONTHS OF FY20, BANGLADESH ECONOMY WOULD
Ahsan H Mansur, SLOW DOWN IN NEAR TERM DUE TO COVID-19
Executive Director of the
Policy Research Institute PANDEMIC BUT IT IS LIKELY TO RECOVER IN FY21”
on increasing the forex Manmohan Parkash, Country Director, Bangladesh, Asian Development
reserves. Bank ( ADB) on GDP growth of Bangladesh

5 of 26
 WORLD ECONOMIC INDICATOR PREPARED BY IDLCSL RESEARCH TEAM

Nominal
Real GDP
GDP: Inflation Current Account Interest Rates Currency
Growth: April Inflation
Country October, Point to Balance: (% of (%), Ten years Units (per
2020 (yearly % (%) As of
2019 (USD point (%) GDP) treasury bond USD)
Change)
in billion)
Frontier Market
Sri Lanka 86.57 -0.50 3.90 June,2020 -3.60 7.23 185.85
Vietnam 261.64 2.70 3.17 June,2020 0.70 2.93 23,201.00
Kenya 98.61 1.00 4.59 June,2020 -4.60 12.40 106.55
Nigeria 446.54 -3.40 12.40 May,2020 -3.30 8.93 360.50
Bangladesh 302.5 8.15 5.35 May,2020 -2.00 8.66 84.83

Emerging Markets
Brazil 1,847.02 -5.30 1.88 May,2020 -1.80 6.47 5.32
Saudi Arabia 779.29 -2.30 1.10 May,2020 -3.10 n/a 3.75
India 2,935.57 1.90 5.84 March,2020 -0.60 5.85 74.64
Indonesia 1,111.71 0.50 1.96 June,2020 -3.20 7.33 14,510.00
Malaysia 365.3 -1.70 -2.90 May,2020 -0.10 2.95 4.29
Philippines 356.81 0.60 2.10 May,2020 -2.30 2.79 49.54
Turkey 743.71 -5.00 12.62 June,2020 0.40 12.19 6.86
Thailand 529.18 -6.70 -1.57 June,2020 5.20 1.27 31.11
China 14,140.16 1.20 2.40 May,2020 0.50 2.93 7.07
Russia 1,637.89 -5.50 3.00 May,2020 0.70 6.04 71.40

Developed Markets
France 2,707.07 -7.20 0.10 June,2020 -0.70 -0.12 0.89
Germany 3,863.34 -7.00 0.90 June,2020 6.60 -0.44 0.89
Italy 1,988.64 -9.10 -0.20 June,2020 3.10 1.32 0.89
Spain 1,397.87 -8.00 -0.30 June,2020 2.20 0.44 0.89
Hong Kong 372.99 -4.80 1.50 May,2020 6.00 0.63 7.75
Singapore 362.82 -3.50 -0.80 May,2020 14.80 0.88 1.40
United States 21,439.45 -5.90 0.10 May,2020 -2.60 0.67 n/a
Denmark 347.18 -6.50 0.00 May,2020 4.80 -0.34 6.63
Netherlands 902.36 -7.50 1.20 May,2020 9.00 -0.29 0.89
Australia 1,376.26 -6.70 2.20 March,2020 0.91 0.91 1.44
Switzerland 715.36 -6.00 -1.30 June,2020 7.20 -0.41 0.95
Britain 2,743.59 -6.50 0.50 May,2020 -4.40 0.19 0.80

Bangladesh Data: GDP size and real GDP are sourced from Bangladesh Bureau of Statistics as per 2018-19 data. Calculation Method of CA Balance (%of GDP): CA
balance of FY18-19 / GDP of FY18-19. Interest rate (%) 10 years TB as per March,2020, Inflation as per May,2020 and Currency Unit (per USD) as per 2nd June, 2020
are sourced from Bangladesh Bank
Nominal GDP: Data of all countries apart from Bangladesh is sourced from IMF estimates of 2019 data (October, 2019 Outlook)
Real GDP Growth and Current Account Balance: Data of all countries apart from Bangladesh is sourced from IMF estimates of April, 2020 data (World Economic
Outlook, April 2020)
Inflation: Data of all countries apart from Bangladesh is sourced from tradingeconomics.com as per 5th July, 2020
Interest rates 10 years TB and Currency Unit: Data of all countries apart from Bangladesh is sourced from Investing.com as per 5th July, 2020

6 of 26
IDEA WATCH

COVID-19 PROVIDES BANKS WITH A UNIQUE OPPORTUNITY

TO REFRAME THEIR CUSTOMER RELATIONSHIPS
The world is dynamic. Because of the pandemic, the However, the banks need to decide either to stay on
financial service sector is changing for exercising the traditional banking or to move in the fin-tech.
better customer satisfaction. Banks are playing vital Here, banks can earn a lot of revenue from overdraft
roles to catch up with the economic fallout during and transaction fees. In this case, there are high
the Covid-19 pandemic. Besides this, it has a critical risks associated with this revenue stream. Research
transmission apparatus to provide government articulated by Accenture discloses that if the banks
initiative grants and loans to the affected business. get back on their traditional approach, the trust gap
Moreover, the banks are also initiating voluntary may cost 5% of their retail revenues in the long term
activities like fee relief for their community or clients. as customers are shifting to the fintech.

In the current situation, the banks need to Here, the question is what if the bank decides to shift
fundamentally alter their relationship with customers. in the fintech where the customers will experience a
They should choose to go for either purpose-driven more trustworthy relationship. The research indicates
that the revenue growth would be 9% if the banks act
banking or business-driven banking which will affect
as advisory rather than a transaction processor.
both short term and long term business prospects. In
the pre-pandemic world, the customers enjoyed a high The customer’s mindset cannot be changed over the
level of trust in data security and transaction which night. It will take time. Whatever it can adopt a two-
had been helped by large technology companies. part strategy to create the purpose-driven model.
However, in the current situation, the high level of In the short term, the banks can extend their digital
transaction trust obscured by a low level of advisory offerings and reduce the fees. In the Accenture
trust. survey, 62% of the customers welcome to analyze
their financial behavior based on information. Two
Different Fintech startups like Dave, Monzo, and N26
third of SMEs provide information for the purpose of
have the issues of lack of advisory trust. Where they
liquidity forecasting and cash flow optimization.
can communicate with their customers and realize
the customer’s difficulties to manage their financial Traditional banking orthodoxy is that advice can’t be
lives. By approaching digitally, they make it easier to profitable if offered to all customers. If bankers take
get, send, and spend money. In some extend, they any lesson from the market shifts of recent years and
eliminate cross –border transactions fee, providing the pandemic’s upheavals, it’s that the traditional
insights like retirement planning which help the orthodoxy needs to be challenged. Advice can’t be
customer to engage with banks more effectively. profitable if offered to all customers which is the
traditional banking orthodoxy. Whatever, if the banks
As the economic crisis happened, the traditional banks take the learning from the current pandemic, the
are adopting the new approach as like these fintechs. traditional orthodoxy should be changed.
Becoming more supportive and helpful rather than
taking advantage of this situation. Different financial ABOUT THE RESEARCH
banks like Lloyds in the U.K, DBS in Singapore and Covid-19 Provides Banks with a Unique Opportunity to Reframe Their
Customer Relationships is a Forbes article by Alan McIntyre on how banks
ING in Poland are coming up with innovative ways to
can give their customer relationship a new dimension.
support their customers during Covid-19.

7 of 26
BANKING MODELS AFTER COVID-19:
TAKING MODEL-RISK MANAGEMENT TO THE NEXT LEVEL

RESEARCH IN FOCUS
The livelihood and human life are on crisis because iii) Liquidity models are failing to foresee the outflow
of the COVID-19 pandemic. As the virus is spreading where it puts the liquidity position is a risk
drastically, people and institutions are struggling to
iv) Model-based market risk systems are overreacting
prevent it. It causes a major economic disruption. Along
to stressed price and credit,
with the banking industry, every industry has been
affected in this pandemic. Financial position, capital v) Regulatory models are systematically increasing
structure, and cash flow position have been hit. The capital and liquidity needs and provisioning
traditional model run by banks is no longer working because of pro-cyclicality.
that has been interrupted.
Like other sectors, the financial institutions were
Although few business leaders could predict the unprepared for the current crisis and were trying to
global economic shutdown, most of the financial adjust to the situation. Recently, they are initiating the
institutions could not account for the crisis. As the model-mitigation strategies although uncoordinated
financial institutions design their models based on a ways may affect. The rapid actions include replacing
stable future, unfortunately, it does not work anymore. models with only expert review, restructuring the
The fact that it is not the failure of the bank to use the model with recent data, adjusting the outcome based
model rather it is the fallback of bank not to have the on expert analysis, and developing the alternative
plan to manage the current situation. model only to fit banks’ current needs.

There are some reasons for such failure. First, the The mitigation actions have been vulnerable for the
assumption and strategies were designed with the short term implication because of its lack of access
mind of the pre-COVID-19 world. Second, the model to alternative data sources as well as the absence
was developed based on historical data where high- of an underlying agile operation model. The last
frequency data might affect. Finally, the alternative obstacle is that the arising changes needed to adjust
data which is only possible theoretically, not practically, on the ongoing basis. Therefore, the mitigation action
the model cannot integrate the new information. themselves are building new risks.
Therefore, the infrastructure is developed in a lack of
flexible manner. First, model failure – the speed at which the model
is developed and adjusted, there is a high risk to
As the banks are fronting the failures of their model and underframe and failure of the model. The inefficiency
the new issues are expected to experience over time,
of information may lead to legal and reputational
they urgently need to review their model strategies.
risk as an inappropriate solution may arrive. Second,
They need to progress the infrastructure and apply
contradictory message and decision – adjustment
both short term and long term actions by accessing its
and underlying assumption may create inconsistency
resilience. In the short time horizon, the bank needs to
over the model. Finally, the inability to launch effective
coordinate and review the model with development
and in the long term, it needs to redevelop and upgrade redevelopment – redevelopment may be impeded
the model-risk-development (MRM) frameworks. because of a new situation and challenges in the
business. Therefore, the banks need to be more
Covid-19 has affected the reliability of the function efficient to develop the infrastructure in the short term
and operation of all the banks’ models. Models are and long term crisis. They should develop and set back
not confined within one business or function rather a coherent and resilient model strategy.
it impacts on every aspect of a bank’s operation. The
effect is widespread, for instance:
ABOUT THE RESEARCH
i) Rating models are inaccurate as they cannot
Banking models after COVID-19: Taking model-risk management
update their credit scores rapidly to the next level is a McKinsey & Company article by Marie-
ii) Early warning system (EWS) indicators are Paule Laurent, Olivier Plantefève, Maribel Tejada, and Frédéric
van Weyenbergh on how the COVID-19 pandemic has revealed
presenting the misleading number of signals
unexpected flaws in the business models that banks rely upon.
causing the loss of predict power

8 of 26
What strategies should financial institutions now PHASE TWO: MOVING TO THE
be putting in place? NEXT LEVEL OF THE MODEL-RISK-
To address the challenges and fix up the solution, the MANAGEMENT JOURNEY
banks need to develop the strategy in two phases. The
first strategy is based on short term crisis – operating Create transparency
model for MRM and the second strategy is based on As the banks are moving more proactively to manage
long term comprehensive enhancement of MRM their portfolios, they need to use MRM in more
strategy to increase its resilience. strategic and fundamental role. It should be resilient to
business efficiency and management decision making.
PHASE ONE: MOVING TO A CRISIS- To use MRM effectively, banks need to develop a solid
OPERATING MODE FOR MODEL-RISK framework. While MRM starts to add value in the
current salutation, the following core elements can be
MANAGEMENT considered:
Here, the banks highlight adjusting the model to fit 1. Overview of models at risk and model contagion
with the purpose and reduce the risk of poor decision – Banks should identify the models at the risk
making. The adjustment should be developed quickly where and how it is essential for business and
but also efficiently and consistently to avoid the banking operation. The interdependence of the
undue readjustment cost. In the recommendation, an model can also be overviewed.
enthusiastic taskforce should be developed to lead the
2. Model Contingency Plan – the bank should
crisis-operating model. To run the MRM effectively review the risk statement and enhance the model
and efficiently, the team should have clear governance, limitation with a clear tolerance level. The fallback
a disciplined operating model, and solution should be enhanced at
effective MRM tools. Using clear a zero or low tolerance in case
methodologies and its MRM tools, of failure.
it can create a well-organized
crisis response plan. The following
recommendation consists
of four parts:
1. Inventory of model
adjustment and
models at risk – the
inventory needs to
3. Dynamic MRM
identify the failure objectives or will likely to be dashboard – The dashboard, a tool of
a failure shortly. Then it should identify all model MRM, should be configured to alert the banks of
adjustments. emerging models at risk. Both the business-wide
model redevelopment and MRM enhancement
2. Consistent model-mitigation actions – the should be integrated tools which will enable to
model adjustment should be executed consistently track the process.
over the functions and operations. The MRM
team should ensure cross-checking and prevent 4. Flexible and versatile talent pool – banks need
contradictory messages and decisions. energetic people with essential expertise who
are capable to identify the model risk from a
3. Timely review of model adjustment – the different angle. The team should work under clear
assigned team should perform quickly and adjust governance, ensure visibility and accountability of
and underlie the adjustment planned. business-critical activities.

As the financial institutions did not anticipate the

4. Short term and long term redevelopment plan –
scenario of Covid-19, many of the issues that the banks
model adjustment and redevelopment need to be are facing could be managed with more proactive MRM.
prioritized based on the importance of the model However, it is not too late to initiate the strategy. MRM
and probability of failure. Once complete, banks now can be a strategic partner that will create value to
need to review the applied model and redevelop the entire organization. Therefore, the banks need to
the model whenever needed. take care of their MRM to the next level of the journey.

9 of 26
MFS SECTOR OF
BANGLADESH
SAFEGUARDING CURRENCY
MOBILITY DURING PANDEMIC
Sushmita Saha, Assistant Manager, Credit-SME
and
Bonnishikha Chowdhury, Executive Officer, Credit-SME

10 of 26
 COVER STORY

In every payment eco system, a new service can only mobile money services on the map, and the subsequent
be successful if it has significant demand. On the other proliferation of similar services can be credited to this
hand, necessity is the mother of invention. success.

It all started when researchers funded by the UK’s In a country like Bangladesh where the financial
Department for International Development (DFID), literacy rate is really low and a great part of the
the foreign aid arm of the British government, observed population is not under formal banking system, Mobile
that Kenyans were transferring mobile airtime as a Financial Services is a must in order to ensure currency
proxy for money. On the other hand, Vodafone was mobility. Thus, as a part of Bangladesh Bank’s Financial
looking for ways to support microfinance through its Inclusion Program, MFS was introduced. According to
mobile platform, as access to banking and credit was ‘The Global Findex Database 2017, in Bangladesh the
limited in Kenya and transporting cash was both risky percentage of 15-plus people having an account is 50%
and slow. Such demand of easily accessible method of and only 35% of them are woman. However, as per The
payment system paved the way of developing M-Pesa. Financial Express January 2020 data, MFS is certainly
Since its launch in 2007, M-pesa is still going strong proved successful by playing a big role in adding 48%
by reshaping Kenya’s banking and telecom sector of adult population under formal financial services
and extending financial inclusion. M-pesa has been umbrella which was only 20% in 2013. Moreover,
especially successful in creating small businesses by about BDT 10 billion is transacted daily through this
reaching low-income Kenyans. Its impact in Kenya put platform on an average.

No. of Banks currently No. of agents No. of registered No. of active

providing MFS 995,265 clients in Lac accounts in Lac*
15 851.29 281.70
*Account in which transaction made in last 3 (Three) Months. Source: Bangladesh Bank as of April, 2020.

Models of MFS in Bangladesh Available services:

As of June 2018, eighteen banks and one subsidiary Cash-in and cash-out using mobile accounts through
have been permitted to provide MFS, whereas fifteen agents, bank branches and ATMs
are in operation. Bangladesh Bank permits only bank- Disbursement of inward foreign remittances: only
the domestic part of transaction, no cross border
led MFS providers to operate in the country. Bank-
transaction is permitted
led MFS is a model where a bank may run the MFS Person to business payments (P2B): utility bills,
as a product of the bank or a bank may form an MFS merchant payments
providing subsidiary with at least 51% of the share Business to person payments (B2P): salary
held by the bank with control of the board. There disbursement, dividend / interest and refund
can also be Non-Bank/Telco-led MFS Model which payments,
is not available in Bangladesh. Even though there are Government to person payments (G2P): elderly
some advantages in non-bank / Telco led model but allowances, social safety net
Person to government payments (P2G): tax, levy
for regulatory purpose most of the countries prefer
payments,
bank lead model over non-bank/Telco led. However, Person to person payments (P2P): one registered
around the globe telco led models are more successful mobile account to another registered mobile account
as telecom industries has access to more information Other Payments: microfinance, overdrawn facility,
and an already built infrastructure. insurance premium, DPS, etc.

11 of 26
Government Payment (In Crore BDT) P2P transaction (In Crore BDT)
294.39 10,077.95
275.5
9,851.50 9,863.78
9,796.98

152.34
122.76 9,242.88
9,098.97
65.32 73.62

November December January February March April November December January February March April
2019 2019 2020 2020 2020 2020 2019 2019 2020 2020 2020 2020

Source: Bangladesh Bank Source: Bangladesh Bank

Key market leaders

Even though Bangladesh Bank has permitted 18 banks to provide MFS but currently 15 banks are providing MFS. In
this sector, both pioneer and market leader is bKash Ltd. However, Rocket, SureCash, Nagad are also considered as key
market players.

Service Objective Institutional Backing Advantage

bKash Mobile Financial Service BRAC Bank Ltd. Largest Market Share & Network of Agents
Larger Transaction Limit; Regulatory
Nagad Digital Financial Service Post Office
Advantage
Rocket Mobile Banking Dutch Bangla Bank Ltd. Banking Facilities
Focused on government education
SureCash Mobile Financial Service Several local Banks
programs, utilities, etc.

bKash
bKash started their MFS program in 2011. At that point it was only a USSD application. It is considered to be the market
leader of Bangladesh in this sector. Backed by BRAC Bank, currently, bKash is running a network of more than 180,000
agents throughout urban and rural areas of Bangladesh with over 30 million registered accounts and holding 80% of
the market share. They offer cash-in, cash out, ATM money withdrawal, bill payments, mobile recharge, remittance,
donation, purchasing movie ticket etc. These can be availed through the prominent telecommunication networks in
Bangladesh. In addition, bKash offers up to 4% Interest (annual rate) on the savings of bKash mobile account.

Interest on Savings of bKash:

Balance/Slab Rate p.a*
BDT 1,000 – BDT 5,000.99 1.5%
BDT 5,001 – BDT 15,000.99 2%
BDT 15,001 – BDT 50,000.99 3%
BDT 50,001 and more 4%

*At least 2 transactions monthly and keeping an average day end balance at least BDT 1000 is mandatory. VAT & AIT will be deducted as per Govt.rules
Source: bKash website

Rocket
After bKash, Rocket has second largest market share in this sector. Dutch Bangla Bank Limited (DBBL) launched
banking services and financial facilities using the mobile communication network in 2012. DBBL provided bank-led
mobile banking services were re-branded as ‘Rocket’. Customers can easily avail the DBBL provided mobile banking
services via ‘Rocket’ app. As of April 2018, has 218,818 agents. Moreover, Nexus Pay is also an app provided to DBBL
account holders with the goal of providing advanced banking services and integrating cards of customers. Unlike other
vendors, all services through Nexus Pay are completely free and does not require any additional commissions.

12 of 26
Nagad
Nagad is a Bangladesh Post Office (BPO) initiative and it is not under Bangladesh Bank’s jurisdiction. It was launched
in November 2018. This MFS platform covers money transactions via Cash-In, Cash-Out, and Send Money. These
MFS also include popular services like, mobile recharge. The upcoming services include utility bills payment, and
e-commerce payment gateway.

Interest on Savings of Nagad:

Slab for Profit Profit Rate (Per Annum)*
BDT. 5001 to BDT. 500000 7.5%
BDT. 1001 to BDT. 5000.99 5.0%
BDT. 0 to BDT. 1000.99 0.0%
BDT 50,001 and more 4%
* Conditions applied  Source: Nagad Website

SureCash
SureCash is another potential MFS platform launched by Progoti Systems Ltd in 2015. SureCash represents an open
network of payment in corporation with several local banks, with above 1,000 payment partners. SureCash developed
their exclusive mechanism focusing on government education programs, schools, colleges, utilities, etc.

Basic Services and charges at a glance*:

Rocket
Details bKash General Consumer Salary and Stipend Nagad SureCash
Product* Product*
At Agent : Free 0.9%
Cash in Free At DBBL Branches/Fast Free Free
BDT 10 per transaction
Track : Free
BDT 5 per Transaction
(Except General
 BDT 5.00
Consumer Product to
Send Money via on every BDT 4 Per
Salary & Stipend BDT 5 per Transaction
USSD Send Money Transaction
transaction Product charge 0.9% on
transaction amount in
USSD & Apps) Per transaction
charge is BDT. 4
For Apps Free
BDT 5.00 (Except General
on every Consumer Product to
Send Money Via App transaction of Salary & Stipend Free Free
BDT 501 and
Product charge 0.9% on
above
transaction amount in
USSD & Apps)
BDT 1.85 for BDT 1.5 for 1.8% service charge
Cash out from agent 1.8% 0.9%
BDT 100 BDT 100 of the cash-out
Cash out from agent BDT 1.75 for At DBBL Branches: At DBBL Branches: 10 per BDT 1.5 for amount. Minimum
with app BDT 100 0.9% BDT. transaction BDT 100 charge is BDT. 5

BDT 30.00 for

Cash out from ATM 0.9% Free - -
BDT 2,000
Payment of Bill Varies institution
(Merchant)/ Receive Bills: Bills: to institution.
Free -
international BDT. 2 to BDT. 20 or 1% BDT 2 to BDT. 20 or 1% Minimum charge is
remittance etc. BDT. 4
*Subject to change Source: Websites.

13 of 26
Limits of Basic Services*:
Services bKash SureCash Rocket
Valid Minimum amount BDT 10 for
BDT 30,000 and 5
Cash in BDT 30,000 and 5 transactions agent/Branch and BDT. 30000 for Fast
transactions
Track. Maximum 5 daily transactions
Send Money via USSD BDT 10 to BDT 25,000
Valid amount BDT. 10 Valid amount BDT. 10 to BDT. 25,000.
BDT 10 to BDT 25,000 and 50 to BDT. 25,000 Maximum 100 transactions
Send Money Via App
transactions
Valid amount BDT 50 to Valid amount
Cash out from agent
BDT 25,000 and 5 transactions BDT 50 to Valid amount BDT 50
Valid amount BDT 50 to BDT 25,000 and 5 to BDT 25,000 and 5 transactions
Cash out from agent with app transactions
BDT 25,000 and 5 transactions
Valid amount BDT 2,000 to Valid amount BDT 50
Cash out from ATM  
BDT 25,000 to BDT 25,000 and 5 transactions
Valid amount BDT 10 to
Transfer Money (MFS to Bank)    
BDT 25,000
Payment (Merchant)/ Receive BDT 125,000 and 10 Minimum 20 to any amount.
 
international remittance etc. transactions Maximum daily transaction 5
*Subject to change Source: Websites.

The role of mobile financing sector in this ongoing pandemic

The year 2020 has been all about the global coronavirus pandemic, which catapulted MFS to an essential service for
ensuring the regular money flow between urban and rural economies during the countrywide shutdown. It was assumed
that considering the need for social distancing and the push towards digital transactions to prevent the spread of the
highly contagious coronavirus this sector might flourish well. However, as per the April, 2020 data there was a negative
growth in both average daily transaction and number of daily average transactions compared to March, 2020. It caused
due to countrywide shut down declared for covid situation which lead to closure of economic activities from March
26,2020. Thus, the average daily transaction stood -24.6% and number of daily average transaction was -4.7% in April,
2020 compared to March, 2020.On the other hand, in April 2020, number of agents, number of registered clients and
number of active accounts showed a positive growth of 0.3%, 3.1% and 4.9% respectively compared to March 2020 as per
BB data. During the lock down period even though the use of mobile money has increased among the middle-class or
the upper-middle-class but the lower income class did not transact money regularly. The outbreak impacted the overall
economy and the MFS industry as well. However, considering Eid the situation got slightly better in May. As per the
Daily Star data, average daily transaction of bKash in March was BDT 985 crore and it came down to BDT 800 crore in
April and then again the daily average transaction volume rose to BDT 1,200 crore in May.

Average daily transaction (In Crore BDT)

1,425.34
1,358.17

1,311.21
1,283.39
1,263.96

967.64

November, 2019 December, 2019 January, 2020 February, 2020 March, 2020 April, 2020

Source: Bangladesh Bank

14 of 26
However, the role of MFS sector was praiseworthy in receiving the fund through Nagad and bkash is
pandemic. also introduced. Inmates will not be permitted to
receive more than BDT 2,000 per month and the
In April, 2020 Bangladesh Bank instructed the
money even can’t be sent in one go. This means
factories to open free of cost MFS accounts for the
friends or family members can only transfer a
workers in order to disburse their March salary
maximum BDT 1,000 at any given time within a
from the BDT. 5,000 crore stimulus package. More
month.
than half of the 4.1 million workers in the garment
sector, which accounts for about 84 per cent of Bangladeshi expatriates are now sending more
the country’s total exports, did not have MFS or money to home using MFS compared to pre covid
bank accounts till then. As per BGMEA report days. Compared to March 2020, in April,2020
some 970,000 new MFS accounts were opened inward remittance through MFS observed a
with bKash, 550,000 with Rocket and 400,000 with growth of 255.3%.
Nagad till April 18, 2020. Such decision was very
Considering the covid situation, bKash has rolled
praiseworthy as most of the workers left for their
villages after lock down declaration and it would out a new facility that allows people to transfer
have made the covid situation worse if they had to funds to non-account holders, in a move that
travel back to their work stations in order to collect may cut reliance on cash and increase the mobile
salary. financial services accessibility. On the other hand,
credit card bills can also be paid via MFS now.
No. of active accounts in Lac*
350.92
Inward Remittance (In Crore BDT) 112.38
346.46
332.94

281.7
270.87 268.45

30.95 29.68 29.99 31.63

26.3

November December January February March April

2019 2019 2020 2020 2020 2020 November December January February March April
2019 2019 2020 2020 2020 2020
*Account in which transaction made in last 3 (Three) Months.
Source: Bangladesh Bank
Source: Bangladesh Bank

14 lac families received PM’s BDT 2,500 cash aid

Limitations to be recovered for better service
and way outs
each via MFS in May, 2020. Out of those 50 lac
families, Nagad was entitled to disburse the highest Subscriber (In Millions)
amount of BDT 425 crore to 17 lac families, bKash 161.506

BDT 375 crore to 15 lac families, Rocket BDT 250

crore to 10 lac families, Surecash BDT 200 crore
to 8 lac families. To be added, the government was
74.26
only charged BDT 15 for each disbursement even
48.032
though the cash out charges are higher, all the
34.34
operators sent full cash out value to the beneficiary 4.873
family.
Grameen Phone Robi Axiata Banglalink Digital Teletalk Total
Ltd. (GP) Limited (Robi) Communications Bangladesh Ltd.
The Prisoner’s Cash fund, which receives money Limited (Teletalk)

in cash, has historically been used by detainees Source: BTRC, For the month of May 2020
to pay for various services while imprisoned. In *Subscriber means the biometric verified subscribers/subscriptions
who have any activity (voice, data, sms etc.) at least once in the
order to curb the spread of the novel coronavirus preceding 90 days.

15 of 26
 There is no doubt that the number of mobile financial inclusion by disbursing micro finance
phone users are increasing rapidly in Bangladesh. credits through MFS.
However, still the biggest difficulty towards
In order to broaden the horizon of MFS, it has to
flourishing MFS sector is low penetration rate of
be included more and more aspects of banking
cell phones. The reason behind this is cell phone
penetration is higher in urban areas but not in activities. For example, till now direct transaction
rural areas. Moreover, in urban areas even in slums between bank and MFS is very limited. As a matter
a wide number of MFS agents are visible which is of fact, not all the banks of the country are even
not the same in rural areas. Thus, if the first barrier included. Such transactions have to be taken in to
can be resolved more currency mobilization will consideration.
be assured.
However, in order to access both cell phone
The development sector has more access in the subscription and MFS account some regulatory
financial activities of the rural area inhabitants documents are required for example NID Card.
which banks do not have. Thus, the development Thus, the availability of such documents should
organizations can play and have been playing in also be considered.

16 of 26
17 of 26
 NEW IDEA!

MONER BONDHU

Ms. Tawhida Shiropa, Founder and CEO of Moner Bondhu in an insightful

conversation discussed her journey, current activities and future plans
with Bonnishikha Chowdhury of MBR Team.

Tawhida Shiropa
Founder and CEO, Moner Bondhu

MBR: How did the idea of Moner Bondhu come into all over Bangladesh. For that reason, our counseling
being? sessions are reasonably priced and we give concessions
to those who are unable to pay the full session fees.
Tawhida Shiropa: Before I started Moner Bondhu, I We do not deny anyone our service due to financial
worked as a journalist in The Daily Prothom Alo for reasons.
13 years. I was in charge of the lifestyle supplement,
Adhuna, which had a confession box, where thousands MBR: How the response was in the initial stage and
of people wrote about their inner struggles. These do you think our country people are enough aware
people mostly suffered in silence due to issues of mental about mental wellbeing?
health which needed professional help. Reading these
Tawhida Shiropa: Generally speaking, there is not
letters, I gained an elaborate insight about the dire need
enough awareness about mental health and wellbeing in
of mental healthcare in our society.
our country. Beside the lack of awareness,
In addition to my experience as a journalist, a personal there is a lot of stigma and
experience propelled me further to start Moner misinformation about mental
Bondhu. A few years ago, my mother health. People suffer in silence,
suffered from severe depression. because they fear that if people
Seeing her suffer up close and know about their mental health
going through that struggle as a struggles, they will be judged and
family made me determined that labelled as “Pagol”. But since we started
I have to do something for the mental in 2016, we have conducted numerous
health sector of our country and thus came the idea of awareness events and campaigns to raise awareness.
Moner Bondhu. Our radio show has been on air since 2016 and has had
over 400 episodes. In January 2020, we launched our
MBR: What is Moner Bondhu’s business model? weekly live TV show where people can call and speak
to our counselor directly. With all these efforts put in,
Tawhida Shiropa: Moner Bondhu earns revenue we have seen an increase in people’s awareness and
through paid television, online and in person willingness to take professional help for mental health
counseling, paid workshops and events, webinars and and well-being. The level of awareness and knowledge
online group sessions and various projects. Moner about mental wellbeing in our country is far from ideal,
Bondhu’s motto is to provide accessible and affordable but we see a change in the positive direction.
mental healthcare and well-being services to everyone

18 of 26
MBR: In an age of technological advancement and
increasing internet accessibility, how do you intend KEY POINTS
to make the services of Moner Bondhu more available
to the general people? Served over 4000 people.
Tawhida Shiropa: We are providing tele and video Reached 10 lac people
counseling all over Bangladesh. We have served people through our online platforms
from at least 30 districts, in both urban and rural
areas. And this has been possible due to technological Reached 1 lac people through
advancement and access to the internet. We are also events
holding online live sessions on important mental health
topics regularly, where our counselors talk about these The radio show has been on air
important issues and interact with the people watching since 2016 and has had over
these sessions. We are also regularly publishing video 400 episodes
contents, write ups, tips for mental wellbeing and social
media posts which are helping the general people to Lack of people’s awareness
know more about mental health and Moner Bondhu’s about mental health and the
services. need for professional
counseling is the biggest
MBR: How many subscribers does Moner Bondhu
have currently?
challenge.

Tawhida Shiropa: So far, we have reached 10 lac people Concessions is provided to

through our online platforms, 1 lac people through our those who are unable to pay
events, workshops and group sessions and we have the full session fees.
served over 4000 people.

MBR: What challenges does Moner Bondhu face in possible in this circumstance. We have also released
general? some free guided Bangla meditations on our social
media platforms and website, which have become very
Tawhida Shiropa: The biggest challenge that Moner popular. Our clients are now requesting live online
Bondhu faces is the lack of people’s awareness about mediation sessions.
mental health and the need for professional counseling.
To tackle this challenge, a big portion of our effort goes MBR: What are the future plans for Moner Bondhu?
into awareness raising through our online platforms,
Tawhida Shiropa: First and foremost, Moner Bondhu
events, Radio and TV shows.
wants to reach more and more people all over
MBR: Considering the Covid -19 situation, what Bangladesh. We do not want anyone to suffer in silence,
kind of support services are more in demand? we want them to know that we are here to help. We are
currently developing the first ever mental health App
Tawhida Shiropa: During this COVID-19 outbreak, in Bangladesh exclusively for COVID-19. We are also
many people are staying at home and minimizing their creating online courses for personal and professional
face-to-face social interaction. This has caused a lot of development of individuals, which will soon be
stress, panic, anxiety and depression among people. launched. All of our work is based in research, so we
So people are availing our tele and video counseling want to continue our research and publish important
sessions, as face-to-face counseling is not always research articles for all.

19 of 26
 IDLC NEWS

IDLC Finance Limited won the “Asiamoney Best Bank for SMEs Award 2020”
November, 2019. The client base grew by 10.3% and
the average ticket size dropped to USD 34,901 (USD
35,560 in 2018), staying in line with its vision of
financial inclusion.

Again, sustainable growth in this sector can only be

achieved through continued efficiency enhancements
and good asset quality. At IDLC, the cost-to-income
ratio till 2019 was 43.33% whereas the industry
average was 49.2% over the period. Its NPL was 3.07%,
compared to an industry average of 11.9%. These data
helps to differentiate the asset quality of IDLC-SME
from its peers.

IDLC-SME has always worked for greater financial

inclusion and has strategically prioritized its focus
on smaller ticket loans in order to penetrate into
comparatively untapped segments. Because of this
strategic priority, it has decided to venture into the VSE
(very small enterprise) segment where the organization
is offering small loans from USD 2,500 to USD 17,000.
While most financial institutions in the country have
refrained from going into very small ticket loans due
to the intricate credit risk management requirement
and inherent resource intensiveness, IDLC has decided
Continuing the winning streak from last year, IDLC to take advantage of its innovative business model
Finance Limited won the highly coveted “Asiamoney and higher efficiency to serve the underserved. “IDLC
Best Bank for SMEs Award” in 2020. According Unnati,” a first of its kind product in the formal financial
to insiders, this token of recognition from such market of Bangladesh, was also launched in 2019 to
distinguished institution is expected to inspire them finance the kitchen market vendors in the country and
to move forward with increased vigor in the pursuit of farther the cause of financial inclusion. The technology
excellence. driven NBFI also rolled-out its in-house built scorecard
based financing model. Tab was also provided to every
Asiamoney evaluated various factors before awarding Relationship Manager to utilize modern technology.
IDLC this award. Even in the midst of declining private
sector credit growth, IDLC SME, in 2019, delivered a After years of operation in the conventional SME
robust year-on-year portfolio growth of 8.3%. In total, business, IDLC-SME has now set its goal to work
the SME portfolio amounted to USD 448 million (USD towards serving even more granular segments,
410 million in 2018). In 2019, SME division disbursed adhering to the vision of boosting financial inclusion
a total of USD 306 million and witnessed the highest in the country. Asiamoney subscribed to this vision of
ever monthly disbursement of USD 27.6 million in IDLC and recognized the effort.

20 of 26
 CAPITAL MARKET REVIEW

Performance of Equity Markets of Bangladesh and Peer Countries

Bangladesh equity market closed the month of June in Among the regional peers, Vietnam’s index also closed in red,
negative territory. Some of the other global indices recovered declining by -4.6%, whereas Pakistan and Sri Lanka’s index
from the worsening situation of the global pandemic and
rose by 1.4% and 6.2% respectively. Additionally, the MSCI
closed in positive territory in June. During the month, the
Frontier Markets Index also increased by 1.2%. Over the long
broad index DSEX fell by -1.8%, losing about 71.4 points.
The blue chip index DS30 and the Shariah index DSES also term, only Vietnam showed the most encouraging track record
declined by -1.8% and -2.8%, respectively. with a 5 years’ return of 39.1%.

Table 1: Equity market performance in Bangladesh and peer countries

Return*
Index Points,
Indices
June, 2020
1M 3M YTD 12M 3Y 5Y

Bangladesh

DSEX 3,989.1 -1.8% -0.5% -10.4% -26.4% -29.5% -13.0%

DS30 1,341.0 -1.8% 0.8% -11.4% -30.5% -35.6% -24.2%

DSES 925.1 -2.8% 0.5% -7.5% -25.7% -28.7% N/A

Peer Countries

Pakistan (KSE 100) 34,421.9 1.4% 17.8% -15.5% 1.5% -26.1% 0.1%

Sri Lanka (CSE - All Share) 5,149.6 6.2% 12.6% -16.0% -4.1% -23.7% -26.7%

Vietnam (VNI) 825.1 -4.6% 24.5% -14.1% -13.1% 6.3% 39.1%

MSCI Frontier Markets Index 639.0 1.2% 11.7% -16.7% -12.6% -11.4% -8.6%

*All returns are Holding Period Return Source: Investing.com, MSCI, DSE

Liquidity Condition in Equity Market of Bangladesh Table 2: Market capitalization and turnover
statistics
During June, the total market capitalization
Particulars 30-Jun- 25-Mar- %
decreased by 0.1% as compared to March after 20 20 change

which the market remained closed due to the Total market capitalization
36,767 36,799 -0.1%
(USD* mn)
general holidays of the pandemic. Free float market
Total equity market
29,901 29,933 -0.1%
capitalization also decreased by 0.1%. The daily capitalization (USD mn)

average turnover of June 2019 was BDT 2.2 bn (USD Total free float market
12,202 12,195 0.1%
capitalization (USD mn)
25.6 mn), decreasing by 41.1% from that of March.
Daily Avg. Turnover (USD
25.6 43.5 -41.1%
Accordingly, turnover velocity which represents mn)

overall liquidity of the market decreased to 18.4% in Turnover Velocity~ 18.4% 25.5% N/A
June compared to 25.5% in March. In 2019, turnover
* All USD figures are converted using an exchange rate of 84.85 as of June 30,
velocity of Bangladesh equity market was 33.5%, in 2020 as per Bangladesh Bank website.
~ Turnover velocity is calculated by dividing monthly total turnover with
comparison to 34.4% in 2018. month-end market capitalization. The figures are annualized.

21 of 26
 Historical Index Points and Market Participation Data Figure 3: Current market P/E* of Bangladesh and
Since its inception on January 27, 2013, DSEX peer countries
yielded a holding period return of -1.6% till June, 25.07x
2020. During the same period, daily average
turnover of the market amounted to BDT 5.3 bn
(USD 62.5 mn) (Figure 1).
19.08x
Figure 1: DSEX since inception along with market
turnover
350
6,300
300
14.80x
5,700 14.25x
250

Turnover (USD mn)

5,100 200 12.58x
Index points

150
4,500
10.16x
100
3,900
50

3,300 0
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20

Turnover (USD mn) DSEX Index

Market Valuation Level - P/E Ratio

The market P/E decreased to 9.30x in June
compared to 10.58x in March. It is also way lower
India Philippines Thailand Vietnam Bangladesh Pakistan
than the 19 years’ median market P/E of 15.05x
* Trailing 12 month P/E as of June 30, 2020.
(Figure 2). In terms of trailing 12 month P/E ratio,
Source: IDLC, Bloomberg
the equity market of Bangladesh is the cheapest
among its regional peers. (Figure 3).
Sector Performance
Figure 2: Historical market P/E* and it’s median During June, all the sectors yielded mixed returns.
Current Market P/E in Context of History
Among the major sectors Bank, Fuel & Power and
29.00x
NBFI yielded the most positive returns of 2.3%,
Medi an Ma rket P/E, 15.05x
24.00x
0.5% and 0.2%, while Telecommunication and
19.00x Pharmaceuticals & Chemicals yielded the most
14.00x negative returns of -6.4% and -2.7% respectively.
9.00x Current Ma rket P/E,
9.30x

4.00x
The largest sector in terms of market capitalization,
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03

Jun-17
Sep-03
Dec-03
Mar-04
Jun-04

Sep-17
Dec-17
Mar-18
Jun-18
Sep-04
Dec-04
Mar-05
Jun-05

Sep-18
Dec-18
Mar-19
Jun-19
Sep-05
Dec-05
Mar-06
Jun-06

Sep-19
Dec-19
Mar-20
Jun-20
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17

Bank is relatively undervalued in terms of P/E

Month End P/E Ratio Median P/E
ratio. On the other hand, Fuel & Power sector
*Price Earnings (P/E) Ratio is calculated by dividing total market capitalization of
all profit making listed companies with their total audited annual earnings. has the highest dividend yield of 6.5% among all
Source: CEIC, DSE sectors.

22 of 26
Table 3: Sector performance snapshot
Market Capitalization
Return*
(USD mn) Dividend
Sector P/E (x)** P/BV (x)^
Yield~
Total Free Float 1M 3M YTD 12M 3Y 5Y

Bank 5,278 2,989 2.3% 0.0% -14.3% -23.3% -16.1% 44.9% 5.3 0.5 5.2%
Pharmaceuticals &
5,473 2,838 -2.7% 2.6% 0.0% -8.5% 0.3% 33.2% 7.7 9.5 2.4%
Chemicals
Telecommunication 3,969 424 -6.4% 0.2% -15.0% -31.7% -20.8% -8.6% 14.3 2.1 5.3%
Fuel & Power 4,177 1,118 0.5% 0.7% -4.1% -21.7% -3.0% 9.7% 10.8 1.2 6.5%
Food & Allied 2,439 868 0.1% 0.1% -3.3% -31.1% -6.0% -2.4% 17.2 5.0 4.0%
Engineering 1,550 803 0.1% 0.0% -10.3% -32.0% -25.4% 4.2% 13.8 1.0 3.0%
NBFI 1,450 441 0.2% -0.2% -11.4% -30.2% -41.2% -4.2% 11.9 1.3 2.6%
Textile 1,122 644 -0.1% -0.1% -10.2% -31.5% -17.6% 25.3% 12.3 0.7 2.8%
Miscellaneous 1,087 272 -1.2% 0.0% -5.0% -16.3% -1.3% 39.5% 19.0 1.0 2.4%
Cement 847 347 1.0% -0.9% 4.8% -21.4% -44.0% -58.4% 20.0 1.9 2.1%
Life Insurance 587 257 -1.9% 0.6% -18.6% -14.9% 11.0% 19.0% 11.0 6.1 1.9%
Non-Life Insurance 473 274 -0.2% 0.2% -18.8% -16.3% 11.7% 60.4% 10.1 0.9 3.6%
Ceramics 233 93 -0.3% -1.1% -12.1% -21.6% -24.9% -28.5% 22.1 1.3 3.5%
Tannery 210 102 0.0% -0.1% -8.0% -32.2% -32.1% -19.8% 26.3 1.6 3.7%
Travel & Leisure 293 151 -0.5% -0.7% 10.5% 19.0% 19.1% 35.0% 25.9 0.7 2.7%
IT 230 144 -0.6% -0.6% -12.3% -17.7% 16.2% 205.7% 29.6 1.1 1.5%
Services & Real Estate 154 79 0.0% -0.1% -3.4% -24.4% -46.0% -44.8% 11.4 0.7 3.6%
Paper & Printing 113 41 0.0% 0.0% -2.2% -30.1% 366.3% 273.9% 17.0 1.7 2.8%
Jute 21 13 2.6% 2.6% -29.8% -55.3% 16.3% 156.3% 42.4 5.3 1.3%
Market 29,682 11,887 -1.8% -0.5% -10.4% -26.4% -29.5% -13.0% 9.7 1.1 4.1%
*All returns are Holding Period Return.
**Price Earnings (P/E) Ratio is calculated by dividing total market capitalization of all profit making listed companies with their annualized earnings excluding companies trading
at an annualized P/E greater than 80.0x.
^P/BV is calculated by dividing total market capitalization of listed companies with their total book values excluding companies with negative book values.
~Dividend yield is calculated by dividing last year’s declared cash dividend with market capitalization.

Cap Class Performance

During the month of June, large and small cap classes yielded negative returns while mid cap class yield positive
returns. Among them, the large cap was the highest dividend yielding (4.8%) class.

Table 4: Performance of different market cap classes

Market
Capitalization % of Total Return*
Dividend
Cap Class of Constituent Equity Market P/E (x) P/BV (x)
Yield^
Companies Capitalization
(USD mn) 1M 3M YTD 12M 3Y 5Y

Large ≥119 79.0% -2.2% 0.5% -9.9% -27.2% -13.5% 3.9% 9.3 1.2 4.8%
Mid 36-118 12.1% 1.3% 1.3% -4.5% -13.0% -12.0% 14.8% 10.8 0.9 2.7%
Small 12-35 7.2% -0.8% -1.7% -4.6% -22.7% -23.4% 8.8% 14.4 0.7 3.1%
Micro <12 1.6% 0.0% 0.2% -9.5% -24.9% -24.3% 6.8% 16.2 0.3 1.3%
Market - - -1.8% -0.5% -10.4% -26.4% -29.5% -13.0% 9.7 1.1 4.1%
*All returns are Holding Period Returns

Performance of 20 Largest Listed Companies in Bangladesh

Among the 20 largest listed companies in terms of market capitalization, BRACBANK (+9.9%) and EBL (+8.1%),
advanced the most in June due to dividend declaration, followed by GLAXOSMITH (6.9%), while SQURPHARMA
(-9.0%) and GP (-6.7%) faced the highest selling pressure during the month.

Majority of these companies yielded outstanding return over longer time horizon (5 years) such as EBL (+114.7%),
NATLIFEINS (+101.6%), RENATA (+77.5%), and DUTCHBANGL (+74.4%).

Among the scrips, SUMITPOWER, TITASGAS, EBL, MARICO, ISLAMIBANK, GP, UPGDCL, DUTCHBANGL,
PUBALIBANK, BATBC recorded a higher dividend yield compared to that of market.

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Table 5: Snapshot of 20 largest companies in terms of market capitalization

Market
capitalization Return*
Daily Avg.
(USD mn) P/ BV Dividend
DSE Code Sector Turnover P/E (x)
(X) Yield
(USD mn)
Free
Total 1M 3M YTD 12M 3Y 5Y
Float

Telecommuni-
GP
cation
3,800 380 0.26 -6.7% 0.0% -15.2% -31.7% -20.7% -7.8% 7.5 11.1 5.4%

BATBC Food & Allied 1,925 509 0.02 0.0% 0.0% -2.3% -30.7% 3.3% -1.7% 17.7 5.0 4.4%

Pharmaceuticals
SQURPHARMA
& Chemicals
1,716 1,123 0.90 -9.0% 0.0% -9.2% -28.9% -23.6% 7.3% 10.4 2.1 2.3%

UPGDCL Fuel & Power 1,368 137 25.96 0.0% 0.0% -10.2% -41.3% 68.8% N/A 18.5 4.4 5.4%

Pharmaceuticals
RENATA
& Chemicals
1,071 523 1.75 -3.5% 0.0% -6.4% -5.1% 31.9% 77.5% 22.3 4.6 0.9%

BERGERPBL Miscellaneous 715 36 0.07 0.0% 0.0% -5.2% -9.6% 27.7% 72.6% 25.1 8.3 2.3%

ICB NBFI 619 20 0.00 0.0% 0.0% -10.9% -35.1% -50.5% -26.8% (82.7) 5.5 0.0%

Pharmaceuticals
MARICO
& Chemicals
580 58 0.06 1.3% 1.3% -3.7% 8.9% 76.9% 44.5% 18.6 26.7 6.1%

BRACBANK~ Bank 498 278 0.19 9.9% 9.9% -38.6% -47.0% -37.6% 64.2% 12.1 1.1 2.2%

LHBL Cement 491 174 0.03 2.8% -0.3% 9.8% -7.1% -39.4% -66.9% 19.9 2.7 2.8%

SUMITPOWER Fuel & Power 442 163 0.06 -3.8% -2.0% 0.3% -4.7% 13.0% 23.4% 6.5 1.1 10.0%

OLYMPIC Food & Allied 354 256 0.09 0.0% 0.0% -9.0% -34.6% -41.4% -10.4% 14.6 4.1 3.2%

TITASGAS Fuel & Power 346 87 0.00 -1.0% -0.7% -3.9% -19.9% -29.4% -45.2% 10.6 0.4 8.8%

DUTCHBANGL Bank 335 44 0.00 0.0% -3.2% -20.2% -17.4% 43.1% 74.4% 9.4 1.1 5.3%

ISLAMIBANK Bank 332 170 0.09 4.8% 3.6% -8.4% -25.8% -41.0% 23.7% 5.1 0.5 5.7%

Pharmaceuticals
BXPHARMA
& Chemicals
331 287 1.67 3.7% 14.0% -0.3% -15.6% -35.4% 24.2% 8.0 0.9 2.2%

Pharmaceuticals
GLAXOSMITH
& Chemicals
310 56 20.96 6.9% 6.9% 27.9% 56.9% 62.7% 27.0% 36.5 23.3 2.4%

EBL~ Bank 296 202 0.00 8.1% 7.4% 0.6% -11.6% 16.6% 114.7% 7.5 1.0 8.1%

NATLIFEINS Life Insurance 294 67 0.04 -3.0% 1.3% -17.7% 9.0% 81.5% 101.6% 18.9 0.8%

PUBALIBANK Bank 252 176 0.01 1.5% 0.5% -13.3% -20.9% -0.5% 55.8% 6.0 0.1 4.8%

Market 29,682 11,887 25.61 -1.8% -0.5% -10.4% -26.4% -29.5% -13.0% 9.7 1.1 4.1%

*All returns are Holding Period Return.

^Five years’ return is not available for UPGDCL as they were not listed then.
~ 1M Return is positive for the stock, due to dividend declaration in June.

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Top Performing Mutual Funds
The top ten open end mutual funds based on 3 year CAGR outperformed the market, during the same period. Among
them, CAPM Unit Fund (+5.7%) yielded the highest return. On YTD 2020 basis, all the funds generated negative returns.
Third ICB Unit Fund (-0.1%) generated the least negative returns.

Table 6: Top ten open end funds based on 3Y return (CAGR) performance
Return
Asset Management Fund Size
Name
Company (USD mn)
2020 YTD* 2019 2017-2019

CAPM Unit Fund CAPM 1.4 -0.4% -7.3% 5.7%

VIPB Accelerated Income Unit Fund VIPB 8.1 -9.9% -4.6% 5.4%

Seventh ICB Unit Fund ICB 3.6 -9.6% -7.8% 3.8%

ATC Shariah Unit Fund ATCP AML 1.5 -6.1% -10.8% 3.2%

LankaBangla 1st Balanced Unit Fund LankaBangla 4.7 -3.4% -8.0% 2.6%

Sixth ICB Unit Fund ICB 2.4 -8.9% -8.4% 2.4%

MTB Unit Fund Alliance 8.9 -2.5% -0.9% 1.7%

UFS-Popular Life Unit Fund UFS 8.1 -7.9% -9.0% 1.6%

Third ICB Unit Fund ICB 3.1 -0.1% -8.2% 1.1%

Peninsula AMCL BDBL Unit Fund One Peninsula 2.3 -6.2% -7.7% 0.9%

Market (Broad Index) Return (%) -10.2% -18.0% -4.3%

*Based on published NAV and DSEX point of June 25, 2020

The top ten closed end mutual funds on the basis of 5 years (2015-2019) performance yielded negative returns
on YTD basis. AIBL1STIMF (-3.4%), RELIANCE1 (-5.1%), and GRAMEENS2 (-6.0%) yielded the least negative
returns. All these funds are traded at a lucrative discount compared to their NAV. Besides, all the funds also
offered higher dividend yields compared to market (Table 7).

Table 7: Top ten close end funds based on 5Y return (CAGR) performance

NAV Return3
Fund Fund Size Price1 NAV1 Price/ Dividend Redemption
DSE Code Year 4
Manager (USD mn) (BDT) (BDT) NAV Yield2 (%) 2020
2019 2017-19 2015-19
YTD
NLI1STMF VIPB 6.6 9.6 11.2 85.9% 13.5% -10.9% -4.5% 5.0% 9.7% 2020

SEBL1STMF VIPB 12.3 9.3 10.5 88.8% 12.9% -10.7% -4.4% 4.7% 8.7% 2023

ATCSLGF ATC AML 7.3 6.8 10.0 67.9% 11.0% -7.1% -8.1% 4.1% 7.5% 2020

EBL1STMF RACE 15.6 4.1 9.2 44.8% 7.3% -7.8% -5.0% 4.4% 6.8% 2029

PHPMF1 RACE 30.5 4.2 9.2 45.7% 7.1% -7.6% -3.5% 4.7% 6.2% 2030

RELIANCE1 AIMS 7.6 8.1 10.7 75.8% 12.3% -5.1% -6.6% 3.8% 6.2% 2029

GRAMEENS2 AIMS 33.1 11.1 15.4 72.1% 8.1% -6.0% -7.1% 4.5% 6.0% 2031

1JANATAMF RACE 31.8 4.1 9.3 44.0% 7.3% -7.5% -4.0% 3.5% 5.8% 2031

POPULAR1MF RACE 32.8 4.2 9.3 45.2% 7.1% -7.6% -4.6% 3.8% 5.8% 2030

AIBL1STIMF RACE 10.7 6.9 9.1 75.7% 11.6% -3.4% -6.4% 2.1% 5.3% 2030

Market 3.8% 10.0% -18.0% -4.3% -1.9%

1 Price as of June 28, 2020, and NAV published on June 25, 2020.
2 On last cash dividend declared.
3 CAGR computed for respected periods, except for 2019 and 2020 YTD, adjusted for dividend. YTD returns of funds debuting within the year represent return generated since
debut, hence is not directly comparable with return of funds that operated throughout the year.
4 In reference to BSEC Press Release weGmBem/gyLcvÎ (3q LÛ)/2011/25 published on March 16, 2018, tenure of existing listed closed end mutual funds can be extended by another
tenure equal to maximum 10 years, provided that the full tenure of the subject fund does not exceed 20 years in total. However, the mutual funds those are not willing to
extend their tenure will still have the option to convert or wind up as per rules and regulations.

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Foreign Participation in Equity Market of Bangladesh
Over last 5 years, Bangladesh equity market has seen a surge of foreign investment. As of February, 2020 total foreign
ownership stood at 6.5% of the total equity market capitalization, which was only 1.7% in 2014.

Figure 4: Net foreign portfolio investment and foreign ownership as % of total equity market capitalization
943
6.6% 6.6% 6.8%
6.5%

5.1% 5.4%
482
316
227
1.7% 144
107 2020 (upto
May)
2014 2015 2016 2017 2018 2019
-51
Net Foreign Portfolio Investment (BoP, USD mn)* Foreign ownership as % of total market capitalization~
Source: DSE and Bangladesh Bank
* Net portfolio investment data are as of December of the respective years, except 2020.
~ % of foreign ownership of equity market capitalization data are as of December of the respective years, except 2020 (as of February).

Among all the companies with foreign ownership, BRACBANK had the highest foreign shareholding of 43.2% as of
February 2020, followed by DBH with 41.2%.

Table 8: Top ten companies with highest foreign shareholding as of February 2020
Ticker Sector Foreign Shareholding
BRACBANK Bank 43.2%
DBH NBFI 41.2%
OLYMPIC Food & Allied 40.0%
BXPHARMA Pharmaceuticals & Chemicals 36.3%
ISLAMIBANK Bank 23.5%
RENATA Pharmaceuticals & Chemicals 22.8%
MLDYEING Textile 21.9%
SHEPHERD Textile 19.5%
SQURPHARMA Pharmaceuticals & Chemicals 19.5%
VFSTDL Textile 18.3%
Source: DSE
*Latest Data for Foreign shareholding available on DSE are as of February 2020.

Performance of BDT and Currencies of Peer Countries against USD

Since 2015, BDT retained its value better than majority of the currencies of peer countries. While BDT depreciated
by 8.9% against US Dollar, other currencies of neighbor countries like Vietnamese Dong (VND), Indian Rupee (INR)
and Pakistani Rupee (PKR) lost 8.5%, 19.9% and 66.3%, respectively.

Figure 5: Five year’s relative performance of BDT and peer currencies 10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-35.0%
-40.0%
-45.0%
-50.0%
-55.0%
-60.0%
-65.0%
-70.0%
Dec-14
Jan-15
Mar-15

May-20
Jun-20
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20

Source: Investing.com BDT VND INR PKR

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