The Role of Lease Financing in Bangladesh

Introduction consider financing is comparatively a unfermented concept in the financial empyrean and has got recognition as aninnovative source of pay for accelerating the pace of industrialization as wholesome as economic offshoot ofBangladesh. Leasing companies guide registered substantial growth in pick out financing during the year 1985through 1994.Since 1995 to date, growth in lease trade has significantly s patheticed down(a) because of sluggisheconomic activities, withdrawal of incentives by the government, imposition of interchange resource needwith Bangladesh Bank as per pay Act 1998, expansion of number of leasing institutions, inadequacy ofdiversification of service and of awargonness in business community about leasing and so forth Researchers have also prove that leasing companies need to develop their professionals and should t all toldy in the market with newmarketing strategy. BackgroundBangladesh is a least(prenominal) developed country in the knowle dge domain with per capita GDP Tk. 11. 284 (USD 230). She beatsfrom poverty, imperfection in both, constituent and product market, continuous in symmetry in the economy,defective administrative structure in both financial and non-financial field, inappropriate task structure,heavy dependence on assistance from knowledge domain Bank including other International add Agencies andDonor Countries, lack of capital stock, massive unemployment, governmental turmoil and unhealthy environmentfor investiture.With the emergence of Bangladesh as an self-sufficient country in 1971, the thenGovernment nationalized all mercantile Banks with the hope of accelerating industrial growth throughfinancial, fiscal and other supports. Since the inception of independent Bangladesh, Commercial Banks,Development Financial Institutions and Investment potbelly stove of Bangladesh have been the major sourcesof industrial finance in the country. These Banks were predominately serving the public sect or by extendingsupport in the form of farsighted term add, working capital finance, noseband finance etc. and had limited experiencein trade, art and industry.Due to dearth of experience in investment decision, project financing,retrieval of loan and recycle of loan, both entrepreneurs and Banking Financial Institutions coupled withdifficulties at both stage of development and accomplishment which eventually led to the emergence ofmany sick industries. The Development Financial Institutions (DFI s) that depend generally on external assistance suffer fromfinancial constrains because of ineffective project appraisal. Imprudent investment decisions, poor recoveryand inability to recycle of loan which resulted in withdrawal of stock certificate by international donors.As a result ofpoor performance and withdrawal of external support, the fluidness position of DFI s have declined and abilityof sanctionative fresh loan and of refinancing sick industries reduced. Nationalized c ommercial Banks areusually reluctant to finance capital use of goods and services due to higher financial luck and poor recovery and designedto promote the unproductive sectors. Besides, their loan operation was substantially change magnitude due toadditional cash reserve requirement imposed by Bangladesh Bank in order to curb inflation. Consequently,genuine industrial clients are affected by their limited get to to the long-term local currency loan.Thiscontention is ostensible from the fact that the private sector stay in massive default to the DFI s and NCB s,90% of borrowers to DFI s are in defaulting and recovery rates are as low as 10% of the total recoverableamount. On the other hand, Dhaka Stock put back (DSE), the only stock market of Bangladesh is not wellorganized and therefore failed to mobilize sufficient fund to meet the demand of the capital market of thecountry. During 1972-84, public sector financial institutions were found totally failure in ontogenesis indus trialsector and promoting first generation of industrial entrepreneurs