MUTUAL FUND a globally popular investment vehicle yet to have a strong foothold in Bangladesh - IDLC Finance Limited
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Volume 17 | Issue 4 | April 2021
MUTUAL FUND
a globally popular investment
vehicle yet to have a strong
foothold in Bangladesh
a of 35
contents
03 13-19 23 -25
Economy at a Glance Cover Story New Idea
Mutual Fund: bimabd.com
a globally popular investment vehicle
04 yet to have a strong foothold in
Bangladesh
Month in Brief Even though mutual fund was first
introduced in 1980s in Bangladesh,
26 -28
the industry growth has not been IDLC News
very noteworthy. On the other • IDLC Finance Limited & UNICEF
05 hand, in developed countries the
size of the industry in terms of
Pledges to Improve Maternal,
Neonatal Health and Nutrition
For the Record Asset under Management (AuM) of Seven Tea Gardens in Sylhet
has sometimes become even larger • IDLC approves 15% cash and 5%
than the economy itself. Even our stock dividend at its 36th AGM
06
neighboring country, India in this
regard showed tremendous progress • IDLC Appoints M. Jamal Uddin
compared to its regional peers. as Acting CEO & Managing
World Economic Indicator Innovative and prudent strategies Director
from asset managers along with policy
support are necessary for further
07 development of the industry in our
country. 29-34
Banking Data Corner Capital Market Review
20-22
08-12
Design & Printing: nymphea l www.nymphea-bd.com
Expert Opinion
Mr. Shahidul Islam, CFA CEO
Research in Focus VIPB Asset Management Company
Bangladesh Startup Ecosystem: Limited
The Untapped Digital Goldmine of Director and Ex-president of CFA
Asia Society Bangladesh
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
Mutual Fund: potential to be popular household financial instrument in Bangladesh
Mutual fund is most preferred by the investors is still struggling. However, India (14.2%) in this
worldwide not only because of its higher return regard showed tremendous progress compared
yielding nature compared to other house hold assets to its regional peers like Pakistan (1.5%), Sri Lanka
but also because it assists the investors by offering (1.3%) and Bangladesh (0.5%). If the factors behind
professional fund management service with the the tremendous progress of India considered, it can
benefit of diversification and lower investment cost. be observed that initiatives such as government
Even though mutual fund was first introduced in incentive, systematic investment plan, product
1980s in Bangladesh, the industry growth has not variety, Presence of a structured and active
been very noteworthy. association etc. played a vital role.
In developed countries, the size of the industry On the other hand, this industry of Bangladesh is
in terms of Asset under Management (AuM) has yet to boom. Innovative and prudent strategies from
sometimes become even larger than the economy asset managers along with policy support can take
itself. The largest mutual fund industry in the world this industry to a new height.
belongs to United States of America (USA). As of
2019, 12.9% of the household financial assets are
invested in mutual funds in USA. Among Asian
countries, Malaysia (54.0%), Japan (40.6%), and
South Korea (34.6%) have been successful in Sushmita Saha
building a size able mutual fund industry compared Assistant Manager
to their economy. The southern part of the region IDLC Finance Limited
INDUSTRY & EQUITY ANALYSIS TEAM
ASIF SAAD BIN SHAMS ADNAN RASHID
Email: shams@idlc.com Email: adnan@idlc.com
SUSHMITA SAHA BONNISHIKHA CHOWDHURY
Email: sushmita@idlc.com Email: shikha@idlc.com
ECONOMY
AT A GLANCE
Prepared by IDLCSL Research Team
EXPORT-IMPORT
Growth in Export Imort Trade (Last 7 Years) Export & Import Growth
30.00% 60%
25.23% 36%
40% 24% 18%
20% 10% 13%
20.00% 1% 4% 4% -4% 3%
0%
11.69% 10.55% -31% -2% 1% -4%
9.77% -20% -8% -7% -6% -5%
9.00% -44% -19% -17%
10.00% 5.81% -40%
3.39% -62%
8.92% -60%
5.94% -83%
0.00% -80%
0.21% 1.16%
1.87% -8.56% -100%
June
August
September
October
November
December
January
February
March
May
July
April
-10.00%
-20.00% -16.93%
FY 20 FY 21
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Export Import Export (EPB) Growth Import (f.o.b) Growth
REMITTANCE
Remittance Growth (Last 12 Months)
20.00% 17.32% 70.0%
15.00% 60.0%
10.83%
9.39% 50.0% 62.6%
10.00% 7.65% 40.0% 45.6%
5.00% 30.0% 33.7% 50.2%
-2.52% 33.9% 35.9%
0.00% 20.0%
28.7%
-1.61% 10.0% 21.2% 19.8% 22.6%
-5.00%
0.0% -13.9%
-10.00% -10.0%
-23.8%
-15.00% -20.0%
April
May
June
July
August
September
November
December
January
February
March
-14.48%
October
-30.0%
-20.00%
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 20 FY 21
PRIVATE SECTOR CREDIT GROWTH
Private credit growth (Last 8 years) Private sector credit growth (Last 12 months)
19.0% 9.48%
18.13% 9.36%
18.0% 9.20%
17.0%
15.55% 8.86% 8.82% 8.86% 8.93%
16.0%
8.61%
15.0%
14.19% 8.61%
14.0% 13.33% 8.37% 8.32%
13.0% 13.50%
8.20%
12.0%
March
April
May
June
October
November
December
January
February
September
July
August
11.0% 10.60% 9.83%
10.0%
8.37%
9.0%
Dec'13 Dec'14 Dec'15 Dec'16 Dec'17 Dec'18 Dec'19 Dec'20 FY 20 FY 21
3 of 35
MONTH IN BRIEF
Injection of money in the As per the Banks
form of loans into the country’s government rescheduled
economy reached BDT 65,622 instructions, now about BDT
crore at the end of January of the corporate 13,457.8 crore of
2021 under 10 stimulus packages sponsor of Power defaulted loans in
through the banking channel, Grid needs to 2020, which is the
according to a Bangladesh Bank offload another lowest in five years
9.64% shares
report.
of the power
transmission
company.
Country’s overall The Bangladesh Agriculture loan In the October-
LNG (liquefied natural Bank’s board of disbursement rose December quarter,
7.2 % in the first the banks and NBFIs
gas) re-gasification directors have disbursed BDT 3,901.56
reached around approved a BDT eight months of the
crore for environment-
837 million cubic 500 crore fund to fiscal year, owing friendly initiatives against
feet per day, the to the increasing their disbursement of
provide low-interest
highest-ever so far, demand for such BDT 2,403.11 crore in
loans for startups credits in the July-
as the government loans as the central
to create new bank lowered their September quarter,
is importing a high
entrepreneurs. showed a Bangladesh
volume of fuel to interest rate amid the
Bank quarterly review
meet the mounting pandemic. report on green banking
domestic demand. activities.
Bangladesh’s first ever tier- Non-bank The Bangladesh
one Mudaraba perpetual bond financial Securities and
Exchange Commission
has received the nod from institutions
has asked brokerage
the Bangladesh Securities and (NBFIs) will be houses to ensure at
Exchange Commission (BSEC) for able to declare least BDT 20,000 in
a BDT 600 crore fund to be raised. the highest investment by the
dividend of 30% general investors
in the stock market
for shareholders,
to be eligible for
with a maximum participating in any
of 15% cash initial public offering
dividend. from April.
4 of 35
For the Record
THE SMES WILL HAVE A VAST The increasing trend of farm
SCOPE OF CONTRIBUTING IN THE loan recovery amid the loan
COUNTRY’S ECONOMY IN THE moratorium facility once
COMING DAYS. WE HAVE CALLED
again proves that small and
THE SMALL-CAP COMPANIES TO
FACILITATE THEIR CAPITAL RAISING medium farmers have good
THROUGH THE SME BOARD repayment behavior
Ali Hossain Prodhania, Managing Director, Bangladesh
Dr. Shaikh Shamsuddin Ahmed, Commissioner, Krishi Bank on Agri-Loan Disbursement soar
Bangladesh Securities and Exchange Commission
(BSEC) on Capital Raise for Facilitating SMEs.
ONLINE BANKING
Light The central
engineering bank should ACTUALLY GIVES
was also allow the
declared the
NBFIs having DYNAMICS TO
industry of the
year in 2020 by
a strong THE COUNTRY’S
financial
the Ministry of
Industries. This health to ECONOMY
declare
has largely
boosted the dividend
AT LARGE BY
confidence without any EXPEDITING
of investors limit in the
in the sector interest of the MONEY
and more capital market
businesses are Md Sayadur Rahman, President,
CIRCULATION
now showing Bangladesh Merchant Bankers Anis A Khan, Former Chairman,
Association (BMBA) on Removing Association of Bankers, Bangladesh Ltd.
interest to Bars on Dividend Limits (ABB) on Online banking.
develop the THE SUBCONTRACTING FACILITY WILL PROVIDE INVESTMENT
sector PROTECTION TO THE MILLS SUFFERING AMID THE CRISIS HERE,
AND THE EMPLOYMENT OF THEIR WORKERS WILL CONTINUE.
Rizwan Rahman, President,
Dhaka Chamber of Commerce
THE MILLS WILL BE ABLE TO REPAY THEIR BANK LOANS WITH THE
and Industry (DCCI) on REVENUE EARNED FROM THE SUBCONTRACTS
Export from Light Engineering Mansoor Ahmed, Secretary, Bangladesh Textile Mills Association (BTMA)
Industry. on Allowing Subcontract in Textile Sector
5 of 35
WORLD ECONOMIC INDICATOR PREPARED BY IDLCSL RESEARCH TEAM
Nominal Real GDP
Current
GDP: Growth: Inflation Interest Rates Currency
Inflation Account
Country October, October 2020 Point to (%), Ten years Units
(%) As of Balance:
2020 (USD (yearly % point (%) treasury bond (per USD)
(% of GDP)
in billion) Change)
Frontier Market
Sri Lanka 81.1 -4.55 4.10 Mar, 2021 -3.63 8.47 199.50
Vietnam 340.6 1.60 1.16 Mar, 2021 1.61 2.34 23,080.00
Kenya 101.0 1.05 5.90 Mar, 2021 -4.90 13.15 108.90
Nigeria 443.0 -4.28 17.33 Feb, 2021 -3.65 10.96 381.05
Bangladesh 330.1 5.24 5.32 Feb, 2021 -0.02 6.01 84.80
Emerging Markets
Brazil 1,363.8 -5.80 5.20 Feb, 2021 0.27 9.30 5.64
Saudi Arabia 680.9 -5.44 5.20 Feb, 2021 -2.51 n/a 3.75
India 2,935.6 -10.29 5.03 Feb, 2021 0.33 6.13 73.31
Indonesia 1,088.8 -1.50 1.37 Mar, 2021 -1.30 6.71 14,515.00
Malaysia 336.3 -6.00 0.10 Feb, 2021 0.94 3.19 4.14
Philippines 367.4 -8.26 4.70 Feb, 2021 1.61 4.39 48.59
Turkey 649.4 -4.99 16.19 Mar, 2021 -3.66 18.42 8.12
Thailand 509.2 -7.15 -0.08 Mar, 2021 4.17 1.77 31.38
China 14,860.8 1.85 -0.20 Feb, 2021 1.30 3.22 6.56
Russia 1,464.1 -4.12 5.67 Feb, 2021 1.17 7.14 76.29
Developed Markets
France 2,551.5 -9.76 1.10 Mar, 2021 -1.92 -0.08 0.85
Germany 3,780.6 -5.98 1.70 Mar, 2021 5.75 -0.33 0.85
Italy 1,848.2 -10.65 0.80 Mar, 2021 3.23 0.63 0.85
Spain 1,247.5 -12.83 1.30 Mar, 2021 0.54 0.31 0.85
Hong Kong 341.3 -7.47 0.30 Feb, 2021 4.35 1.40 7.77
Singapore 337.5 -6.00 0.70 Feb, 2021 14.98 1.73 1.34
United States 20,807.3 -4.27 1.70 Feb, 2021 -2.12 1.72 1.00
Denmark 339.6 -4.50 0.60 Feb, 2021 6.37 0.34 6.30
Netherlands 886.3 -5.40 1.80 Feb, 2021 7.56 -0.28 0.85
Australia 1,334.7 -4.16 0.90 Dec, 2020 1.85 1.77 1.31
Switzerland 707.9 -5.30 -0.20 Mar, 2021 8.48 -0.34 0.94
Britain 2,638.3 -9.76 0.40 Feb, 2021 -2.05 0.80 0.72
Bangladesh data: DP size and real GDP are sourced from Bangladesh Bureau of Statistics as per 2019-20 data. Calculation Method of CA Balance (%of GDP): CA balance
of FY19-20 / GDP of FY19-20. Interest rate (%) 10 years TB as per March, 2021, Inflation as per February, 2021 and Currency Unit (per USD) as per 5th April, 2021 are
sourced from Bangladesh Bank .
Nominal GDP: Data of all countries apart from Bangladesh is sourced from IMF estimates of 2020 data (October, 2020 Outlook).
Real GDP Growth and Current Account Balance: Data of all countries apart from Bangladesh is sourced from IMF estimates of October, 2020 data (World Economic
Outlook, October 2020).
Inflation: Data of all countries apart from Bangladesh is sourced from tradingeconomics.com as per 5th April, 2021.
Interest rates 10 years TB and Currency Unit: Data of all countries apart from Bangladesh is sourced from Investing.com as per 5th April, 2021.
6 of 35
BANKING
DATA CORNER
Prepared by IDLCSL Research Team
Foreign Exchange Reserve (In Billion USD) Foreign Exchange Reserve YoY Growth
43.4
34.3%33.4%
35.9 32.3%
33.5 30.1%31.5%
32.9 32.7
30.2 25.8%
23.5%
18.5%
15.6%
9.6%
6.0%
1.8% 1.9% 2.5%
February
March
April
May
June
July
August
September
October
November
December
January
February
March
FY16 FY17 FY18 FY19 FY20 FY21 (Mar) 2020 2021
MFS Total Transaction Volume 2020 - 2021 MFS No. of Total Transaction YoY Growth 2020-2021
(BDT Billion and YoY Growth)
630 573 39.4%
566 551 36.5%
448 533 536 31.7%
39% 28.3% 32.1%
476 491 65%
68% 28.6%
398 414 27.7%
41% 41%
13% 41% 39% 33% 21.8%
15%
290
17% 23.7%
22.1%
12.8%
-17%
2.9%
Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21
Transaction Volume (Billion BDT) YoY Growth Mar -20 Apr -20 May-20 Jun -20 Jul -20 Aug -20 Sep -20 Oct -20 Nov -20 Dec -20 Jan -21 Feb -21
Total Amount of Internet Banking Transaction Total Amount of Card Transaction
(BDT Billion and YoY Growth) (BDT Billion and YoY Growth)
85
80 81 25% 207 208
74 46% 197
70 15% 16%
50% 14% 191
66 23% 22%
63 63 29%
52% 41% 137 182
55 150
68 33% 167
20% 127
47 31%
166 - 8%
90 -2%
16% 12%
-
-
-30%
-8% 39%
-20%
Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Mar-19 Apr-19 May-19 Jun-19 Jul -19 Aug-19 Sep -19 Oct-19 Nov-19 Dec-19 Jan-20
Amount in BDT bn YoY Growth Amount in BDT bn YoY Growth
Source: Bangladesh Bank
7 of 35
BANGLADESH STARTUP ECOSYSTEM:
THE UNTAPPED DIGITAL GOLDMINE OF ASIA
RESEARCH IN FOCUS
The startup ecosystem in Bangladesh, started its journey in the early 2010s, has gone through a remarkable
transformation and is finally coming of age. The ecosystem crystalized around Dhaka and Chattogram on the back
of sectors such as IT, e-commerce and digital marketing among others. The next wave, fueled by ride-sharing, Tech
and logistics industry, has taken the ecosystem even further.
Bangladesh’s startup ecosystem has had a late start compared to its regional peers. However, the exemplary
growth was possible due to the successful implementation of a number of countrywide incubators and accelerators
programs. The global and local incubators and accelerators have been assisting entrepreneurs in aspects ranging
from scaling up their ideas to raising funds and becoming sustainable in the long run.
The Bangladesh Entrepreneurship Ecosystem is at an inflection point with an excess of USD 200 million in
international investments from big-name corporate investors and venture capitals, investing in industries like
FinTech, Logistics, and Mobility over the last four years. The emergence of active Angel Investment Networks,
Impact Investing, host of local and international operating accelerators/ incubators propelled 1,000+ active
Startups, generating 1.5 million+ employment – embracing products and services of Startups as a part of the
country’s everyday life. Additionally, B-SEC (Bangladesh Securities and Exchange Commission) has also approved
small-cap stock exchange guidelines, which is a big step towards providing investors with Startup exits.
Bangladesh Startup Ecosystem:
A glance of growth in numbers
Fintech Dhaka
1,000+ 200+ Ride-Sharing Chattogram
Sylhet
Logistics
Active Startups New Startups Major Active Cities
in Bangladesh born every year Popular Growth in the Startup
Sector In 2019 Ecosystem
USD 200 mn+
USD 15 mn+
40% USD 11.5 mn
International Local Investment Startup Bangladesh
Startup Investment
VC Fund Brought USD 6 Million Fund Established
Raised in 2019
in the last decade in 2019 in 2020
USD 80 mn+
200+ 20+ 1.5 mn+
Alternative
Active Angels Accelerators and Total Employment
Investment Fund
Boosted Incubators Active Created by the
Registered
by Angel Networks in the Country Startup Ecosystem
in Bangladesh
Source: Bangladesh Securities and Exchange Commission, Bangladesh Startup Survival Guide Group, LightCastle Partners
8 of 35BOOSTERS TO THE STARTUP ACTIVITY
MFS is growing steadily at a 20% CAGR E-Commerce market is expected to
over the last 5 years grow to USD 3 Billion by 2023
Every one out of two persons 2,000 e-commerce sites and 50,000
(85 Million) has a MFS account in Facebook-based outlets which
Bangladesh delivers around 30,000 products
5.3 Million people conducts 7.6 everyday
Million transactions of USD 151 80% of online sales are concentrated
Million+ everyday in Dhaka, Chattogram and Gazipur
7 Million new MFS accounts Bangladesh e-commerce market
registered during pandemic surge stands at USD 1.6 Billion, ranking
(Mar-May’20) 46th in the global ranking
ICT sector has grown by 40% annually Government boosting Startup activity
since 2010 through ICT wing
Over 1,500+ IT companies thrive in Government initiated its own public
the country capturing a significant startup support wing, Startup
share in the international markets Bangladesh with 100 crore BDT
worldwide is expected to produce 1% (USD 11.5Million) fund to catalyze
of the country’s total GDP in the next investments
five years Multiple competitions conducted
Bangladesh is the second largest to boost student entrepreneurship
supplier of online labor with over —100+ startups received cumulative
650,000 registered freelancers seed fund over USD 1.5Million+
generating USD 100 Million+ National ICT Budget for fiscal year
annually 2020-21 stands at USD 0.53 Billion
MFS is Growing Steadily at a 20% CAGR
51% 51.1
47%
45.1
8 th
5 th
38.8
30.1 29%
Largest Most Densely 20.5
16%
13%
Population Populated
in the World in the World
2015 2016 2017 2018 2019
Transaction USD Billion Annual Growth
Source: Bangladesh Bank, World Bank, E-CAB, Statista, UNCTAD, BASIS,
ICT Ministry and LightCastle partners
28
~62% Years
Population
Median Age ABOUT THE RESEARCH
under the
Age of 35 A Country Bangladesh Startup Ecosystem: The Untapped
of Youth Digital Goldmine of Asia is a Light Castle Partners
report published on September, 2020.
9 of 35FOUR TIMES INVESTMENT GROWTH OVER THE LAST DECADE
Alongside steady economic growth, the investment to GDP ratio of Bangladesh has grown to 32% (USD 96 Billion)
in FY 2018-19 from 26% (USD 26 Billion) in 2009-10. Despite the excellent progress, the country’s Foreign
Direct Investment (FDI) in CY 2019 stood at a mere 3% (USD 2.87 Billion) of the country’s total investment. With
policymakers devising policies to attract FDIs, investments are expected to increase in the new decade.
Investment as % of Nominal Annual GDP of Bangladesh
32%
31% 31%
29% 30%
29% 302
27% 28% 28%
26% 26% 274
250
221
195
172
150
128 133
115
102
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
GDP USD Billion Investment as % of GDP
Source: Bangladesh Bank, World Bank and LightCastle Partners
Homegrown Startups
have Raised USD 200 Million of Foreign Investment over the Last Decade
USD 80 mn+ USD 7 mn+ USD 3 mn+ USD 2 mn+ USD 2.8 mn+
Bkash SureCash Shop Up CloudWell SOLshare
fintech from fintech from fintech from fintech from cleantech from
Money in Motion, BRAC Osiris Group Sequoia Capital India, Aavishkar Venture IIX Growth Fund
Bank, Gates Foundation Omidyar Network & Capital
& Ant Financial Lonsdale
USD 9 mn+ USD 5.5 mn+ USD 0.9 mn+ USD 15 mn+ USD 12.8 mn+
Zero Gravity Chaldal Gaze Shohoz Pathao
(Sindabad & Kiksha) E-commerce from deeptech from logistics from Logistics from
E-commerce from IFC, IDLC, Mir Group, Anchorless Bangladesh Linear Venture, Golden GO-JEK, Osiris Group
Y Combinator Gate Venture Openspace Ventures, and
Aavishkar VC & Frontier
Battery Road Digital Holdings
Fund
USD 3.8 mn+ USD 6 mn+ USD 1 mn+ USD 2 mn+ USD 1.3 mn+
BDjobs Sheba.xyz Bongo Deligram AjkerDeal
job marketplace from service marketplace from Entertainment from Ecommerce from Ecommerce from
SEEK Epyllion Group, BFP-B Razor Capital SkyCatcher Innotech Corporation
DFID and Local Angel
Investors
Source: Databd.co, Crunchbase and LightCastle Partners
10 of 35RIGHT TIME TO ATTRACT FOREIGN INVESTORS AS THE STARTUP EPICENTER
OF THE WORLD SHIFTS TOWARDS ASIA
Emergence of Asia a startup hotspot Aspiring ecosystem activates in
Asia now has 42% (262 out of 615) of Bangladesh
all the total unicorns Educational institutions are creating
Market valuation of unicorns from focused curriculum for integration
Asia stands at USD 960 Billion of technology, producing 5,000+ IT
professionals annually
Boom in global startup funding 28 High tech parks are launched to
support startups and innovations
2018-19 saw record investment of
total USD 21.5 Billion for mature Ecosystem enablers such as, co-
stage companies working spaces, competitions,
accelerators and incubators have
30% increase in funding in Asia Pacific come up in the last 5 years boosting
countries the last 5 years the ecosystem
Government of Bangladesh focusing on
ease of doing business
GoB is on the mission to improve
‘Doing Business’ ranking from 168 to
top 100
GoB imposing new policies and
pushing special economic zones in
accordance to Bangladesh’s formal
China
graduation to middle income status in
2024
Multiple incentives for foreign
investment:
India Tax exemption for up to 15 years
for foreign investors
No import duties for export
oriented sectors
Retained earnings treated as new
investments;
Strategic Loaction at the Heart of Asia
Foreign ownership companies
can also secure working capital/
Beneficial Location at the crux of Chindia long term financing from local
financial institutions
11 of 35POSITIVE CONFIDENCE INDEX IN 2019-2020
A survey source from 100+ startup founders and investors rated Fintech and Ride-sharing and Logistics as
the most promising sectors.Online-enabled service marketplace platforms has captured the urban market
significantly over the last 5 years. Players like Sheba.xyz, Smanager, Jantrik and Hellotask are formalizing the
unstructured SME market and informal workers boosting financial inclusion.E-Commerce and F-Commerce
sector garners high confidence from investors. Startup players like ShopUp, Chaldal, Evaly, Daraz and Sindabad
Meanwhile, digital marketing showed a drop in confidence, due to market saturation and thinning profit margin
coupled with latest TAX issuance.
Startup Ecosystem Confidence Index Top Sectors Preferred by Investors
Ride-sharing and Logistics 85%
65 62 60 57
50 48 45 45 42
37 35 33 FinTech 83%
27 40
19
HealthTech 67%
-24
EduTech 67%
E-Commerce 50%
Sector - specific Confidence Overall Confidence
Source: LightCastle Startup Confidence Index 2019
PUBLIC, PRIVATE AND DEVELOPMENT INITIATIVES BOOSTING THE STARTUP ECOSYSTEM
TOWARDS “COMING OF AGE”
Ecosystem enablers, Local and global Government initiatives boost
Multiple events initiate the
accelerators and investors bet on the the startup ecosystem to
entrepreneurship spirit
incubators initiate ecosystem come of age
2013 2014 2015 2016 2017 2018 2019 2020
Google Groups Founder’s Institute GP Accelerator Banglalink IT R- Ventures YY Goshti Tiger Bangladesh Angels Biniyog Briddhi
Startup Weekend TiE Dhaka Makerlab Incubator YGAP Cage Startup Dhaka Incubator BYLC Ventures
USD 5mn: USD 1mn: USD 7 mn: USD 2 mn: Idea Project Bangabandhu Tier-4 Data Center BDT 100 Cr. Seed
BD Jobs Priyo.com Surecash loudwell Launched Satellite launched Launched Investment Fund by
USD 1.3 mn: Startup Bangladesh
Startup Innovation Digital USD 2 mn : USD 56 mn: State owned VC
AjkerDeal bKash launched – Startup
Documentary by Extreme World Pathao 28 High-tech Parks
Startup USD 1 mn: USD 15 mn: Bangladesh Limited launched
Direct Fresh Social
Dhaka, Startup Shohoz Launched EkSheba,
Media 2,650 Unions under
USD mn: USD 10 mn:
Expo EkPay, EkShop broadband internet
Bash Startup Pathao Pathao connectivity
Weekend USD 4.2 mn:
Innovation Fair USD 5.5 mn: Sindabad
Chaldal USD 18 mn:
Connecting USD 2 mn: Augmedix
Startups USD 5 mn: Deligram
Zero Gravity USD 1.1 mn:
USD 1.5 mn: SOLshare
Robi-Airtel M&A USD 3.8 mn: ShopUp
Bdjobs USD 0.83 mn:
Student to Startup Gaze
USD 1.7 mn:
Competition USD 0.6 mn:
SOLshare
Accelerating Asia LoopFreight
USD 1.6 mn:
ShopUp USD 0.5 mn:
Jerra - Summit iFarmer
USD 1 mn: Partial M&A
Sheba Call 4 Nation
JTI - Akij M&A COVID Accelerator
Ecosystem Enablers
Government Initiatives EverCare - Apollo
M&A
Notable Investments
Unilever-GSK M&A
Notable Events Janata Jute Mills
Merger & Acquisition M&A
12 of 35MUTUAL FUND:
A GLOBALLY POPULAR
INVESTMENT VEHICLE YET TO
HAVE A STRONG FOOTHOLD IN
BANGLADESH
MD. ITRAT HOSSAIN, CFA
Investment Analyst, Portfolio Management
AND
KAZI UMME SUMAIYA, CFA
Investment Analyst, Portfolio Management
IDLC Asset Management Ltd.
13 of 35COVER STORY
Investment is the prerequisite for wealth accumulation. economy itself. Figure-1 depicts the enormous size
Traditional savings instruments like bank deposits of mutual fund industry in developed countries in
hardly beat inflation and resultantly do not increase the comparison to their economy as of 2019.
real value of wealth. Higher return yielding investment Figure 1: AuM as % of GDP in Developed Countries as of 2019
securities like equities, bonds etc. can increase the
wealth in real terms. However, investment in such risky 132%
securities require extensive knowledge, research and 108%
106%
time, often out of the capacity of individual investors. 96%
89%
Mutual fund has evolved to the investors’ rescue here 81%
70% 68%
by offering professional fund management service with
the benefit of diversification and lower investment
cost. Globally, mutual fund is one of the most preferred
USA
Canada
Netherlands
Switzerland
Sweden
France
UK
Germany
investment tool for investors. Though mutual fund was
first introduced in 1980s in Bangladesh, the industry
growth has been lackluster. It requires structured Source: World Bank, SEBI Handbook of Statistics, IDLC
initiatives for the proliferation of the industry. This
The largest mutual fund industry in the world belongs
article intends to articulate the issues revolving around
to United States of America (USA). USA saw a faster
the development of the industry in Bangladesh. The
discussion would start with a preview of global mutual penetration of mutual funds in 1990’s. Only 5.7% of the
funds industry, followed by a study of the explosive households owned mutual fund in 1980 in USA, which
growth in Indian mutual funds industry, putting dramatically increased to 45.7% by 20004. However, the
the local industry in a historical context and finally penetration level has not changed much since then. As of
beckoning a way forward. 2019, 12.9% of the household financial assets is invested
in mutual funds in USA, which is 20.1% in Canada.5
Global Mutual Fund Industry
Among Asian countries, Malaysia (54.0%), Japan
The basic investment theme of mutual funds is pooling (40.6%), and South Korea (34.6%) have been successful
money from small investors and investing that fund in building a sizeable mutual fund industry compared
across different asset classes, achieving diversification. to their economy. The southern part of the region is
The origin of such investment concept has been traced still lagging behind. However, India (14.2%) in this
back in 1774 in Europe when a Dutch merchant Adriaan regard showed tremendous progress compared to its
Van Ketwitch created an investment trust. The name of regional peers like Pakistan (1.5%), Sri Lanka (1.3%)
Van Ketwich’s fund, “Eendragt Maakt Magt”, translated and Bangladesh (0.5%) (Figure 2).
to “unity creates strength”1. However, the first modern
day mutual fund is said to be created in 1924 through Figure 2: AuM as % of GDP in Asian Countries as of 2019
the arrival of Massachusetts Investors’ Trust in Boston.
The mutual fund industry has gradually developed 54.0%
40.6%
34.6%
since then through the introduction of varieties of 14.2% 13.2%
mutual funds in terms of investment styles and evolved 1.5% 1.5% 1.3% 0.5%
as one of the major investment tools of modern day in
developed world. The global asset under management
(AuM) stood at USD 89.0 tn as of 20192, which is higher
than global equity market capitalization of USD85.0 tn3.
Malaysia
Japan
South Korea
India
China
Pakistan
Philippines
Sri Lanka
Bangladesh
In developed countries the size of the industry in terms
of AuM has sometimes become even larger than the Source: World Bank, SEBI Handbook of Statistics, IDLC
1. Investopedia.com 4. Statista.com
2. Global Asset Management 2020: Protect, Adapt, and Innovate by BCG 5. Data.oecd.org
3. CNBC
14 of 35Development of Mutual Fund Industry in journey in 1963 with monopoly of Unit Trust of India
India, an Exemplary Case (UTI). Now, there are 44 asset management companies
managing an average net asset size of INR 31.0tn (USD
Even if India’s Mutual fund industry is still small as
percentage of its GDP compared to the developed 433.48 bn) as of Dec 2020. It took the industry around
world, the progress the country has made so far in 50 years to accumulate the first INR 10 tn, while the
this industry is commendable. The industry started its next INR 10 tn was amassed within 5 years .
Figure 3: Development of Mutual Fund Industry in India at a Glance
Launch of "Mutual
SEBI MF regulations
Entry of private
Fund Sahi Hai"
Introduction sector entities
Campaign
1996
35.0
30.0
Entry of public
sector entities
25.0
Removal of
entry load
20.0
of SIP
15.0
10.0
5.0
-
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average AuM (INR tn)
Source : AMFI, IDLC
Figure 3 depicts the evolution of mutual fund industry Figure 4: Composition of Household Financial Asset in India
in India marking the major events. The mutual funds 41%
39%
AuM in India grew at a CAGR of 21.0% approximately
during 2003-2020, riding on a number of stimulating
24%
factors like industry reform initiatives, introduction of 21%
18%
innovative products catering to customer needs and 16%
mass awareness campaigns. All these factors led to 10% 9%
6% 6% 7%
increased penetration of mutual funds among Indian 3%
households, expanding the share of mutual fund in
household financial asset to 6.0% in 2018 from 3.0% Mutual Funds Provident
Fund
Cash Insurance Direct Equity Small Savings,
SDs, FDs and
in 2014. During this period, mutual funds grew at a 2014 2018
Bonds
CAGR of 31.0%, highest among the other financial asset Source: BCG
categories held by households (Figure 4). According
to Reserve Bank of India, the share of mutual funds Figure 5: Decomposition of Mutual Fund Accounts according
to Investor Type in India
in household financial asset stood at 7.0% as of March 0.8%
2020. Retail investors account for 90.1% of mutual fund 9.1%
accounts in India with an average ticket-size of INR
69,185 (USD 942.86) per account (Figure 5). Retail
investors are also leading in terms of AuM by holding
53.2% of the total industry asset size as of February 2021.
Equity mutual funds derive 88.0% of their assets from
90.1%
individual investors. On the other hand institutional
investors dominate the liquid and money market
schemes (84.0%), debt oriented schemes (61.0%) and Retail Investor High Net Worth Institutional Investor
ETFs (91.0%). Source: AMFI
6. Unlocking the INR 100 Trillion Opportunity - asset management industry in India by BCG and AMFI
7. Ticket size is computed as assets managed for a scheme category/number of accounts for that category.
8 Association of Mutual Funds in India (AMFI)
15 of 35The factors that contributed to the proliferation of provide program schedule for each fortnight to
mutual funds in India are summarized below: AMFI in advance. AMCs in India has run 72,257
Government incentives: Government of India IAPs across the country in 8 years (Figure 6).
(GOI) has provided tax incentives for investment Figure 6: IAPs conducted in India (May 2010 - May 2017)
in mutual funds for a long-time which attracted
the investors to this industry. Dividend and Capital
gains from investment in equity mutual funds held
for more than one year were fully tax exempted till
2017 in India.
IAPs Cities Participants
Systematic Investment Plan (SIP): SIP is Conducted Covered Covered
believed to be a major driver of increased retail 72,257 485 2.6 mn
participation, which allows investors to start
investment in mutual fund schemes with a ticket Source: AMFI
size of only INR 500.0. As of February 2021, mutual
Mutual Fund Industry of Bangladesh, a
fund SIP accounts stood at 36.3 mn, mobilizing a
Journey of 40 years
total of INR 75.3 bn in that month alone. Total
fund collected through SIP in FY’20 was INR 1.1 The journey of mutual fund industry in Bangladesh
tn, which was INR 439.2 bn in FY’17; indicating a started in 1980 led by state owned Investment
staggering 3 years’ CAGR of 31.6%. Corporation of Bangladesh Limited (ICB). For a long
Product variety: The asset management period of time ICB operated as the only asset manager
companies (AMCs) in India offers varieties of in the country offering both Closed and Open end
mutual funds focusing on different liquidity needs, Mutual Funds. Following the economic liberalization in
return preferences, risk appetite and investment late 80s and 90s private sector participants entered the
objectives of investors e.g. balanced funds, growth industry with a promise of specialized products.
funds, different maturity based bond funds, In order to achieve a perspective of the mutual fund
money market funds, retirement savings funds, industry, we have divided the history of development
infrastructure funds, etc. of the industry in three generations. The first generation
Presence of a structured and active mutual funds are those that came during 1980-1999. The
association: The Association of Mutual Funds in second generation encompasses the time period of 2000-
India (AMFI), the association of all the registered 2014. The third generation funds came in 2015 and later.
AMCs in India was established in 1995 under the These generations are categorized by some common
purview of Securities and Exchange Board of India characteristics which will be discussed as we proceed.
(SEBI). The aim of the association is to develop the
First Generation (1980-1999)
mutual fund industry on professional and ethical
ground with a view to protecting and promoting During 1980 – 1999, a total of 10 mutual funds came
the interests of mutual funds and their unit holders. into operation. 9 of those mutual funds were managed
The association has been vested with appropriate by ICB and only 1 by the then Bangladesh Shilpa Rin
power to strongly regulate the industry of INR Shangstha. First ICB Mutual Fund was the first Closed
31.0tn. No mutual fund agents, distributors and end mutual fund launched in Bangladesh in 1980. On
brokers are allowed to sell or recommend a mutual the other hand, the first Open end mutual fund was ICB
fund without a registration number from AMFI. Unit Fund, launched in 1981.
Robust awareness campaigns: SEBI has
Though the first ICB Mutual Fund was under
mandated that the AMCs need to spend 2.0 basis
subscribed at the time of its floatation, the first
points of their total AUM for Investor Awareness
generation of mutual funds were quite successful in
Program (IAP), half of which (1.0 basis points)
terms of investors’ wealth generation.
will be distributed to AMFI. AMCs have been
conducting IAPs following a uniform structure The First generation mutual funds were mainly
as recommended by AMFI and are required to Closed end and did not offer any specific style to cater
16 of 35individual demand, given the early age of the industry. Although, most of the funds were of general style, 4
Yet, they played a vital role in creating a foundation for Shariah funds and 1 Fixed Income fund were launched
the industry in Bangladesh. during this period.
Second Generation (2000-2014) The second generation of mutual funds got a boost from
the 2009-10 bull-run in capital market. At the peak of
The second generation funds mark an influx of private the market in 2010, 14 mutual funds debuted in a single
asset management companies, starting with Asset year. Momentum in new mutual funds offerings slowed
and Investment Management Services of Bangladesh after the bull-run and number of new offerings declined
Limited (AIMS). AIMs’ first mutual fund AIMS every year up until 2015.
First Guaranteed Mutual Fund (AIMS1STMF) was
the first mutual fund offered by a private sector firm Third Generation (2015-Present)
in Bangladesh, in 2000. The fund was unique also
in another sense that it was the only fund offering From 2015 to onwards, mutual fund industry revived
guaranteed capital protection. with a new vigor. The most defining characteristics of
this generation is the proliferation of Open end funds
The Second Generation funds were mostly Closed ends. and introduction of different style oriented funds.
A total of 42 funds debuted during 2000-2013, 34 of
which were Closed end funds (Table 1). During last 6 years, 54 new funds came in already,
whereas a total of 42 funds came in the entire span of 15
Table 1 : 2nd Generation (2000-2014) Mutual Funds years of Second Generation.
by Type and Style
45 of these funds are Open end, and 32 of the funds
Type Style
have some Style orientation (Table 2).
Mutual Funds General Shariah Fixed Income Total
Open end 7 1 0 8 Chronic undervaluation of Closed end funds were
one of the key reasons for newer AMC’s orientation
Closed end 30 3 1 34
to Open end funds, while tapping new customer class
Total 37 4 1 42
incentivized adoption of various Styles.
Table 2 : 3rd Generation (2015-Present) Mutual Funds by Type and Style
Type Style
Mutual Funds General Shariah Fixed Income Growth Balanced Income Total
Open end 18 10 0 8 5 4 45
Closed end 4 2 0 2 1 0 9
Total 22 12 0 10 6 4 54
Shariah has emerged as the most dominating among the Number of Existing Mutual Funds
styles with 12 new funds offerings, followed by Growth
Overall, there are a total of 101existing mutual funds
funds with 10 new offerings. in Bangladesh, of which 64 are Open ends and 37 are
Closed ends (Table 3).
Table 3 : All Existing Mutual Funds by Type and Style
Type Style
Mutual Funds General Shariah Fixed Income Growth Balanced Income Total
Open end 36 11 0 8 5 4 64
Closed end 29 4 1 2 1 0 37
Total 65 15 1 10 6 4 101
17 of 35Figure 7: AuM (BDT bn) by Open end and Closed end Return Generation
Mutual Funds in Bangladesh as of March 2021
In aggregate,Closed end mutual fund industry has
generated excess return over DSEX, justifying the
benefits of professional fund management services.
61.9% 72.3%
During 2015-2019, Closed end funds in aggregate
generated an excess return of 6.6% over DSEX. During
the bearish market of 2018 and 2019, the funds generated
an excess return of 8.6% and 10.6%, respectively;
representing the industry’s capacity to offer value
Open end Closed end
Source: IDLC
protection in tough times. However, the industry could
not outperform the market during 2020. (Figure 10).
Industry AuM
Figure 10: Excess Return by Aggregate
As of March 2021, there are 29 asset management Closed end Funds over DSEX
companies who are managing a total sum of BDT 10.6%
134.2 bn under 101 mutual fund schemes. ICB Unit
Fund alone has an AuM of BDT 30.3 bn, while other 6.6% 6.6%
Open end funds collectively have AuM of BDT 42.0
bn combined. The Closed end funds have an aggregate
AuM of BDT 61.9 bn (Figure 7). ICB and ICB AMCL 2020
remain the largest asset manager controlling almost 2015-2019 2017-2019 2019
50% of industry AuM.
Figure 8: Total AuM by Asset Managers (BDT bn)
-6.4%
9.1% Source: IDLC
32.2%
3.1%
4.2%
On an average, Open end mutual funds also generated
10.4%
excess return over the market return. During 2018 and
2019, all Open end funds generated an average excess
return of 7.5% and 9.6%, respectively. In 2020, the Open
64.2% end funds beat the market marginally with an average
excess return of 0.4%.
RACE LR Global VIPB
ICB AMCL AIMS Others Mutual Fund Industry in Bangladesh: The
Source: IDLC Way Forward
Figure 9: Mutual Fund Industry of Bangladesh Mutual Funds industry is awaiting a takeoff. There has
4.1%
4.4% 4.3% 4.4% 4.2% 4.4% been a demand for a stable capital market product in
Bangladesh for a long while. Innovative and prudent
strategies from asset managers, their openness to
110 115 139 142 145 112 learning curve and policy support can spark a boom in
the industry.
We identify some key factors that could play a major
role in putting mutual fund industry on a fast track.
2015 2016 2017 2018 2019 2020
1. Favorable Tax Regime: Globally, tax incentives
Mutual Fund Industry AuM (BDT bn) AuM (% of Total Equity Market Cap)
Source: IDLC have always worked as a major tool to push an
industry’s growth. Currently in Bangladesh,
18 of 35income from mutual funds are tax free up to an 4. A Strong and Active Association: The AMC
amount of BDT 25,000 for Open end funds. Full industry needs a vocal and active association of
tax exemption on both capital gain and dividend asset managers. As the industry is still small in
can be used as an incentive tool for the growth comparison to other market participants, the
of mutual fund industry in Bangladesh similar AMCs need to be unified to take the industry to the
to other countries. It becomes more beneficial in new heights. An active association can play a vital
terms of government’s revenue collection if tax is and strong role in creating investors’ awareness
imposed once the industry reaches the maturity and work to complement the policy initiatives
stage. It will not only encourage the investors to taken by Government and regulatory bodies. The
direct their savings towards capital market, but association can actively run common investor
also ensure market stabilization, promoting long awareness program for the overall growth of the
term value oriented investing. industry. An initiative called “Mutual Fund Sahi
2. Product Diversification: With the economic hai” taken by AMFI can be an example here.
development of Bangladesh, the financial fortune
5. Encouraging Collective Growth: For the
of its population is improving. With financial
overall growth of the mutual fund industry, it
development and inclusion, demand for diversified
is essential to build investors’ confidence in it
and specialized financial productsis also growing.
by ensuring transparency in the industry and
In addition to the existing equity market, a fully
making investment hassle-free. AMCs can be
functional debt market is necessary for increasing
evaluated based on a number of criteria e.g. fund
the depth of the capital market. Globally, debt
performance, services provided, contribution
market is much bigger than the equity market and
to raising investment awareness, transparent
also is the major financing source of development
disclosure etc. and can be assigned a rating
projects of government. With a structured debt
accordingly. AMCs management fees can be
market in place, products like bond funds can be
tagged with the rating so that AMCs with best
a major tool for channeling individual savings.
In India, 48.7% of the total AuM of mutual fund rating can be rewarded for their contribution to
industry comes from debt funds. Appropriate the overall industry growth. This will encourage
policy support is needed for the development healthy competition in the industry promoting
of debt market and introduction of diversified quality growth as well as help the investors to take
investment products. more informed investment decision.
3. Popularizing Systematic Investment Plan A vibrant capital market is a precondition for a thriving
(SIP): Systematic Investment Plan is a way of economy. Through increased penetration of mutual
investing in a mutual fund scheme where the funds individual savings can be channeled to the
investor can invest a small sum of money on capital market under professional supervision. It will
monthly basis for a fixed time period. As investors not only help the investors to reap the benefits of long
can start investing with a very small amount, it term investment in capital market, but also ensure the
helps build a habit of investment from an early age quality of investment directed towards the market.
and enjoy the benefit of compounding. It also helps By addressing the factors mentioned above with
defy market volatility through taka cost averaging appropriate initiatives, greater penetration of mutual
benefit. SIP AuM accounts for 12.8% of the total funds can be ensured with mutual funds grabbing
AuM of India9. Couple of AMCs are already
a sizeable share in the households’ financial assets
offering SIP in Bangladesh. Popularizing SIP with
composition of Bangladesh.
thorough communication on its benefits will help
attract more people to invest in mutual funds.
9. As indices scale new highs, SIP investments are on a roll- The Economics Times
19 of 35EXPERT OPINION
Mr. Shahidul Islam, CFA
CEO, VIPB Asset Management Company Limited
Director and Ex-president of CFA Society Bangladesh
Interviewed By
Kazi Umme Sumaiya, CFA on behalf of MBR Team
MBR: Globally mutual fund is a very popular industry is, unfortunately, very small in Bangladesh.
investment tool. Why do you think it failed to Total assets of all the mutual funds in the country
attract investors in Bangladesh? is equivalent to about 3.5% of the country’s equity-
market capitalization. There might be few reasons why
Mr. Shahidul Islam, CFA: Mutual funds are collective
mutual funds in Bangladesh failed to attract investors.
investment vehicles that issue securities representing
Firstly, I think, fund managers failed to meet investors’
shared ownership in the asset the vehicles hold. As
expectations in terms of returns, compliance of
mutual funds are managed by professional fund
securities laws and professionalism. Secondly, I think,
managers, they contribute to efficiency and stability there is a lack of understanding among investors about
of capital markets all over the world. Mutual funds mutual funds. Investors’ lack of understanding may
are suitable investment alternatives for retail investors partly explain the reason why closed-end mutual funds
who are interested to take exposures in capital market in Bangladesh sometimes trade at deep discounts or
instruments such as stocks and bonds but are unable high premiums to their net asset values (NAVs).The
or unwilling to do research price of a unit of a listed
on the companies that closed-end fund in the
issue those instruments. secondary market should be
Such investors can invest in equal to or close to its NAV.
mutual funds and benefit Though investors’ lack of
from well-researched trust in fund managers or
investment decisions of professional fund managers. the NAV reported by them may be one of the reasons
Also, generally, an equity mutual fund is less risky why many closed-end funds have been trading at very
than an individual stock or a fixed-income mutual high discounts for long a period of time, investors’
fund is less risky than an individual bond because ignorance or speculative tendency is the only reason
the underlying assets of mutual funds are well- why mutual funds trade at high premium to their
diversified and professional fund managers manage NAVs. In last 12-14 years, we have noticed that some
the investment risks of the assets. closed-end fund shave traded at a premium as high as
600% to the NAVs.
For these reasons, in some financial markets, the
total assets under mutual funds and other collective MBR: Very few fund managers have a decent
investment vehicles such as exchange-traded funds performance record over 3- or 5-years’ horizon.
(ETFs) are more than 50% of the stock market Why do you think majority of the mutual funds
capitalization of those markets. The mutual fund are failing to generate expected return?
20 of 35Mr. Shahidul Islam, CFA: Stock-market returns MBR: What factors should investors consider
in Bangladesh have been very low or negative in before investing in mutual funds (both open end
Bangladesh in last 10-years or so. In fact, most of the and closed end mutual funds)?
fund managers performed better than the market Mr. Shahidul Islam, CFA: Investors should analyze
during that time frame, if we trust the NAV numbers the track record of the fund managers before
reported by them. But it seems that investors don’t investing in any fund. They should also do research
trust those numbers. Otherwise, why would closed- on the backgrounds and professionalism of the fund
end funds trade at discounts as low as 50% to NAV? managers.
As I mentioned earlier, a mutual fund unit should
In case of open-ended mutual funds,investors can
trade at a price that is equal to or close to its NAV. That
buy fund units from the fund manager only at a price
is generally the case in most other markets because a which is equal to or close to the latest NAV of the
mutual fund represents a portfolio of securities and fund. So, price is not an important deciding factor
its price should not be significantly more than or less in case of investing in an open-ended fund. In case
than the value of its underlying securities. of closed-end fund, however, the market price in the
secondary market can be significantly more or less
MBR: What factors do you think would help to
than the fund’s NAV. If an investor trusts the fund
improve the performance of mutual funds?
manager and the trustee of a closed-end fund, they
Mr. Shahidul Islam, CFA: The fund managers can comfortably invest in the fund if it trades at a
can improve the performance by practicing strict price that is significantly below its NAV. But, under no
investment disciplines and doing proper research circumstances, they should buy a closed-end fund at a
before investing. Also, fund managers need to control significant premium to NAV.
the expenses of the funds. Expenses of the funds as A mutual fund is not an operating company that
percentage of fund under management seem to be produces goods and services. It just represents
high in Bangladesh compared to other markets. a portfolio of securities. Its price should not be
significantly more than or less than its NAV. We can
MBR: What steps should be taken to instil the
explain it by using an analogy of a basket of apples and
confidence of investors in the mutual fund
oranges. If, for example, the price of one KG apples is
industry?
Tk. 200 and the price of one KG oranges is Tk. 300,
Mr. Shahidul Islam, CFA: Mutual fund managers the price of a basket containing one KG apples and
and trustees need to strictly abide by the terms and one KG oranges should be Tk. 500, not Tk. 800 or Tk.
conditions as disclosed in the fund documents: the 1,500. However, the value of the basket can be less
prospectus, trust deed and investment management than Tk. 500 if the buyers perceive that the apples and
oranges in the basket are rotten or if they think that
agreement. Investors invest in a fund expecting that
the basket actually contains value-less garbage instead
the fund managers and trustees will follow the terms
of apples and oranges that it is supposed to contain.
and conditions as mentioned in those documents. If
fund managers, trustee and other parties do not abide MBR: Why are open-ended funds more popular
by those terms and conditions, investors will lose than closed-end funds globally? What risks are
confidence in the funds. Also, fund managers need associated with closed end mutual funds?
to ensure transparency of the funds by publishing Mr. Shahidul Islam, CFA: Closed-end mutual funds
their financial statements and portfolio holdings on a are less common in markets outside of Bangladesh.
quarterly basis. That would enhance investors’ trust in Globally, vast majority mutual assets are in open-
NAV numbers the funs publish weekly. ended funds. In Bangladesh, however, due to some
21 of 35legacy issues, closed-end funds have more asset under MBR: In India, Association of Mutual Funds
management than open-ended funds. Things have of India (AMFI) played a vital role in the
started to change in Bangladesh as well: almost all the development of the industry. Is it possible to do
newly-approved funds are open-ended. the same in Bangladesh?
As the managers of open-ended funds are bound to Mr. Shahidul Islam, CFA: AMFI played a vital role
redeem the outstanding units of open-ended funds in promoting mutual funds in India. A mutual fund
at prices which are equal to or close to the reported association can try to do the same in Bangladesh.
NAVs, investors can exit from such funds easily However, before mutual funds are promoted to retail
any time if they don’t trust the fund managers or
investors aggressively, the fund managers, trustees,
the trustees anymore. In case of closed end funds,
custodians, sponsors and regulators need to do their
however, investors can exit from a fund by selling
job properly and bring back investors’ confidence in
the fund units in the secondary market. But, exiting
mutual funds.
from a closed end fund by selling its units in the
secondary market is not easy in Bangladesh. As MBR: All the mutual funds in the industry are
I mentioned earlier, vast majority of closed end equity focused. Do you think there is scope
funds in Bangladesh have been trading at very high to launch other types of mutual funds in
discounts to NAV in last 10 years or so. Bangladesh?
MBR: Currently, there is no way to compare Mr. Shahidul Islam, CFA: Yes, I think there is a scope
the performance of all the mutual funds over to launch other types of mutual funds, especially the
different time horizons. Resultantly, people fixed income mutual funds, in Bangladesh and some
can’t take proper decision when investing in a AMCs are already in the process of launching such
mutual fund. How do you think this problem can funds. However, we need to have a vibrant secondary
be addressed? bond market to ensure liquidity of fixed income funds.
Mr. Shahidul Islam, CFA: It would be fantastic if BSEC has taken some initiatives recently to create a
reputed international organizations, e.g., Morning vibrant secondary market for fixed income securities.
star, that measure performance of mutual funds Hopefully, we will have some fixed income mutual
operated in Bangladesh. Unfortunately, the mutual funds in Bangladesh soon.
industry and the investing population are still too
MBR: How do you think regulators and policy
small in Bangladesh for them to make any financial
makers can play a role in the growth of the
sense to start an operation in the country. Until
industry?
that happens, investors need to do their own due
diligence on the performance and professionalism Mr. Shahidul Islam, CFA: The role of the regulators
of fund managers before investing. Perhaps is very critical. Like all other segments of financial
Bangladesh Securities and Exchange Commission markets, a mutual industry can gain investors’
(BSEC) can start licensing registered investment confidence and thrive only if there is a rule of law in
advisors who could advise investors on performance the industry. Regulators play a critical role in ensuring
and risk aspects of mutual funds. the rule of law.
22 of 35NEW IDEA!
BIMABD.COM
Alvi Nizam Arnab Paul
Co-founder, CEO Co-founder, COO
Arif Hossain Shibu Debnath
Co-founder, CCO Co-founder, CTO
MBR: How did the idea of bimabd.com come we still had good reviews from the deliveries made
into being? What motivated you to start and have seen multiple referrals when they get
bimabd.com? decent services.
Bimabd.com: Bangladesh is the most underinsured The business soon hit off with good traction until
country in the South East Asian region as per a the first wave of covid 19 took place and during
report of Lloyds,published in 2018. that time the business froze for around a month.
It was when we constantly communicated with
Our initial objective was the development of this
insurance companies and foreign reinsurers to
eco-system. Thus, we started to look for solutions
develop a solution. In April 2020, we introduced
and while discussing with clients, colleagues and
rider’s accidental health insurance for Foodpanda
industry experts we realized that a platform where
with Covid-19 coverage, which
people can avail multiple
was later provided to multiple
insurance products with
companies for their employees.
minimal effort and get claims
for their solutions faster can be There was a steep rise of orders in
one solution for such a large retail section when we reopened
scale problem and that is how the idea of BimaBD. with around 25% growth on average every month
com was generated. for the next 2 quarters. We were then providing the
motor act liability insurance which has been closed
MBR: How was the response of people in the
since December 2020 (Bangladesh currently being
initial stage? How pandemic situation has
one of the few countries in the world without an Act
affected your business?
Liability protection). Thus, we increased multiple
Bimabd.com: As the insurance industry of our product lines for people to manage their insurance
country already has a stigma of unfortunate in one place, this diversified the risks and allowed a
sufferings, people were a bit skeptic at first. However, better understanding of the market demand.
23 of 35Since then we have introduced multiple products through multiple channels. Although it is a very
through 8 insurance companies. The pandemic emerging stage and we are working for it to be more
hasn’t been the easiest to cope up with but it also robust in the coming days.
enabled a lot of people to get insurance online.
For corporate, currently we have 6 innovative
MBR: In an age of technological advancement
products rolled out through multiple corporate
and increasing internet accessibility, how
partners. These are designed along with insurance
are you making use of this advantage for the
companies and are aiming to set a standard of
profitability of your business?
providing the fastest claim settlement. Moreover,
Bimabd.com: We strive to develop the easiest and we are also focusing on providing support for
fastest user journey to acquire insurance products innovative product solutions to mitigate specific
as in Bangladesh most people are yet to adopt
risks.
technology. The good thing is the majority of
the population is still young and can adopt these Apart from digitally enabling insurance, we are
services easily, which should create a good market providing insurance companies a platform to
share going forward. provide customers service with ease; even amidst
Digitizing insurance services also cuts down human the pandemic.
processing errors, processing time and significantly
MBR: Could you please give us an overview
reduce multiple risks of the consumer.
of bimabd.com in terms of services you offer,
The current landscape has enabled us to introduce number of clients you have and the size of your
many of our corporate products providing through business etc.?
ticketing platforms. Such as helmet brands, OTA,
logistics and much more. All of these are digitally Bimabd.com: Currently, we operate an online
enabled through tracking, claims assistance, retail insurance marketplace which offers multiple
enrollment, reporting and management among retail products including: Motor, Travel, Health,
other facilities. Accidental and Life insurance. We also provide
MBR: What are the strategic priorities of corporate solutions, digitally enabled services and
bimabd.com at the moment? How do you hope new age products with express claims assistance.
to scale up the business?
Till now we have provided more than 250,000 micro
Bimabd.com: In case of retail market, we are insurances and retail policies. Moreover, we have
reaching out to customers and trying to establish been working with 25+ B2B partners.
bimabd.com as their go-to insurance solutions
provider where insurance is easy, fast and secure. MBR: What is the core competitive advantage
of Bimabd.com? Why will the customers
We are continuously taking the feedbacks of
choose bimabd.com instead of other insurance
customers with on-field and online surveys to
companies?
provide solutions which a specific segment of
population might need. The goal is to create a Bimabd.com: Easy, fast and secure solutions. We
convenient solution for both insurance companies, are providing a variety of choices that one insurance
corporates and consumers.
company simply cannot provide. The user journey
We are working with a data driven capacity building till now is the easiest in bimabd.com for customers
as our number of retail customers are growing and insurance underwriters in Bangladesh.
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