Money Market and Capital Market participation for industrialization in Bangladesh Assignment Made by MD.Ariful Islam Saimon Chy ID:1022114412 Department of finance B.B.A Premier university Chittagong,Bangladesh

1. Premier
University
Department of Finance
B.B.A,PremierUniversity,Chittagong
6/4/2015

2. B.B.A
Money and Capital Market
Assignment on:
Money Market and Capital Market participation for industrialization in
Bangladesh
Submitted to
Assistant Professor: Mrs.Tanbina Tabassum
Department of Finance
Faculty of Business Administration
Premier University, Chittagong.
Group: D
Presenter’s Name :
NO ID NAME
1 1022114412 Md. Ariful Islam Saimon Chowdhury
2 1022114372 Md.ShahadatHossain
3 1021114362 Imteaj Ibna Hossain
4 1022114406 Md.TowkyUddin
5 1022114384 Md.Shazzad Hossain
6 1022114600 Shuvashis Sarkar

3. Contents No. Contents Page No.
1 Introduction 1
2 Objectives 2
3 3.0.Progress and prospects of capital
market participation for industrialization
of Bangladesh:
3.1Role Capital market for industrial
development
3.2History of capital market
3.3Participants of capital market
3.4Structure of capital Market in
Bangladesh
2-4
4 4.0.DhakaStockExchange (DSE)
4.1.Functions of DSE:
4.2.SIZE of DSE
4.3.MARKET CAPITALIZATION
4.5.Growth of Listed Number of
Companies
4.4.Market Capitalization Ratio
4-10
5 5.0.Securities andExchange
Commission
5.1..Role in promoting industrialization
through improvement of capital market
5.2.Functions of SEC
11
6 6.0. Chittagong Stock Exchange
(CSE)
6.1.Objectives of CSE
6.2. Number of industries getting capital from
CSE
12-13
7 7.0.Money market and its Activities in
Bangladesh
7.3.Money Market Instruments:
7.2.Money Market Participants:
7.1.History ofMoney Market in Bangladesh
14-16
8 8.0.Problems and recommendation of
Capital Market 17-20
9 Conclusion
20

4. 1.Introduction
Bangladesh is a developing country. After the liberation war of 1971 Bangladesh has
developed in many sectors; such as Education, sports, science, business etc. But for any
country development mostly depend on how much a country industrialized. As Bangladesh
is developing country industrialization in not easy going. It needs a huge amount of capital to
build the infrastructure and run the business. For that reason Money and Capital Market
emerged in Bangladesh. The area of financial market is vast . Financial institutes of Money
Market The Central Bank of Bangladesh Commercial Banks, Insurance companies,
Institutional Investors, Private Individuals etc.In Bangladesh there are almost 54 commercial
banks who perform the role of money market to provide short term capital to industries. And
the capital Markets are Dhaka Stock Exchange(DSE), and Chittagong Stock
Exchange(CSE).They are providing capital to the industries since 1976. It not only provide
capital to the industries but also attract investors to invest in securities. And the body who
control the capital market is Security And Exchange Commission (SEC).
Whenever we talk about the capital market, most people in our country visualize share
trading at the secondary market. That is why it is a generalized perception that the capital
market does not contribute to economic development in the country. Historically, the
secondary market is considered the barometer to gauge the importance of the capital market.
However, the capital market's main role is to raise capital for industrial development. In
Bangladesh, formation of capital through the market is insignificant compared to bank loans.
Most businesses in Bangladesh depend on bank borrowing and equity financing. The total
fund raised from the market is low compared to bank financing.
In recent years, even though market activity has increased, the contribution of the capital
market in channelling capital for industrial development has been very low. In 2013, 14
companies raised Tk 8.38 billion through the capital market;and loans and advances from
Money market accounted for Tk 388.71 billion.
Capital markets are essentially about matching the needs of investors with those that need
capital for development. Bangladesh has no shortage of both parties a young and a dynamic
population that increasingly wants, and is able to, make provision for lifetime events, to save
for children’s education, for the possibility of ill health and ultimately for old age
and retirement. On the other side of the equation, Bangladesh has a pressing need for
investment resources to bolster its stretched infrastructure resources, to build more power
stations , bridges, ports and gas-pipelines to empower the people in the development of
enterprise and the creation of jobs. Debt markets are an extremely effective mechanism for
matching the long term needs of savers with those of entrepreneurs
Money Market an integral part of the financial market of a country. It provides a medium for
the redistribution of short term loan able funds among financial institutions, which perform
this function by selling deposits of various types, certificate of deposits and discounting of
bills, treasury bills etc. The participants in the money market are: the central bank,
commercial banks, the government, finance companies, contractual saving institutions like
the pension funds, insurance companies, savings and loan associations etc. The instruments
that are generally traded in the money market constitute: treasury bills, short-term central
bank and government bonds, negotiable certificates of deposits, bankers acceptances and
commercial papers like the bills of exchange and promissory notes, mutual funds etc.

5. 2.Objective of the assignment:
 To understand the importance of money and capital market in Bangladesh.
 To find the Relation of money and capital market with Industrialization.
 To know the present situation of capital market and money market.
 To understand the scope of money and capital market.
 What is the role of money and capital market in the growth of economy?
 To know the history of money and capital market.
 To see the activities of capital market.
3.0.Progress and prospects of capital market participation for
industrialization in Bangladesh:
History ofcapital market
Capital market started in USA at Wall Street in 1653. 1t came to Mumbai, the commercial
capital of India around 1890. However, investment in shares boomed in late 1970s. It took
many years to come to the land, now comprising Bangladesh. The origin of stock market in
Bangladesh goes back to April 28, 1954 when a stock exchange was formed under the name
East Pakistan Stock Exchange Association at Narayanganj. Trading started in 1956. It was
renamed East Pakistan Stock Exchange Ltd. Transferred to Dhaka in 1958 and again renamed
Dhaka Stock Exchange Ltd in 1964.Trading remained suspended during the Liberation War
in 1971. The Dhaka Stock Exchange resumed operation in 1976 with nine listed companies
as against 452 today. Capital market in Bangladesh got momentum with the establishment
of Securities and Exchange Commission in1994. A big wing was added to the capital market
with the incorporation of Chittagong Stock Exchange on April 1, 1995. Operation of CSE
started on October 10, 1995.
3.1. Participants in capital Market:
Participants of capital market may be discussed in groups because of their similar activities.
Groups or clusters of the participants are discussed below
 Loan provider: these types of organizations provide loan to capital market.
Others can take the loan from the loan providers such as savings organizations insurance
organizations etc
 Loan takers: A huge number of organizations want to take loan from the
capital market. Among them the following are prominent as govt. organizations, corporate
bodies, on-profit organizations, small business and local authorities.
 Financial intermediaries: Financial intermediaries are media between loan
providers and takers. The financial intermediaries are insurance organizations, pension funds,
commercial Banks, financing companies, saving organizations, dealers, brokers, jobbers,
non-profit organization
 Service organizations: Service organizations help to run capital market
perfectly. these firms, in one hand, help issuers or underwrites to sell their instruments with
high value in other hand help sellers and buyers to transect easily these are mainly service
organization investment banks, brokers, dealers, jobbers, security ,exchange commission ,
Rating service ,Underwriters.
 Regulatory organizations: Regulatory organizations are mainly govt.
Authority that monitors and controls the capital market. It secure both the investors and
corporations. it strongly protects forgery in stock market. Regulatory organization controls

6. the margin also. Central Bank, on behalf of govt. generally controls the financial activities in
a country.
With the above mentioned participant are involved with the capital market among
transactions in capital market are done and regulated
3.2.RoleCapitalmarket for industrial development:
Most people in our country visualize share trading at the secondary market. That is why it is a
generalized perception that the capital market does not contribute to economic development
in the country. Historically, the secondary market is considered the barometer to gauge the
importance of the capital market. However, the capital market's main role is to raise capital
for industrial development. In Bangladesh, formation of capital through the market is
insignificant compared to bank loans. Most businesses in Bangladesh depend on bank
borrowing and equity financing. The total fund raised from the market is low compared to
bank financing. In recent years, even though market activity has increased, the contribution of
the capital market in channelling capital for industrial development has been very low. In
2013, 14 companies raised Tk 8.38 billion through the capital market; loans and advances
from scheduled banks accounted for Tk 388.71 billion. Since 1996, the capital market
attracted investors and people have invested their savings. The secondary market has
developed to some extent. There were times when the market was flooded by new funds and
excess demand from the investors highly overvalued the market. The market tapped new fund
as returns from the capital market were rewarding compared to deposits or returns on savings
certificates or other instruments. However, excess funds over a span of time created a bubble.
Unfortunately, we cannot channel the excess fund to industrial development through a large
number of IPOs. As a result, the market crashed and most people lost their hard earned
money. With too much money chasing a limited number of stocks, the market rose with no
justification. That is why the market price earnings ratio (P/E) was historically very high at
the DSE. Turnover velocity at DSE dropped to 36.07 percent in November 2013. However,
liquidity in the market is still good and we should utilize our vibrant secondary market to
float more IPOs. There are many reasons behind slow IPO floatation; one reason is pricing.
Entrepreneurs most often think they are not getting proper prices of their stocks, even though
they are getting a 10 percent tax advantage. They overleveraged their balance sheets by
taking bank loans. Another reason for slow IPO market growth is the time needed to float an
IPO. Most entrepreneurs think that raising funds through an IPO is a cumbersome and time
consuming process. Regulators, on the other hand, are often reluctant to make quick
approvals on IPOs, considering a negative impact on the secondary market and the demand
side of the primary market. Presently, even though IPOs get oversubscribed, the capacity to
absorb large IPOs on a frequent basis is not there. So regulators ration IPO approvals. To
improve this situation, the demand side needs to be further increase

7. 3.3.Structure of capitalMarketin Bangladesh:
4.0.Dhaka Stock Exchange:
The foundation of Capital market in Bangladesh was Dhaka stock exchange , which was
first named East Pakistan Stock. The Dhaka Stock exchange started its operation in 1971 with
only 9 listed companies. Since then DSE perform a vital role in providing long term capital
for organizations and growth of industrialization and economy. At present the number of
listed company in DSE is 300. In fiscal year 2013-14 companies raised ( )from DSE. The
descriptive statistics of total listed companies in DSE shows that the minimum and maximum
numbers of listed companies of DSE were 9 and 750 respectively with an average mean value of
listed companies was 232 based on the last 41 years information.
4.1.Functions ofDSE:
 Listing of Companies that need capital.
 Providing the screen based automated trading of listed Securities of listed company so that
investor can recognize the organization that can take part in economic development.
 Settlement of trading of securities that is selling the share and providing the capital to the
share issued company.
 Granting approval to the transaction
 Market Administration & Control ( This is a vital function of DSE. It always monitor the
market to correctly execute the role of raising capital, providing income to the investor and
take immediate measure if any default is emerged.)
 Market Surveillance
 Publication of Monthly Review
 Monitoring the activities of listed companies
 Investor’s grievance Cell
 Investors Protection Fund
 Announcement of Price sensitive or other information about listed companies through online.
Capital Market inBangladesh
Security
exchange
commission
(SEC)
OTHERSChittagong
Stock
Exchange
(CSE)
Dhaka Stock
Exchange
(DSE)

8. 4.2.SIZE of DSE
One of the important indicators of the capital market is the number of listed companies. The rationale
of including this measure is that as the number of listed company increases, available securities and
trading volume also increases. In basis of
In FY 1990-91 the number of listed companies of DSE was 149 and At present the listed companies
of DSE stood at 750.
the properties of the companies, the companies are divided into five groups; A, B, G, N and Z. The
properties of these companies are shown in the table below.
Category Properties
A Holding Annual Meetings (AGM) and have declared dividend at the rate 10
percent or more in a calendar year
B Holding Annual Meetings (AGM) and have declared dividend less at the rate 10
percent or more in a calendar year
G Greenfield companies
N All new listed companies except Greenfield companies
Z Have failed to hold the AGM or fail to declare any dividend or which are not in
operation continuously.
4.3.MARKET CAPITALIZATION
The market capitalization refers the sum that derived from the current stock price per share times the
total number of shares outstanding. Although the market capitalization of a company is an indication
of the value of the company, it is only a temporary metric based on the current stock market. Market
capitalization ratio equals the value of listed shares divided by GDP. This ratio are often using as a
measure of stock market size. In terms of economic significance, the assumption behind market
capitalization is that market size is positively correlated with the ability to mobilize capital and
diversify risk on an economy wide basis. So market capitalization to GDP ratio can be used as an
indicator of market development.
4.4.Market Capitalization Ratio
Between FY 1995-96 and FY 2008-09, market capitalization stayed between 4 to 20 percent. In
FY1995-96, the rate of market capitalization was 4.77 percent while in FY 2004-05, it reached at 5.72
percent. After this period, the rate of market capitalization increased at a smooth rate and in FY 2008-
09; the market capitalization ratio reached at 16.29 percent. But after that year,market capitalization
ratio doubled than that of the previous year and reached at 32.79 percent in FY2009-10 and finally in
FY 2010-11, the market capitalization rate became 29.55 percent.
4.5.Growth of Listed Number of Companies
Over the time, the number of listed companies of DSE was following both positive and negative
growth. In FY 1991-92, the numbers of listed companies increased by 2.68 percent while in FY 1994-
95 the number of listed companies decreased by 4.47 percent. In FY 2009-10, the number of listed
companies of DSE decreased from 300 to 273, about 9 percent less than that of the previous fiscal
year. And finally in FY 2011-12, the number of listed companies declined to 268. Figure 8: Growth in
percent of DSE listed companies Source: Dhaka Stock Exchange, 2011

9. Numeric analysis of growth in DSE
Main Board as on January 2015
Total Number of Listed Securities 548
Total Number of Companies 276
Total Number of Mutual Funds 40
Total Number of Debentures 8
Total Number of Treasury Bonds 221
Total Number of Corporate Bonds 3
Total number of Shares/Certificates: (No. in mn)
Total Number of Shares & Mutual Fund
Certificates of All Listed Securities*
49,519
Total Number of Shares
of All Listed Companies
45,202
Total Number of Certificates
of All Listed Mutual Funds
4,304
(No. in ' 000)
Total Number of All Listed Debentures 409
Total Number of All Listed Gov. T-Bonds 5,485
Total Number of All
Listed Corporate Bonds
6,267
Total Issued Capital of : (Figure Tk.in mn) (Figure US$ in mn)
All Listed Securities 1,057,776 13,583.87
All Companies Shares 458,943 5,894
All Mutual Funds 43,044 553
All Debentures 140 2
All Listed Govt. T-Bonds 549,381 7,055
All Listed Corporate Bonds 6,267 80
Total Market Capitalization of: (Figure Tk.in mn) (Figure US$ in mn)
All Listed Securities 3,169,711 40,705
All Listed Companies Shares 2,584,505 33,190
All Listed Mutual Funds 28,848 370
All Debentures 576 7
All Listed Govt. T-Bonds 549,381 7,055
All Listed Corporate Bonds 6,401 82
Conversion Rate: BDT against USD 77.87
* Total No. of Shares/Share Capital / Market Capital includes Bonus /Right of shares

10. Main Board as on December 2014
Total Number of Listed Securities 546
Total Number of Companies 274
Total Number of Mutual Funds 40
Total Number of Debentures 8
Total Number of Treasury Bonds 221
Total Number of Corporate Bonds 3
Total number of Shares/Certificates: (No. in mn)
Total Number of Shares & Mutual Fund
Certificates of All Listed Securities*
49,234
Total Number of Shares of
All Listed Companies
44,917
Total Number of Certificates of
All Listed Mutual Funds
4,304
(No. in ' 000)
Total Number of All Listed Debentures 409
Total Number of All Listed Gov. T-Bonds 5,485
Total Number of All Listed Corporate Bonds 6,267
Total Issued Capital of : (Figure Tk.in mn) (Figure US$ in mn)
All Listed Securities 1,054,926 13,547.28
All Companies Shares 456,094 5,857
All Mutual Funds 43,044 553
All Debentures 140 2
All Listed Govt. T-Bonds 549,381 7,055
All Listed Corporate Bonds 6,267 80
Total Market Capitalization of: (Figure Tk.in mn) (Figure US$ in mn)
All Listed Securities 3,244,406 41,664
All Listed Companies Shares 2,657,773 34,131
All Listed Mutual Funds 30,334 390
All Debentures 576 7
All Listed Govt. T-Bonds 549,381 7,055
All Listed Corporate Bonds 6,342 81
Conversion Rate: BDT against USD 77.87
* Total No. of Shares/Share Capital / Market Capital includes Bonus /Right of shares

11. Sector wise growth in companies in DSE

12. DSE Sectoral Performance - January 2015
Sector
Mrkt Cap. in mn
% of
total
Mrkt
Cap
Turnover Tk. in mn
January December January December
% of
total
Turn-
over
Financial Sector
Banks 413,463.50 413,755.49 15.78 5,360.50 6,683.62 9.62
Financial Institutions 173,985.08 179,603.73 6.64 4,545.47 4,397.73 8.16
Insurance 90,870.91 97,970.58 3.47 1,014.26 1,343.95 1.82
Mutual Funds 28,848.05 30,334.05 1.10 935.48 746.19 1.68
Total 707,167.53 721,663.85 26.99 11,855.71 13,171.49 21.29
Manufacturing
Food & Allied Product 230,501.01 212,777.17 8.80 3,173.34 3,444.80 5.70
Pharmaceuticals
& Chemicals 328,903.24 336,250.53 12.55 5,337.12 9,146.36 9.58
Textile 91,666.45 90,468.97 3.50 8,043.35 6,641.66 14.44
Engineering 106,568.11 114,978.64 4.07 6,773.56 7,397.36 12.16
Ceramic 22,435.29 23,894.12 0.86 613.21 689.10 1.10
Tannery 23,666.83 23,618.76 0.90 311.64 482.35 0.56
Paper & Printing 1,996.13 2,199.09 0.08 358.66 319.67 0.64
Jute 802.87 879.57 0.03 58.18 86.72 0.10
Cement 198,423.73 199,166.36 7.57 2,431.87 2,117.19 4.37
Total 1,004,963.66 1,004,233.20 38.36 27,100.93 30,325.21 48.66
Service & Miscellaneous
Fuel & Power 321,196.81 329,377.13 12.26 7,308.33 7,558.14 13.12
Services & Realestate 19,868.97 22,992.45 0.76 2,398.23 2,548.64 4.31
IT – Sector 5,849.76 5,823.21 0.22 2,345.58 1,648.55 4.21
Telecommunication 461,024.42 506,168.55 17.60 1,779.36 1,861.10 3.19
Travel and Leisure 26,961.84 28,515.00 1.03 579.99 683.35 1.04
Miscellaneous 66,319.81 69,333.65 2.53 2,317.74 2,330.44 4.16
Total 901,221.61 962,210.00 34.40 16,729.23 16,630.23 30.04
Bond
Corporate Bond 6,401.17 6,341.94 0.24 12.61 5.67 0.02
Total 6,401.17 6,341.94 0.24 12.61 5.67 0.02
Grand Total 2,619,753.97 2,694,448.99 100 55,698.48 60,132.60 100

13. DSE Sectoral Performance - December 2014
Sector Market Cap. in mn Turnover Tk. in mn
December November
% of
total
Mkt.
Cap
December November
% of
total
Turn-
over
Financial Sector
Banks 413,755.49 407,436.43 15.36 6,683.62 7,296.44 11.11
Financial Institutions 179,603.73 150,182.43 6.67 4,397.73 4,538.68 7.31
Insurance 97,970.58 95,327.59 3.64 1,343.95 2,371.71 2.23
Mutual Funds 30,334.05 29,253.98 1.13 746.19 888.08 1.24
Total 721,663.85 682,200.44 26.78 13,171.49 15,094.91 21.90
Manufacturing
Food & Allied Product 212,777.17 208,007.10 7.90 3,444.80 5,748.12 5.73
Pharmaceuticals
& Chemicals
336,250.53 330,964.18 12.48 9,146.36 17,658.00 15.21
Textile 90,468.97 83,795.40 3.36 6,641.66 7,205.31 11.05
Engineering 114,978.64 115,252.59 4.27 7,397.36 22,211.42 12.30
Ceramic 23,894.12 22,275.39 0.89 689.10 1,175.71 1.15
Tannery 23,618.76 22,853.55 0.88 482.35 700.06 0.80
Paper & Printing 2,199.09 2,084.84 0.08 319.67 1,893.28 0.53
Jute 879.57 941.59 0.03 86.72 245.22 0.14
Cement 199,166.36 181,515.79 7.39 2,117.19 3,268.16 3.52
Total 1,004,233.20 967,690.43 37.27 30,325.21 60,105.26 50.43
Service & Miscellaneous
Fuel & Power 329,377.13 334,727.10 12.22 7,558.14 23,826.70 12.57
Services & Realestate 22,992.45 20,854.01 0.85 2,548.64 4,732.26 4.24
IT - Sector 5,823.21 5,122.67 0.22 1,648.55 1,602.47 2.74
Telecommunication 506,168.55 448,630.14 18.79 1,861.10 3,188.39 3.09
Travel and Leisure 28,515.00 28,118.05 1.06 683.35 1,937.13 1.14
Miscellaneous 69,333.65 66,224.48 2.57 2,330.44 4,998.18 3.88
Total 962,210.00 903,676.45 35.71 16,630.23 40,285.13 27.66
Bond
Corporate Bond 6,341.94 6,294.17 0.24 5.67 8.76 0.01
Total 6,341.94 6,294.17 0.24 5.67 8.76 0.01
Grand Total 2,694,448.99 2,559,861.49 100 60,132.60 115,494.06 100

14. 5.0.Securities andExchange Commission
To make the capital market more lucrative, secure and formal finance ministry of Bangladesh
introduced The Securities and Exchange Commission (SEC) in 1993. It has the supreme authority of
capital market of Bangladesh. It is responsible for improving capital market by developing facilities
for both investors and companies and ensuring the efficient and effective management of capital
market. SEC virtually controls the capital from households to corporate bodies there by helping
Industrialization and creating employment.
5.1..Role in promoting industrialization through improvement of capital market:
 It secures the investment of investor so they are more and more interested in investment
which is then converted into the capital for industries and organization.
 It ensures a convenient environment for both investor and companies so they can achieve
their interest (income for investor capital for companies).
 It monitors, investigate and control the capital market to create a lucrative situation in capital
market.
 To minimize risk of investment it protects frauds and other misdeeds.
5.2.Functions of SEC
 Regulating the business of stock exchange securities market
 Registering and regulating the business of stock-brokers, sub-brokers, share transfer
agent, bankers and managers to an issue, underwriters, portfolio managers, investment
advisers and other intermediaries in the securities market
 Registering, regulating and monitoring of collective investment schemes including all
forms of mutual funds
 Prohibiting fraudulent and unfair trading practices securities or any securities market
 Promoting investors education and training of all intermediaries of securities market
 Prohibiting insider trading in securities
 Regulating substantial acquisition of shares or stocks and take-over of companies
 Compiling, analyzing and publishing indices on the financial performance of any
issuer securities
 Conducting research and publishing information for the above purpose

15. 6.0.Chittagong Stock Exchange (SEC)
The Chittagong Stock Exchange (CSE) was registered as a public limited company and incorporated
on 1st April 1995.In the backdrop of a strong need to institute a dynamic automated and transparent
stock exchange in the country, 70 reputed business personalities established this bourse in the
commercial capital Chittagong. Only 30 securities were listed on the first day trade when market
capitalization stood at $0.2 billion. The trading operations of the exchange are fully automated from
1998. CSE is a self-regulated non-profit organization. respectively. The total number of securities
listed with the Chittagong Stock Exchange in April 2015 stood at 250. As of April 2015 market
capitalization of all securities stood at Tk.2,34,000 crore.
To enhance the capitalization process it introduced internet based trading system in 2004.And it helps
CSE to capture more investor in a short possible time.
6.1.Objective of CSE:
•Develop a strong platform for entrepreneurs raising capital
•Provide a fully automated trading system with most modern amenities to ensure quick,
easy,accurate transactions and easily accessible to all;
•Undertake any business relating to the Stock Exchange, such as a clearing house, securities
depository center or similar activities;
•Develop a professional service culture through mandatory corporate membership;
•Provide an investment opportunity for small and large investors;
•Attract non-resident Bangladeshis to invest in Bangladesh stock market;
•Collect preserve and disseminate data and information on stock exchange;
•Develop a research cellfor analyzing status of the market and economy
•Increase business turnover
•Modernize trading system
•Ensure effective relationship management
• Achieve high level of confidence & professionalism
• Engage in product and market diversification
• Contribute to capital market policy development
• Ensure exchange related quality services

16. 6.2.Number of industries getting capital from CSE
SL Industry name Number of
company
1 Bank 29
2 Cement 7
3 Ceramic 5
4 Corporate Bond 2
5 Debenture 1
6 Energy 16
7 Engineering and electrical 25
8 Foods And Allied 12
9 General insurance 29
10 ICT 6
11 Leasing And Finance 22
12 Leather and footwear 5
13 Life insurance 12
14 Miscellaneous 12
15 Mutual Fund 41
16 Paper and printing 4
17 Pharma and Chemicals 22
18 Service and property 7
19 Telecommunication 2
20 Textiles and clothing 35

17. 7.0.Money market and its Activities in Bangladesh
7.1.History of Money Market in Bangladesh
The money market in Bangladesh is in its transitional stage. The various constituent parts of
it are in the process of formation, while continuous efforts are being made to develop
appropriate and adequate instruments to be traded in the market. At present, government
treasury bills of varying maturity, Bangladesh Bank Bills and Certificates of Deposits etc in
limited supply are available for trading in the market. However, the short-term credit market
of the banking sector experienced a tremendous growth since liberation. In 1999, a total of
about 6000 branches of the scheduled banks provided short-term credit throughout the
country in the form of cash credit, overdraft and demand loan. The rates of interest are
determined by the individual banks and as such the market is quite competitive. Each bank
maintains its liquidity and supply of fund is arranged throughout the country with the help of
an interconnected network of branches. Bangladesh bank as central bank of the country
exercises its role in this market through the use of instruments such as bank rate, open market
operations and changes in statutory liquidity requirements.
The money market of Bangladesh reached its present phase through a series of changes and
evolution. Initially, after liberation, money market was the major constituent part of the
financial market of the country. Capital market, its other segment was a relatively smaller
part. All financial institutions of the country were nationalized after liberation. The growth
and evolution of money market in the country took place during the period from 1971 to the
early eighties under various sets of interventionist rules and regulations of the government
and as such it could hardly reflect the actual market conditions. However, in this period a vast
financial superstructure with large network of commercial bank branches was established in
the country. Simultaneously, specialized financial institutions under government sector also
emerged with the objective of mobilizing financial resources and channeling them for short,
medium and long-term credit and investments. The market participants had to operate in an
environment of directed lending and loan disbursement goals, and predetermined rates of
interest fixed by the authority. However, rate of interest in the call market was flexible but
due to prevalence of liberal refinance facility at concessional rates from Bangladesh Bank,
the activities of call money market remained insignificant.
In the beginning of the 1980s, money market in Bangladesh entered a new era with the
denationalization of two nationalized banks and establishment of some private banks. With
this development money market assumed the characteristics of a competitive market in the
country. However, the administered interest rate structure and the government's policy of
priority sector lending continued to operate as factors that deterred the development of a
liberalized money market in the country.

18. 7.2.Money Market Participants:
In the perspective of Bangladesh the money market participants are :
 Government treasury department
 Central Bank/Bangladesh bank
 Commercial Bank
 Business
 Investment and Security Firms
 Investment companies
 Finance companies
 Insurance companies
 Pension funds
 Individuals

19. 7.3.Money Market Instruments:
Money market
Securities
Issued by Common
Investor
Common
Maturities
Treasury bills Federal Government Households,
firmsand
financialinstitution
13 weeks,
26weeks. 1 year
Retailcertificates
ofdeposit(CDs
Banks and
savinginstitutions
Households 7 Days to 5
years
Or longer
Negotiable
certificates
ofdeposit
(NCDs)
Large banks andsaving
Institutions
firms 2 weeks to 1
year
Commercial
paper
Bank
holdingcompanies,
financecompanies
andother companies
Firms 1 day to 270
days
Eurodollar
Deposit
Banks locatedoutside
the country
Firms and
government
1 day to 1 year
Banker’s
Acceptances
Banks ( exportingfirm
can sell theacceptance
at adiscount
obtainfunds
Firms 30 days to 270
days
Federal funds Depositoryinstitutions Depository
institution
1day to 7days
Repurchase
Agreement
Firms
andfinancialinstitutions
Firms and
financial
institution
1day to 15 days

20. 8.0.Problems and recommendation of Capital Market
Capital market in Bangladesh is now going through a hard time currently as there are some
upheavals in the market and there exists an upsetting condition in the stock markets. But as
per the past occasions, it is evident that our current capital market has a good ground now for
future developments. We should take this opportunity to boost up the market as well as
contribute to our economy. In addition, our mindset needs to be changed regarding earning
profit from the capital market overnight. Foreign investments also need to be increased to
ensure a sound capital and along with this; the government should make an authentic list of
the companies that has credibility and ac-accountability. If we can develop our capital
market, it will definitely enhance our national economy.
8.1.Problems Involved in Capital market
The unexpected rise and fall in share prices mostly followed from the general confidence of the
investors about political stability, euphoria of investment in shares, prospect of quick capital gains, a
vacuum in respect of institutional presence in the share market, monopolistic dominance of member
brokers, inefficiency of the SEC to cape with the developments, existence to kerb market, absence of
proper application of circuit breaker etc. Delivery Versus Payment mechanism was used as one of the
main vehicles of manipulation. Kerb market gave birth fake and forged share certificates. Although
there are[10] increasing trends in all the indicators, Capital is not free from problems. The problems
of capital market may be summarized as under.
 Price manipulation: It has been observed that the share values of some profitable companies
have been increased fictitiously some times that hampers the smooth operation of market.
 Delays in settlement: Financing procedures and delivery of securities sometimes take an
unusual long time for which the money is blocked for nothing.
 Irregulations in dividends: Some companies do not hold Annul General Meeting (AGM) and
eventually declare dividends that confused the shareholders about the financial positions of
the company.
 Selection of membership: Some members being the directors of listed companies look for
their own interest using the internal information of share market.
 Improper financial statement: Many companies do not focus real position of the company as
preparing financial statements. As a result the Shareholders as well as investors do not have
any idea about position of that company.
 The intrinsic value[13] for the securities traded are sometimes estimated without considering
the current market prices of the securities.
 Lack of skilled manpower in the capital market as well as financial and non-financial
institutions involved in the securities market.
 The lack of proper policy framework that provides incentives and protection to investors.
 The dominance of bigger public sector and borrowing of public sector as well as government
from the institutional sources rater than the market.

21. 8.2.Recommendation:
When more investors are attracted in capital market , firms can gather more fund from the market. So
as to enhance the investment for the growth of industry following suggestion cal be helpful.
Smooth Operation in the Primary Market: There has been an enormous response to IPOs
in Bangladesh in recent years. But, investors still feel uncomfortable in the primary market
for the following reasons: depositing the full amount with applications, delay in holding
lottery, limited number of bankers to the issue and hassle in collecting refunds. Paying 20-25
per cent of the total money during application time and remaining amount within 10 days
after allotment will ease the pressure on investors. Organizing the lottery should ideally be
ensured within three weeks and the whole process should be completed within one month.
Increasing the number of bankers to the issuers including locations of bank branches and
provision of accepting online application will ensure smooth participation of all types of
investors. Moreover, refund amount should not be delayed on the grounds that names are not
properly written in the issuer book or because of the existence of multiple BO accounts in the
same name or because of several applications made by the same investor. In addition, the
allegation that issuers in collaboration with banks delay the refund intentionally in order to
reap undue pecuniary benefits through reinvestment deserves thorough investigation and
immediate remediation.
Margin Loan Ratio: Frequent changes of the margin loan ratio and compelling clients to sell
off shares to adjust loans destabilize the market. The SEC may consider instituting a
permanent policy for the margin loan ratio and let merchant banks lend investors within their
own parameters.
Rumors: Retailers make investment decisions mostly based on rumors rather than company
– specific fundamentals. This makes their investment very risky. The SEC can notify
investors immediately about the securities undergoing large deviations in terms of price and
volume with sound justifications. Moreover, merchant bankers and brokerage houses can
organize regular awareness programs for investors to help them make rational investment
decisions and to warn them in advance against rumors to mitigate possible stock market over-
reactions/under-reactions. Gradually, investors should be made well-educated about
sophisticated investment tools with instant and simultaneous access to market information for
greater efficiency.
Market Volatility
High price volatility is a matter of serious concern to investors. Any policy decision on
volatility controlling mechanisms must be supported by empirical evidence. No convincing
empirical work has been done to date on the effectiveness of the currently used mechanisms,
trading halts and daily price limits in mitigating market volatility. A comprehensive empirical
research work on the efficacy of currently used mechanisms is thus warranted. Suitability of
other mechanisms including margin regulations, price stabilization funds and securities
transaction taxes merit proper attention of the policy makers.
Fair Value of Share
An important aspect of a well-functioning capital market is the fair valuation of shares.
Currently, this is not the case in either the primary or the secondary equity markets in
Bangladesh. It has already been observed that offer prices of all shares floated in 2008 were
less than average of the trading prices of the first three days by two to eight times. This
implies that issuers do not get fair prices of their shares. For price discovery, in addition to
direct listing rules, a book building system should be introduced quickly. Unnecessary
formalities and transaction costs should also be cut down to improve market efficiency. For
fair prices in the secondary market, local and foreign institutional as well as individual

22. investors need to be enticed. These types of investors would add to market sophistication by
information dissipation.
Incentives for Issuers
Reducing time taken to meet compliances of numerous formalities, lowering cost of initial
public equity offerings, making dividend income from PLC tax-free, eliminating double
taxation, providing tax holiday and granting CIP status to the sponsors of PLC will be helpful
to the equity market’s improvement. Shares with smallest denomination (say with paisa
one/Tk. 1) like US penny stocks may be made available in the equity market. Regarding the
inclusion of foreign issuers and local large industries, regulations should be made compatible
for licensing or registration. After reaching a certain stage, they may be allowed to use the
capital market for direct financing. In addition, monitoring agencies, namely, SEC, DSE,
CSE, CDBL and credit rating agencies need to play an integrated and active role in
simplifying the bureaucratic intricacies and remove the duplication of work in different
agencies. New rules need to be instituted to provide incentives to the existing as well as
prospective issuers.
Advertisement
For a vibrant market with active presence of issuers and investors, the SEC should initiate
awareness, educational and promotional programmed through institutional training and
advertisement in the domestic as well as the foreign print and electronic media.
Foreign Portfolio Investments
Foreign portfolio investments that are nearly absent from the Bangladesh stock market can be
attracted by the creation of a favorable environment. This requires political stability,
developed information infrastructure, selective deregulations, etc. Moreover, image building
activities through seminars, symposium and fairs at home and abroad deserve due
consideration.
Securities and Exchange Commission
The SEC is now highly active in enforcing strict rules and guidelines, trading circuit breakers
and international surveillance standards to ensure fair play. The SEC should protect
investors’ interest and create an enabling environment for issuers. For transparency in
reporting financial results, the SEC may consider an Act similar to US Sarbanes-Oxley Act of
2002. SEC may also ask issuers of de-listed companies to repay investors’ funds at least at
the prevailing market rate of the shares during the time of delisting.
Stock Exchange
The stock exchange should shorten the time span needed for making listing decisions and
improve capacity to deal with rising trade volumes. Also, a SME platform may be created
within the current structure of the stock exchanges with separate rules and regulations for
registration, listing and delisting. Separate trading time for SME may be required as well.
Registrar of Joint Stock Company and Firms (RJSCF)
RJSCF should be prompter in registering issuers with specific deadlines. Issues of side
payment, harassments during registration and delayed clearance by RJSCF call for immediate
resolution.
Government Initiatives
A good government bond market needs to be created to facilitate the corporate bond market
architecture by constructing a benchmark yield curve, allowing a market-based interest rate,
innovating new financial products, and ensuring a speedy payment & settlement system.
Furthermore, efforts are needed to educate prospective issuers, investors and primary dealers.

23. The portrayal of a government securities yield curve based on so-called risk-free interest rate
is essential in order to efficiently price corporate bonds. The government may take necessary
initiatives to issue treasury bonds with a few buckets of maturities extending to at least a 10-
year period. Government initiative is also desirable in creating a strong issuer and investor
base. Government infrastructure projects and state-owned enterprises may be persuaded for
mobilizing direct financing through bond issuance. On the other hand, as institutional
investors are the natural suppliers of funds in the debt market, the government should
encourage them to invest in corporate bonds with good ratings.
Corporate bond Market
An active corporate bond market comprising of private and public placements is essential. A
private placement market may be encouraged at the initial stage to entice issuers so that they
can sell issues quickly with low distribution costs and fewer formalities. However, the
marketability of securities is considered as a drawback of private placements, which needs to
be addressed.
Simultaneously, public placement market should also be there for issuers. They may be
encouraged to place a certain percentage of debt securities in the public placement market
and the remaining in the private placement market. Appropriate fiscal incentives and a
regulatory framework will be helpful in this regard. The introduction of Shelf Registration
Rules may be considered. An Over the Counter (OTC) market that is extensively used for
corporate bond trading should be established as a secondary market.
9.0.Conclusion:
From the above analysis we can see that in Bangladesh capital market is more important then money
market for the industrialization. Capital market is now a major sector for capitalization. Since capital
market emerged in Bangladesh it changes the prospect of organization for capital. It connect the mass
people to the industry so that more and more firm can be financed. Money market is less important for
capitalization but it provides a short term fund which is needed for run the operation of organization.
So we can say that capital market is needed for foundation of organization and money market is
needed for running the organization. So both market have to be controlled and developed for the
industrialization of Bangladesh.

24. 10.0.References:
Websites:
1. www.Capitalmarket.bd.com
2. www.BDstockmarket.com
3. Www.globalfinancial.com
4. www.financial market.com
5. Www.cse@spctnet.com
6. Www. dse@citechco.net
7. www.worldCapitalmarket.com
8. www.stockexchage.com
9. www.icb.bd.com
10. www.sec.com
Newspapers:
.The Daily Star, “present situation of Capital Market in Bangladesh”
4th page, Date of publications: 19.11.2014
. The Daily Jugantor, 05.03.2011
1. Imam, O. Mahood, The Capital Market Development in Bangladesh: problems and
prospects, October 5, 2000.
2. Imam, M. Hasan, Capital Market: An Overview
3. Nazimuddin, AZM, An Overview of Bangladesh Capital Market, 20074.
4. DCCl. Report of the Round Table Discussion on Capital Market - A Vehicle for In-
dustrialization and Privatization, August 10. 1999
5. El-Erian. M.A., "Middle East Financial Markets: Potential for Development and
Internationalization", Middle East Executive Report,June 1994.
6. S.M. Solaiman, “Recent Reforms and the Developmentof the Securities Market in
Bangladesh “, Journal of Asian and African Studies, Vol. 41, No. 3, pp. 195-228, 2006.
7. M. K. Mujeri, and M. H. Rahman, “Financing Long Term Investments in Bangladesh:
Capital Market Development Issues”, Paper provided by esocialsciences.com in its series
Working Papers with number id 2060, 2009.
8. K. A. R. Islam, “The prospects, possibilities and challenges of Bangladesh capital market”,
The Financial Express, Home Page, Dhaka, Thursday, December 20,2007
9.J. Abedin, Bangladesh Share and Capital Market, Antarip Publication, Dhaka, p. 22, 2008.