Offshore banking in Bangladesh has evolved significantly since 1985, with loans totalling nearly $7 billion. However, regulatory support remains crucial for sustaining this growth, according to Shams Abdullah Muhaimin, deputy managing director of Prime Bank.
In an interview with 抖阴精品, Shams Abdullah emphasised that the overall economic health will be pivotal in maintaining a stable exchange rate and ensuring steady demand for offshore financial services from businesses.
The sector鈥檚 development began almost 38 years ago when Bangladesh Bank permitted the establishment of offshore banking units, marking the start of integrating Bangladesh鈥檚 financial sector with the global market.
Initially aimed at supporting businesses in export processing zones, offshore banking in Bangladesh has expanded its scope significantly.
Shams Abdullah, who oversees banking transactions, capital market debt, and financial institutions, noted that the Offshore Banking Act 2024 represents a positive step towards enhancing foreign currency reserves and attracting international investment.
The Act provides the clarity and stability needed to appeal to foreign investors seeking a secure, well-regulated environment.
Positive features of the Act include the diversification of funding sources for offshore banking units, tax exemptions for deposits from the diaspora, and flexibility in fund withdrawals and local currency transfers. However, challenges remain, particularly in supporting the country鈥檚 imports, foreign currency management, and exports.
Shams Abdullah highlighted the need for offshore banking units to create a common marketplace to boost remittance flows from non-resident Bangladeshis.
He also stressed that economic instability and fluctuating exchange rates could undermine investor confidence, underscoring the importance of strong corporate governance and transparency in maintaining stability.
The banker also emphasised the importance of improving creditworthiness by enhancing financial performance, effective risk management, and engaging with credit rating agencies to maintain stable credit ratings.
To attract clients, banks should offer competitive, global-standard services and invest in technology and innovation. Strong governance, transparency, stakeholder engagement, and investment in modern banking technologies are also crucial.
Regarding the criteria for local enterprises to qualify for offshore banking unit loans, the banker explained that eligibility is determined based on the Act and Bangladesh Bank circulars.
Enterprises must show a need for foreign currency financing and ideally have foreign currency revenue to repay the loans.
This approach ensures alignment with international trade obligations and reduces over-reliance on foreign currency.
Risks are managed by evaluating borrowers鈥� ability to generate foreign currency income and applying robust credit assessment processes, he said.
To prevent the misuse of offshore funds in speculative activities, the banker noted that offshore banking units would operate within a framework that limits their size relative to domestic deposits.
Regulatory safeguards, outlined in the Act and central bank guidelines, restrict the use of funds for speculative purposes.
Additionally, stringent oversight and compliance measures are in place to maintain overall financial stability and prevent misuse of offshore deposits.
