ROLE OF NON-BANKING FINANCIAL INSTITUTIONS IN ECONOMIC DEVELOPMENT: A CASE STUDY OF IDLC FINANCE PLC IN BANGLADESH

Abstract

The Non-Banking Financial Institution (NBFI) sector represents one of Bangladesh's most dynamic growth industries, with 36 institutions playing an integral role in the Economic Development of Bangladesh. Consequently, rigorous financial performance analysis is paramount for NBFIs navigating this competitive landscape. This summary highlights the key contributions of NBFIs to economic development. Financial Inclusion: NBFIs are instrumental in promoting financial inclusion by providing access to financial services for underserved populations. Microfinance institutions, for instance, enable small-scale entrepreneurs, particularly women, to secure funds for starting or expanding businesses, thereby contributing to poverty alleviation and economic empowerment. Diversification of Financial Services: By offering a variety of financial products, such as investment opportunities, insurance, and credit facilities, NBFIs diversify the financial landscape. This diversification helps mitigate risks associated with reliance on traditional banks, ensuring a more stable financial environment. Mobility of Capital: NBFIs facilitate the efficient allocation of capital within the economy. They channel savings from households and businesses into productive investments, supporting infrastructure development, industrial growth, and technological advancements. Risk Management: Through insurance products and derivatives, NBFIs provide mechanisms for risk management, which is crucial for both individual and corporate entities. This aspect fosters a culture of entrepreneurship, as businesses feel more secure taking risks with their initiatives. Alternative Funding Sources: NBFIs offer alternatives to traditional bank loans, improving access to funding for small and medium enterprises (SMEs). By providing venture capital and private equity, they support innovation and the growth of start-ups, which are essential for job creation and economic dynamism. Economic Stability: A robust NBFI sector contributes to overall economic stability by reducing systemic risk.