Technical report : final evaluation of the Bangladesh financial sector reform project, 338-0078-3-30051 [i.e. 388-0078-3-30051]

While the project's contribution was significant, it has not solved major banking problems; it would take 10 years for the 5-year project to achieve its goals. Perhaps one of the project's most significant contributions has been to make the financial community, the GOB, and donor agencies aware that the banking sector was in much worse condition than previously thought. As the project progressed and the severity of the deficiencies in the banking sector revealed themselves, the project focused its efforts on training personnel from the four Nationalized Commercial Banks (NCBs), primarily by training trainers who introduced state-of-the-art techniques in the field of banking. The benefits of training were widespread, but sustainability is in doubt in two of the NCBs. Overseas training for high level professionals from the central bank, the Bank of Bangladesh (BB), the Ministry of Finance, the NCBs, and training institutes was also important, with the programs of Citibank in New York and the U.S. Federal Reserve System representing the summit of banker training programs. Noteworthy efforts to revitalize the Bangladesh Institute of Bank Management (BIBM) included introducing a Master's in bank management, updating courses, and providing the institution with computers for classroom use, and updating its facilities with air conditioning. To redirect the NCBs, the project's principal focus, the project introduced improved management techniques, providing NCBs with computers and computer software for producing financial reports, and, most importantly, introducing a revised loan ledger, which represented the first step in developing a loan accounting system. The project improved the BB's supervisory capacity by introducing an off-site surveillance system called CAMEL, and upgrading the BB's Credit Information Bureau (CIB). The NCBs, BB, and the Central Bank significantly improved their operations after they were introduced to a dramatically improved Management Information System (MIS). However, the usefulness of the MIS was limited as senior managers were not thoroughly trained in its use. The project helped the NCBs gradually improve their financial performance. Specifically, FSRP TA helped them to improve implicit inter-relationships in terms of monitoring, with the most visible impact on the performance planning statement used by bank management in policy decisions. The effects of the use of the Loan Risk Analysis (LRA) are not yet visible. Unfortunately, none of the interventions focused on monitoring loan recovery, a serious and known problem. The BB received significant assistance, primarily through the institutional development of the Monetary Management Technical Unit (MMTU). This unit produced a monthly report focusing in changes on monetary variables in the economy for meetings of the Monetary Policy Committee, established seminars for the BB staff, and created a data bank of financial and economic statistics, which has been well-received. Training was provided BB staff, including MMTU, although training sustainability is doubtful since many staff members have been transferred to other offices where their training is not utilized. FSRP contributed indirectly to the reform of monetary policy by assisting in the production of regular papers on financial variables and economic conditions for the Monetary Policy Committee. In sum, FSRP TA helped to reform the banking system in Bangladesh. The use of new methods introduced has varied among different institutions, although there is an awareness of these new techniques among a wide range of employees. The TA would have been of more use to senior managers and NCBs bank boards had theses two types of personnel been adequately oriented as to the what the new techniques, equipment, and training programs were intended to do. On the whole, however, as one authority put it: "In the long run, provided the success so far is not allowed to diminish, Bangladesh will benefit greatly from the foundation of skills, systems, and procedures, provided through FSRP TA."