A modern economy cannot achieve sustained industrialization, innovation and long-term investment by relying solely on banks. It requires a strong, transparent and efficient capital market that mobilizes savings, allocates capital to productive sectors and provides businesses with long-term financing. For Bangladesh, where the banking sector is already burdened by massive distressed assets and weak governance, the need for a vibrant capital market has never been greater. Yet despite its enormous potential, Bangladesh's stock market has remained one of the country's most fragile financial institutions, repeatedly disappointing millions of investors who entered the market hoping to build wealth but instead suffered devastating losses.
The proposed national budget for FY2026-27 has offered renewed hope by introducing important policy initiatives to revitalize the capital market. The emphasis placed on the sector by Finance Minister Amir Khosru Mahmud Chowdhury, who is also the former chaiman and founder of Chittagong Stock Exchange, signals recognition that Bangladesh can no longer depend overwhelmingly on banks to finance economic growth. The budget acknowledges that a diversified financial system requires a strong capital market capable of financing industries, infrastructure, technology, municipal development and emerging enterprises. However, budgets alone cannot restore confidence. The deeper challenge lies in rebuilding trust in a market repeatedly damaged by manipulation, regulatory failures and weak corporate governance.
Bangladesh's capital market has long suffered from excessive volatility that often bears little relationship to the financial performance of listed companies. Share prices have frequently risen or collapsed without any corresponding change in corporate fundamentals, creating an environment where speculation replaces investment. Instead of rewarding sound financial analysis, the market has too often rewarded rumors, syndicates and artificial price movements.
The consequences have been severe. The stock market crashes of 1996 and 2010 remain painful reminders of how manipulation and regulatory weaknesses wiped out the life savings of ordinary citizens. Thousands of middle-class families invested their retirement benefits, provident funds and personal savings expecting long-term returns only to suffer catastrophic losses. This distrust has prevented the capital market from performing its fundamental role. Instead of becoming the principal source of long-term financing for businesses, Bangladesh has remained excessively dependent on bank lending despite the banking sector's unprecedented distressed assets, weak governance and declining public confidence.
The proposed national budget for FY2026-27 has offered renewed hope by
introducing important policy initiatives to revitalize the capital
market. The budget acknowledges that a diversified financial system
requires a strong capital market capable of financing industries,
infrastructure, technology, municipal development and emerging
enterprises.
A properly functioning capital market channels household savings into productive investment, enables companies to raise equity instead of excessive debt, reduces dependence on commercial banks, encourages entrepreneurship and supports infrastructure financing through diversified financial instruments. It also improves corporate governance through greater disclosure requirements and market scrutiny.
The FY2026-27 budget correctly recognizes these realities. The government has proposed expanding the corporate bond market, introducing municipal bonds, operationalizing the country's first commodity exchange, reviewing wider use of Real Estate Investment Trusts (REITs), Exchange Traded Funds (ETFs), hedging instruments and infrastructure funds, simplifying Non-Resident Investor Taka Accounts (NITA), digitizing IPO approvals, shortening settlement cycles from T+2 toward T+1 and eventually T+0, improving disclosure standards and considering specialized tribunals for capital market disputes. If implemented effectively, these initiatives could modernize Bangladesh's financial architecture.
The Bangladesh Securities and Exchange Commission bears the greatest responsibility for restoring confidence. A regulator must not merely formulate regulations but enforce them without fear or favor. Surveillance systems should identify unusual trading patterns in real time. Insider trading, circular trading, false disclosures, coordinated price manipulation and market abuse must be investigated promptly using advanced technological tools and forensic market analysis. Enforcement should be swift, transparent and proportionate so violations carry real consequences.
Equally important is improving the quality of listed companies. The presence of fundamentally weak, poorly governed and financially distressed companies has diluted market quality. Some have failed to maintain governance standards, delayed financial reporting or repeatedly disappointed investors while remaining listed. Listing requirements should prioritize corporate quality rather than merely increasing the number of listed firms. Companies, those consistently violate disclosure obligations or fail to meet minimum governance standards, should face strict sanctions.
Independent external audits must also become more credible. Financial statements are only useful if investors trust them. Auditors, credit rating agencies, evaluators, merchant bankers, issue managers and research analysts should all be held accountable for professional negligence or intentional misconduct. The government's proposal to clearly define the responsibilities and liabilities of these intermediaries is therefore significant.
The stock exchanges themselves must evolve beyond traditional trading functions. Modern exchanges should invest continuously in technology, cyber-security, surveillance, product innovation, investor education etc. Faster settlement systems, improved trading infrastructure and greater operational transparency will enhance investor confidence. The Dhaka and Chittagong stock exchanges should also encourage high-quality companies to enter the market while discouraging speculative trading practices.
Capital market intermediaries also play a critical role in shaping investor confidence. Brokerage houses, merchant banks, portfolio managers and investment advisers should uphold the highest ethical standards and promote long-term investment based on sound financial analysis rather than speculation based short term profits. Professional certification, continuing education and stronger compliance requirements can significantly improve service quality.
The government must also create an environment where fundamentally strong companies view stock market listing as an attractive financing option. Bangladesh still has relatively few large, profitable listed companies. Many successful family-owned businesses prefer private financing while considering public listing burdensome. Simplifying IPO procedures, ensuring predictable regulation and maintaining reasonable tax incentives can encourage greater participation.
Eliminating corruption from capital market operations is perhaps the single most important reform. Corruption distorts price discovery, undermines fair competition and discourages genuine investors. Political influence, preferential treatment, selective enforcement and regulatory capture have weakened investor confidence for years. Every stage of the investment process�"from company listing and IPO approvals to disclosure, surveillance, investigation and enforcement�"must operate under transparent and accountable procedures.
The coming decade presents Bangladesh with ambitious economic aspirations, including higher industrialization, expanded exports, technological upgrading and large-scale infrastructure development. Achieving these objectives will require enormous volumes of long-term investment that commercial banks alone cannot provide. A mature capital market capable of mobilizing domestic and international savings is therefore indispensable.
Ultimately, Bangladesh's capital market should become a trusted national institution that finances innovation, supports entrepreneurship, creates employment and strengthens economic resilience. Restoring such a market requires far more than periodic fiscal incentives. It demands uncompromising regulatory integrity, zero tolerance for corruption, high-quality corporate governance, professional intermediaries, informed investors and unwavering political commitment to transparency.
The FY2026-27 budget has established an encouraging roadmap for reform. Whether Bangladesh finally succeeds in transforming its capital market will depend not on parliamentary announcements but on the determination with which every stakeholder�"the government, regulators, stock exchanges, intermediaries, listed companies and investors�"implements those reforms. Only then can the capital market become the independent, transparent and efficient engine of long-term growth that Bangladesh needs to achieve its next economic milestones.
The writer is Chief Editor at Mohammadi News Agency (MNA) and Editor at Kishore Bangla
