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University of Dhaka
Department of Accounting & Information Systems
Assignment
On
Institutional Shareholders in
Bangladesh
Course Name: Corporate Governance Course Code: 7104
Date of Submission: 11/08/2014
Submitted to:
Dr. Dhiman Kumar Chowdhury
Professor
Department of Accounting & Information Systems
Faculty of Business Studies
University of Dhaka
Submitted by:
Name ID Serial No.
Mir Imrul Hasnat 16004 01
A. B. M. Abdullah 16010 03
Md. Ababil Chowdhury 16013 04
Md. Billal Hossain Shourav 16025 06
Syeda Seemia Mahbub 16026 07
Naima Islam 16063 15
Sahera Khatun 16083 18
Md. Mehedi Hasan 16088 20
MBA 16th
Batch, Section – C
Department of Accounting & Information Systems,
Letter of Transmittal
Department of Accounting & Information Systems
University of Dhaka
August 11, 2014
Dr. Dhiman Kumar Chowdhury
Professor
Dept. of Accounting & Information Systems
University of Dhaka
Subject: Submission of final assignment
Dear Sir,
We are delighted to submit our assignment on ‘Institutional Shareholders in Bangladesh’.
This paper has been prepared according to your authorization. To prepare this paper, we have
gone through many articles, reports, journals, research papers and websites for collecting
necessary information.
We are thankful to you for assigning us for preparing such a paper that will increase our
knowledge in different areas of capital market.
Sincerely Yours,
Syeda Seemia Mahbub
On behalf of the group
Table of Contents
Contents Page Number
Acknowledgement 01
Executive Summary 01
Introduction 02
Literature Review 02
PART 1 Existence of Institutional Investors in the Capital Market of
Bangladesh
05 - 10
1.1 Institutional shareholder: Definition and meaning 05
1.2 Shareholdings by the Institutional shareholders in different
industry sectors of Bangladesh
05
1.3 Shareholdings by the Institutional Shareholders (In Different
Companies)
09
PART 2 Institutional Shareholders in Bangladesh: Forms & Nature 11 - 15
2.1 Investment Corporation of Bangladesh (ICB) 11
2.2 Scheduled Banks 11
2.3 Merchant Banks 12
2.4 Bangladesh Development Bank Limited (BDBL) 12
2.5 Non-bank Financial Institutions (NBFIs) 12
2.6 Insurance Companies 13
2.7 Leasing Companies 14
2.8 Pension Funds and Provident Funds 14
2.9 Postal Saving Schemes and Postal Life Insurance 14
2.10 Co-operative Land Mortgage Banks 15
2.11 Other institutional shareholders 15
Conclusion 16
Bibliography 17
1
Acknowledgement
We are heartily grateful to our instructor Dr. Dhiman Kumar Chowdhury whose encouragement,
guidance and support from the initial to the final level enabled us to complete this paper. We
would also like to extend our thanks to all those writers, researchers, journalists and bloggers
whose works provided us with all the necessary information.
Executive Summary
Shareholders in the capital market are either individual shareholders or institutional shareholders.
Institutional shareholders are mainly different types of business or non-business organizations.
These investors play very important roles in developing and stabilizing the capital market. But
the capital market of Bangladesh is facing a serious shortage of institutional investors.
The institutional shareholders in the capital market are of different categories, for example-
Investment Corporation of Bangladesh, Bangladesh Development Bank Limited, scheduled
banks, merchant banks, insurance companies, leasing companies, non-bank financial institutions,
pension funds, postal saving schemes & postal life insurance, co-operative land mortgage banks,
employee insurance funds and so on.
The companies listed in Dhaka Stock Exchange (DSE) have on an average 16.81% institutional
shareholding in their share capital. Companies with large proportion of institutional shareholding
in the share capital are very few. Moreover, 58 companies have no institutional shareholding in
their share capital.
It has been found that in the capital market of Bangladesh, institutional shareholdings are high in
companies in some industry sectors, for example- mutual funds, ternary, service & real estate,
pharmaceuticals etc. On the other hand, institutional shareholding is very low in companies of
telecommunication, textile, jute, food & allied sectors. Most of the companies of other industry
sectors do not have significant portion of institutional shareholdings in their share capital.
The shortage of institutional shareholders is hampering the overall development of the capital
market of Bangladesh. But there are opportunities of increasing the base of institutional
2
shareholders in the capital market. But the government should take proper steps to attract these
investors to participate in the capital market.
Introduction
Background: In the capital emerging capital markets around the world, the position and
participation of institutional shareholders is very significant. But the situations of the capital
market of Bangladesh are very much lagging behind in this regard. Here, institutional
shareholders are negligible and unwell to expand their investment in the capital market.
Increasing the base of institutional shareholders in the capital market of Bangladesh has become
a burning question. Before we attempt to this increase base, we need to find out the present
position of this shareholders in the capital market. Moreover, we need to clearly identify the
institutional shareholders existing in the capital market.
Objective: The objectives of this paper are to:-
Describe the concept and meaning of institutional shareholder
Find out the presence of institutional shareholders in the capital market of Bangladesh
Identify the institutional shareholdings in the capital structure of the listed companies of
Bangladesh
Describe the existing institutional shareholders in the capital market of Bangladesh etc.
Methodology & limitations: This paper has been prepared based on content analysis.
Information has been collected from different articles, journals, websites, research papers and
annual reports. In some cases, we have performed mathematical calculations through Microsoft
Excel. The main limitation of this study is that information has been collected form secondary
data sources like annual reports, websites, articles, research papers. Moreover, we have
performed this study with our limited knowledge and within a limited time.
Literature Reviews
Afroz, T. (2004) presented some suggestions for increasing the institutional base in the capital
market of Bangladesh. Some of these suggestions are:- (a) Removing regulatory barriers to
enable contractual savings funds (such as, insurance company funds, pension and provident
3
funds etc.) to invest substantial amount of their collections into capital market instruments with
better earning capacity, (b) Enforcing a level playing regulatory measure for public and private
mutual funds, (c) Proper restructuring of ICB and making it more answerable and transparent;
and (d) Reforming current regulatory regime into one where more coordination is guaranteed
among various regulators (for example- SEC, the Bangladesh Bank, the Department of
Insurance, Ministry of Finance, Ministry of Commerce, other concerned ministries etc.) who
directly or indirectly influence capital market mechanism for institutional investment.
Akhter, R. and Ahmed, S. (2013) mentioned, “It is said that stock market is a gambling market.
There is scope of manipulation to earn more profit. In manipulation major contribution is made
by institutional buyers.”
CMDMPM, BSEC (2012) “Institutional investor participation in Bangladesh‟s capital markets
has been limited. We recognize the need to improve the enabling environment through the
adoption of policies that stimulate the expansion of the institutional investor base specifically
with respect to three types of institutional investors: mutual funds, insurance companies, and
pension and provident funds.”
Institutional Investment is negligible in Bangladesh. Institutional investment as percentage of
total market capitalization ranges between 4.53 per cent and 4.88 per cent during 2005-2008.
Institutional investment brings long-term commitment and greater focus on the fundamentals
and, hence, stability in the market. Furthermore, the presence of institutional investor is also
expected to ensure better valuation levels due to their special analytical skills. Bangladesh capital
market missed this source of efficiency gains as institutional investment is very small in both
absolute and percentage terms. (Banerjee et al., 2010)
Malik, M. and Imam, O. M. (2007) have found that in Bangladesh foreign holdings are
increasing in those firms that have good governance. They observe a positive relationship
between institutional ownership and firm performance suggesting that institutional shareholders
have the incentive as well as the power to monitor and control the behavior of firms, and have
played a significant role in corporate governance. The role of large institutions in corporate
governance is particularly important in countries where legal protection of shareholders‟ interest
4
is weak for historical and institutional reasons. This is a situation that exists in many transition
economies.
Moazzem, K. G. (2013) has pointed out that some institutional shareholders, for example,
financial institutions were found to behave like retail investors. They were non-compliant with
laws and performed unauthorized transactions in the secondary market. They have the tendency
to invest for short periods in the market for achieving high capital gains. But institutional
investors like the financial institutions are likely to supply long-term money in the capital
market.
Sayeed, Y. (2004) identified a serious dearth of institutional investors in the capital market of
Bangladesh. In this country, the institutional investor community like investment & merchant
banks, mutual funds, pension & provident funds, life insurers etc. has unfortunately not
developed due to multifarious impediments. The market is essentially retail based and prone to
high risk. The newly licensed merchant banks are yet to make any tangible mark, the government
pension funds are essentially non-funded and non-accounted-for liabilities, provident and
insurance funds restrained under age old qualitative and quantitative restrictions and growth of
private mutual fund retarded under stringent regulatory frame-work and an uneven playing field.
None of these ground realities has been conducive to growth of a healthy and vibrant capital
market.
5
PART 1
Existence of Institutional Investors in the Capital Market of Bangladesh
1.1 Institutional shareholder: Definition and meaning
In the capital market there are two types of shareholders- individual and institutional. General
people who buy/sell their shares in the market are individual shareholders. On the other hand,
many institutions, firms, associations and organizations who buy/sell shares of listed companies
in the capital market for investment purposes are institutional shareholders. Examples of
institutional shareholders are banks, insurance companies, mutual funds and many other financial
institutions. In this paper, we will focus mostly on this type of shareholders.
Generally, these shareholders are large organizations with considerable assets to invest in the
securities of the listed companies. In some capital markets, these institutional shareholders
undertake large volume of transactions. For example, in the New York Stock Exchange, 70% of
the trading is performed on behalf of the institutional shareholders. (Business Dictionary, 2014)
Institutional shareholders are more knowledgeable compared the individual shareholders. So,
they are stronger than the individual shareholders in protecting their own interest. Moreover,
institutional shareholders in many cases have to comply with fewer regulations in share trading
compared to the individual shareholders.
1.2 Shareholdings by the Institutional shareholders in different industry sectors of
Bangladesh
To find out the position of institutional shareholders in the capital market and in different
industry sectors of Bangladesh, we have analyzed the information of 303 listed companies from
19 industry sectors of Dhaka Stock Exchange (DSE). In our analysis we have excluded 3
industry sectors, for example- Treasury Bonds, Corporate Debentures and debentures. The
findings of this analysis are shown in (Table 1.1).
From (Table 1.1), we see that the institutional shareholders constitute a small portion of
shareholding in the capital market. Present shareholding by institutional shareholders in DSE
listed companies is on an average 16.81%. This has been calculated by taking the institutional
6
shareholdings in 303 companies listed in DSE. Again, we can also see that institutional
shareholding exists in 245 companies and in 58 companies this type of shareholding is 0%.
Table 1.1 Institutional Shareholding in DSE
No. Industry Sectors Total
Companies
Total Companies
with Institutional
Shareholdings in
Share Capital
Total Companies
with no Institutional
Shareholdings in
Share Capital
Average Percentage
of Institutional
Shareholdings in the
Overall Industry
01 Banks 30 26 04 14.89%
02 Cement 07 05 02 14.10%
03 Ceramics 05 05 0 17.43%
04 Engineering 25 21 04 16.47%
05 Financial Institutions 23 21 02 15.26%
06 Food & Allied 18 14 04 10.90%
07 Fuel & Power 16 12 04 14.24%
08 Insurance 46 31 15 12.30%
09 IT Sector 06 05 01 15.04%
10 Jute 03 01 02 9.79%
11 Mutual funds 41 29 12 30.53%
12 Pharmaceuticals 26 24 02 18.26%
13 Service & Real Estate 03 03 0 18.62%
14 Ternary 05 04 01 19.44%
15 Paper & Printing 01 01 0 8.51%
16 Telecommunication 02 02 0 9.25%
17 Travel & Leisure 03 02 01 15.44%
18 Textiles 34 30 04 11.67%
19 Miscellaneous 09 09 0 11.68%
Total 303 245 58 16.81% *
Average institutional shareholding in 303 listed companies in DSE *
Source: Website of Dhaka Stock Exchange (DSE)
From the above table, we see that the highest institutional shareholding exists in the Mutual Fund
sector. In this sector, mutual funds have on an average 30.53% institutional shareholding in their
7
share capital. Among the mutual funds, 70.73% funds (29 out of 41) have institutional
shareholding in their share capital. The mutual funds which have high institutional shareholding
in share capital are – NCCBL Mutual Fund-1 (83.81%), LR Global Bangladesh Mutual Fund
One (81.16%), AIBL 1st Islamic Mutual Fund (76.31%), MBL 1st Mutual Fund (69.03%),
Grameen Mutual Fund One (61%), EBL First Mutual Fund (60%) and Trust Bank 1st Mutual
Fund (60%). It is important to note that among the 41 mutual funds Investment Corporation of
Bangladesh (ICB) occupies 8 funds and ICB Asset Management Company Limited which is a
subsidiary of ICB, occupies 11 funds. (DSE, 2013)
From (Table 1.1), we see that the second highest institutional shareholding exists in Tannery
sector. In this sector, companies have on an average 19.44% institutional shareholding in their
share capital. In this industry segment, 80% of the companies (4 out of 5) have institutional
shareholding in their share capital. Among these tannery companies which have high
institutional shareholding are - Apex Footwear Limited (39.81%) and Apex Tannery (33%).
From (Table 1.1), we see that the third highest institutional shareholding exists in Service & Real
Estate sector. In this sector, companies have on an average 18.62% institutional shareholding in
their share capital. The company which has the highest institutional shareholding in this sector is
Samorita Hospital (32.01%).
In the Pharmaceutical sector, companies have on an average 18.26% institutional shareholding
(Table 1.1). In this sector, 92.31% companies (24 out of 26) have institutional holding in their
share capital. Companies with high institutional shareholding in this sector are - Orion Pharma
Ltd. (49.56%), AFC Agro Biotech Ltd. (48.11%), ACI Limited. (37.73%), Wata Chemicals
Limited (36.10%) and Central Pharmaceuticals Limited (29.51%).
According to (Table 1.1), considerable shareholding by the institutional shareholders also exists
in Ceramics sector. Ceramic companies have on an average 17.43% institutional shareholding in
their share capital. All the listed companies in this sector have institutional shareholding and the
highest institutional shareholding is in Fu-Wang Ceramic (29%).
Companies in the Engineering sector have on an average 16.47% institutional holding in their
share capital as per (Table 1.1). Here, 84% companies (21 out of 25) have institutional
shareholding. The top companies according to institutional shareholding are - Aftab Automobiles
8
(47.49%), Anwar Galvanizing (41.38%), National Polymer (40.15%), BSRM Steels Limited
(38.07%) and Appollo Ispat Complex Limited (33.53%).
(Table 1.1) shows that in Travel & Leisure sector, companies have average 15.44% institutional
holding in their share capital. Here, 2 companies out of 3, have institutional shareholding. The
higher institutional shareholding is in Unique Hotel & Resorts Limited (29.14%).
The listed financial institutions have average 15.26% shareholding by the institutional
shareholders (Table 1.1). In this sector, 91.30% companies (21 out of 23) have institutional
shareholding. Here, the companies with high institutional shareholding are- ICB (70.82%),
Uttara Finance (31.95%), Islamic Finance & Investment Ltd. (24.30%) and First Lease Finance
and Investment Ltd. (23.92%).
According to (Table 1.1), institutional shareholders own on an average 15.04% shares in the
companies of IT sector. In this sector, 83.33% companies (5 out of 6) have institutional holding
in their share capital. Among the IT companies, the highest institutional shareholding exists in
Aamra Technologies limited (28%).
From (Table 1.1), we see that institutional shareholders on an average own 14.89% shares in
banks. In banking sector, 86.67% companies (26 out of 30) have institutional shareholding. The
banks with highest institutional shareholding are - AB Bank Limited (54.86%), IFIC Bank
(33.91%), Bank Asia Ltd (29.21%), Pubali Bank (26.90%) and Southeast Bank (23.61%).
In the fuel & power companies average institutional shareholding is 14.24% (Table 1.1). Among
these companies 75% companies (12 out of 16) have institutional holding in share capital. In this
sector, top companies as per institutional shareholding are - Bd. Welding Electrodes (31.68%),
Summit Power Limited (29.01%) and Padma Oil Co. (25.39%).
Institutional shareholders also hold shares in the cement companies. Average shareholding by
these investors in cement companies is 14.10% (Table 1.1). Among these companies, 71.43% (5
out of 7) have institutional shareholdings. In this sector, the company which has the highest
institutional shareholding is Confidence Cement (26.50%).
In the insurance sector, 67.39% companies (31 out 46) have institutional shareholding. Average
institutional shareholding among these companies is 12.30% (Table 1.1). In this sector, top
9
companies according to institutional shareholding are - United Insurance 56.34%, National Life
Insurance (48.54%), Pragati Life Insurance Ltd. (29.75%), Northern General Insurance Company
Ltd. (27.16%), Pragati Insurance (26.83%) and Karnaphuli Insurance (26.55%).
Companies in Textile sector have an average 11.67% institutional shareholding (Table 1.1). In
this sector, 88.24% companies (30 out of 34) have institutional shareholdings. According to
institutional shareholding, top companies in this sector are - Apex Spinning & Knitting Mills
Limited (30.79%), The Dacca Dyeing & Manufacturing Co. Ltd. (23.75%), Generation Next
Fashions Limited (21.59%), Sonargaon Textiles (21.49%) and Mozaffar Hossain Spinning Mills
Ltd. (20.78%).
Among the miscellaneous companies (which are not included in any industry sector), average
shareholding by the institutions is 11.68%. Total 9 companies fall in this category. The highest
institutional shareholding among the miscellaneous companies is in Aramit (36.95%).
Average institutional shareholding is low in the companies of Food & Allied sector. The average
is only 10.90% (Table 1.1). In this sector, 77.78% companies (14 out of 18) have institutional
shareholding in their capital. According to institutional shareholding, top companies in this
sector are - National Tea (46.06%), Olympic Industries (30.31%) and Fu Wang Food (25%).
From (Table 1.1), we see that there are three sectors where companies get very low institutional
shareholding, for example, Paper & Printing, Telecommunication and Jute sectors. In Paper &
Printing sector, there is only one company and institutional shareholding in the share capital of
that company is 8.51%. In the Telecommunication sector, there are only two companies and they
have 9.25% institutional shareholding in their share capital. In the Jute sector there are there
companies but only one has institutional shareholding in its share capital. The only jute company
which has institutional shareholding in its share capital is Jute Spinners (29.36%).
1.3 Shareholdings by the Institutional Shareholders (In Different Companies)
In this section, we will discuss the portion of institutional shareholding in the companies of DSE.
In the previous section, we showed that 245 DSE listed companies out of 303 companies have
institutional shareholdings in their share capital. We have found that most of the companies (145
out of 245) have small portion of institutional shareholding which is less than or equal to 20%.
10
There are 88 companies which have institutional shareholding between 21% and 50%. Most
importantly, only 12 companies have institutional shareholding more than 51%. The detail of the
analysis of this section is presented in following (Table 1.2):
Table 1.2 Institutional Shareholding in the Share
Capital of the DSE Listed Companies
Percentage of Institutional
Shareholding in Share
Capital
Total Number of
Companies
10% or less 63
11% - 20% 82
21% - 30% 57
31% - 40% 18
41% - 50% 13
51% - 60% 06
61% - 70% 02
71% - 80% 02
81% - 90% 02
91% or more 00
Total Companies 245
Source: Website of Dhaka Stock Exchange (DSE)
At the end of this part, it can easily be said that the participation of institutional shareholders in
the capital market of Bangladesh is not in a satisfactory level. Although in some sectors
institutional shareholdings are very high, most of the industry sectors face a serious dearth of
institutional shareholding/investment. From the company point of view the situation is even
more disappointing. A considerable number of companies do not have institutional shareholding
at all in their share capital. Again, most of those companies which have institutional
shareholdings in their share capital have a lower proportion of such shareholding. This situation
is not good for increasing capital market efficiency and growth, ensuring governance in the
corporate world and enhancing the confidence of potential investors (both individual &
institutional).
11
PART 2
Institutional Shareholders in Bangladesh: Forms & Nature
In the capital market of Bangladesh also, shareholders can be divided into two segments –
individual shareholders and institutional shareholders. In this part of the paper, we will discuss
different types of institutional shareholders in details. The institutional shareholders in the capital
market of Bangladesh are: Investment Corporation of Bangladesh (ICB), Scheduled banks,
Merchant banks, Bangladesh Development Bank Limited (BDBL), Non-bank financial
institutions (NBFIs), Insurance companies, Leasing companies, Pension funds and provident
funds, Postal savings schemes, Postal life insurance, Co-operative land mortgage banks, Pension
and provident funds, Employees insurance funds and Security deposits. (Sayeed, 2004; Islam et
al., 2008; Mohajan et al., 2012; Azad, 2012)
2.1 Investment Corporation of Bangladesh (ICB)
Being a government-owned corporation, ICB works for building up an organized and vibrant
capital market in Bangladesh. It provides institutional assistance to the companies. As the largest
institutional investor, the corporation tries to meet up the equity gap in the enterprises. ICB
performs all its activities through the formation of three subsidiaries- the ICB Capital
Management Ltd (ICML), the ICB Asset Management Company Ltd. (IAMCL) and the ICB
Securities Trading Company Ltd. (ISTCL). Up to the end of June 2013, ICML invested Taka
4.70 billion in the investor account. Up to the end of June 2013, IAMCL has floated fifteen
mutual funds (12 closed-end and 3 open-end) and the total investment in these fifteen funds has
been stood at 30.30 billion. ISTCL has become the largest shareholder in the country with a
turnover of Taka 103.10 billion which is 10.70% of the total market turnover of both Dhaka
Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) in the financial year 2012-2013.
(Bangladesh Bank 2013, p. 63-64)
2.2 Scheduled Banks
In Bangladesh, there are 56 scheduled banks which play important roles as the institutional
shareholders. The scheduled banks have significant investing activities in the capital market of
Bangladesh. Up to the end of June 2013, all the scheduled banks jointly have Taka 259.20 billion
12
investment in securities and this investment was 5.82% of total market capitalization of both
DSE and CSE. (Bangladesh Bank 2013, p. 64)
2.3 Merchant Banks
There are 51 merchant banks operating in Bangladesh. The main three functions of these banks
are- underwriting IPOs, managing new issues and providing portfolio investment management
services. These banks play very important roles as the institutional shareholders in the capital
market of Bangladesh. Total outstanding loan in the merchant banks was amounted to Taka 130
billion up to September, 2013. (Bangladesh Merchant Bankers Association, 2013; Mufazzal,
2014)
2.4 Bangladesh Development Bank Limited (BDBL)
Bangladesh Development Bank Limited also works as the institutional investor. It performs
share and security trading, operates mutual funds, underwrites public issues and provides
brokerage house services. BDBL has a subsidiary called BDBL Securities Limited (BSL) which
provides all sorts stock brokerage and dealing services. Up to the end of December 2013, the
total investment in securities by the BDBL had a market value of Taka 24.28 billion. (Islam et
al., 2008; Bangladesh Development Bank Limited 2013, p. 26)
2.5 Non-bank Financial Institutions (NBFIs)
Non-bank financial institutions are an important group of institutional shareholders in
Bangladesh. At present, there are 31 non-bank financial institutions in Bangladesh (Bangladesh
Bank 2013, p. 51). Among these 31 institutes, we have analyzed the investment portfolio of 14
financial institutions whose financial information is available. We have found that most of these
non-bank financial institutions keep major portions of their total investment in the capital market
securities. Among the 14 non-bank financial institutions, 9 kept more than 60% of their total
investment in the capital securities. Even some of them have kept 100% of their total investment
in the capital market securities. Now, (Table 2.1) in the next page shows the details of
investment in capital market securities by these 14 NBFIs:
13
Table 2.1 Investment in Shares by NBFIs
SL
No
Company Name Total
Investment
(Taka)
Total Investment
in Shares
(Taka)
% of
Investment
Made in
Shares
01 Bangladesh Industrial Finance Co.
Ltd
37,89,77,858 23,29,05,923 61.46%
02 BD Finance 582,401,228 418,007,379 71.77%
03 Delta Brac Housing Finance
Corporation Ltd.
358,102,856 266,103,356 74.31%
04 Fareast Finance & Investment
Limited
182,991,316 182,991,316 100%
05 FAS Finance & Investment Ltd 161,186,659 79,984,979 49.62%
06 CSP Finance 227,037,547 227,037,547 100%
07 IDLC Finance Ltd. 523,510,863 485,088,328 92.66%
08 IPDC Ltd 920,970,869 7 ,000,000 0.76%
09 Lanka Bangla Finance 3,515,894,297 2,023,416,003 57.55%
10 National Housing Finance &
Investment Ltd
20,582,396 20,582,396 100%
11 Phoenix Finance & Investment Ltd. 789,138,062 642,553,973 81.42%
12 Prime Finance & Investment Ltd 967,560,066 428,376,886 44.27%
13 Union Capital Ltd. 1,627,749,003 344,721,150 21.18%
14 Uttara Finance & Investment Ltd. 1,730,971,743 455,382,832 26.31%
Average investment in shares 62.95%
Source: 2012 Annual Reports of NBFIs.
2.6 Insurance Companies
Insurance companies are also an important segment of institutional shareholders in Bangladesh.
At present, there are 77 insurance companies in Bangladesh, 46 of them are non-life insurance
and 31 of them are life insurance companies. Among these 77 insurance companies 2 are state
14
owned - Sadharan Bima Corporation & Jiban Bima Corpration. (Insurance Development &
Regulatory Authority Bangladesh, 2013)
These insurance companies have huge investment in the capital market securities. In fact, capital
market securities are the main source of investment for insurance companies in Bangladesh. It
has been found in research that most of the insurance companies have kept more than 70% of
their total investment in capital securities. (Samina, 2012)
2.7 Leasing Companies
At present, leasing companies are growing in Bangladesh. There are 15 leasing operating in this
country and the money value of leasing business in Bangladesh is more than 3.16 billion
(Mohajan, 2012). These leasing companies also invest in the capital market. These companies
are also regarded as the non-institutional segment of institutional investors in the capital market
of Bangladesh. (Azad, 2012)
2.8 Pension Funds and Provident Funds
The pension and provident funds of the government employees in Bangladesh are in unfunded
condition. On the other hand, the private sector pension funds and provident funds are invested
in different sources. At present, the total monetary value of the private sector provident funds is
31,500 crore of which 15% is invested in government securities, 50% is invested in the fixed
deposits and the rest 35% is invested in the capital market securities. So, these private sector
pension funds and provident funds constitute a large group of institutional shareholders in this
country. (Uddin, 2013)
2.9 Postal Saving Schemes and Postal Life Insurance
In Bangladesh, postal department of the government plays a very important role in deposit
mobilization. At present, this department runs 6 deposit schemes. Again, this department also
runs 3 life insurance policies. A significant amount of the fund collected through these saving
schemes and insurance policies is also invested in the shares in different companies. So, postal
department in this country is also an important institutional shareholder. (Moulick et al., 2011;
Mohajan et al., 2012)
15
2.10 Co-operative Land Mortgage Banks
In Bangladesh, there are 119 co-operative banks. Among them 48 are co-operative land
mortgage banks (Board of Investment Bangladesh, 2012). These banks also play their roles as
the institutional shareholders in capital market of Bangladesh. (Mohajan et al., 2012; Azad,
2012)
2.11 Other institutional shareholders
There are some other forms of institutional shareholders in Bangladesh also. But no specific
information is available regarding these institutional shareholders. Perhaps, they have a very
negligible impact in the capital market or they do not get much attention. Some of these
institutional shareholders are:- Employee Insurance Funds, Pension Deposit Schemes, Security
Deposits and Gift Certificate Deposits, Surcharge and Development Charges. (Mohajan et al.,
2012; Azad, 2012)
In this part, we have discussed the major types of institutional shareholders in the capital market
of Bangladesh. But there are some institutional shareholders which cannot be brought under a
specific category. In many cases, the private limited companies and the listed public limited
companies (other than banks, insurance companies, financial institutions and leasing companies
etc.) buy the shares of other listed public limited companies. Here, the companies purchasing
listed shares become the institutional shareholders.
At the end of this part, it can be said that institutional shareholders in the capital market have
very different and diverse forms. But these investors have a low base in the market. Although
some of them have active participation in the capital market, others have very limited
participations. In some cases, institutional investors are reluctant to increase their investment and
participation in the capital market because of the volatility of the market. Sometimes their
participation is barred by regulations and legal proceedings. Moreover, some institutional
shareholders keep largest portion of their investment in the T-bills and in Fixed Deposits of
banks with a view to reducing investment risks.
16
Conclusion
Institutional shareholders are very important elements for the development and expansion of
capital market in a country. These shareholders supply long-term investment in market, increase
governance in the corporate sector and increase the confidence of local retail shareholders &
foreign shareholders. As a result, institutional shareholders have significant presence and
activities in most of the emerging capital market of the world. But the condition of the capital
market of Bangladesh is quite different. Here, the presence of institutional shareholders is very
limited and their activities in the capital market are also not in a satisfactory level.
In Bangladesh, there may be many reasons which discourage institutional shareholders to expand
their presence and activities in the capital market. Again, there are also some factors that obstruct
institutional shareholders to come to the capital market. The policy makers of this country should
address and resolve all these unfavorable factors and impediments. They should try to increase
the institutional shareholders‟ base in the capital market.
In our study, we have found that there are many categories of institutional shareholders in the
capital market although their participations are limited. Again, there are many potential
institutional shareholders which can be brought in the capital. These two things suggest that if
the government and regulatory bodies make the capital market attractive for the institutional
shareholders, the participation and activities of these shareholders in the capital market will
increase dramatically in the future. This chance of increasing institutional shareholders‟ base in
the capital market of Bangladesh makes us hopeful.
17
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