Why fewer than 1 in 100 Bangladeshis invest in stocks

Stock market participation has remained low in Bangladesh, with only around 17 lakh beneficiary owner (BO) accounts against a population of nearly 18 crore — less than 1 percent.

Moreover, the number of BO accounts does not reflect the actual number of investors, as many investors maintain multiple accounts, which are required to hold shares, mutual funds, bonds and other securities in electronic form.

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Industry people believe that the actual number of people involved in the stock market is not more than 2 lakh. If this is taken into consideration, actual participation could be below 0.1 percent.

Such a low number of BO accounts in a country with more than 19 crore bank accounts clearly reflects people's limited appetite for stocks, mutual funds and bonds.

A comparison with neighbouring Asian countries shows how far behind Bangladesh is. In India, around 6 percent of the population participates in the stock market, while the figure is as high as 26 percent in Nepal. However, India's 6 percent represents more than 10 times Nepal's 26 percent in terms of the absolute number of people.

In developed nations, the proportion of people participating in securities markets is much higher.

The question, then, is why people in Bangladesh have so little appetite for the stock market. It would be inaccurate to say that people in the country are inherently reluctant to invest in stocks.

In 2010, people in Bangladesh rushed to the stock market, pushing the number of BO accounts to more than 33 lakh. However, the number began to decline following the infamous market crash of that year.

Profitability has always been a major factor driving stock market participation. When the market offers opportunities to make money, funds continue to flow in, bringing more investors with them.

In Bangladesh, the stock market does not offer reliable money-making instruments. Rather, investors have seen their funds embezzled by fraudulent stock brokerage firms and even by fund managers appointed to safeguard their hard-earned money.

Investors' sufferings do not end here. Some firms raised capital by showcasing their high potential, but it later emerged that their financial statements were full of irregularities.

There are even some strong companies that remain conservative in paying cash dividends despite holding hundreds of crores of taka in bank deposits.

As a result, investors could not improve their financial positions even after investing in good stocks. Only 10 to 15 entities stood out by generating good returns. In this situation, investors witnessed rising prices only in companies with low paid-up capital.

Meanwhile, some investors made bad decisions and rushed to these junk stocks, ensuring a steady flow of funds for market manipulators to exploit and profit from.

In return, the manipulators received paltry punishments compared to the severity of their wrongdoing. Most importantly and unfortunately, investors did not even have the Bangladesh Securities and Exchange Commission (BSEC) on their side. They were left unprotected on several occasions.

For instance, the regulator approved the extension of the tenure of closed-end mutual funds by a decade, forcing investors to wait another 10 years to get their money back.

The market watchdog also allowed bonus shares for listed mutual funds. Most importantly, it gave the go-ahead to several companies to raise funds, which were all set to turn into liabilities for the market.

A prime example is Sikder Insurance, which invested around 72 percent of its life fund in junk stocks before launching its IPO (initial public offering).

There was actually little to attract investors to the market.

Recently, the Dhaka Stock Exchange (DSE) started returning funds to investors that had been embezzled by a couple of brokerage firms. This is indeed a praiseworthy step. However, it is still a very mild remedy for wounds inflicted by years of mistreatment.

After the fall of the Awami League government in 2024, the BSEC was reconstituted, and the regulatory body has been trying to introduce reforms across various areas. This is a good sign.

BSEC Chairman Masud Khan has already outlined his vision for the market and made several important commitments. If the new commission can deliver on those promises, simplify the listing process, digitise all procedures and protect investors' interests, investors will be encouraged to enter the market on their own.

The market should first ensure a proper equity market alongside a vibrant bond market. Other products can be introduced gradually. The regulator should also ensure that the bond market does not suffer a setback due to defaults by bond issuers.

If several well-performing companies enter the market, investors will be encouraged to participate. Along with this, the regulator should focus on controlling manipulation in the secondary market and ensure that no intermediary embezzles investors' funds. Most importantly, the regulator should never fail to stand by investors.

Dictating index movements or turnover is not the regulator's task. Instead, it should focus on policymaking and ensuring good governance and accountability.

If the regulator commits to implementing all these measures, it would be the best gift to investors as Bangladesh prepares to celebrate World Investor Week.