Importance of Housing Finance Companies in Development of Financial Markets of Bangladesh

Abstract

Money market is the market for short-term loans and securities (i.e., for one year or less). The strong presence of money market can boost the economic development of a country. The main purpose of money market is to provide the liquidity need of financial institutions, non-bank financial institutions and other participants in the market. The average borrowing rate in the call money market in 2009 was at 1.7% compares to 9.7% in the year 2008. The main concern in this study is Housing Finance Companies (HFCs). At present, there are three Housing Finance Companies (HFCs) in Bangladesh, which are an integral part of Non-Bank Financial Institutions (NBFIs). The objective of this study is to highlights the present scenario of HFCs, and its role in the development of money market. The study shows that the HFCs are not active participants in the money market like other financial institutions (like banks). In spite of this, they can play a significant role in the development of money market through active participation directly; issuing different money market securities to collect short term fund for new loan sanction and innovate new short-term financial products like securitization of the mortgage loan.