Financial Sector Development and Its Contribution to Economic Development of Bangladesh

Soon after the independence of Bangladesh in 1971, scholars tended to argue that Bangladesh is a hopeless country. Now Bangladesh is considered the next Asian tiger due to the pace of its development. The economy experienced an average growth rate of 6.5 percent for the last decade. There are many factors that have contributed to the development of the economy. Among them, financial inclusion through financial sector development plays an important role. This chapter broadly covers the evolution of the banking and non-banking financial sectors of Bangladesh, focusing on the number of banks and branches, changes in the monetary and exchange rate policies, expansion of banks and bank branches over time along with structural changes, performance, and measurements of development of the banking sector. It also provides an empirical analysis of the relationship between financial system development and the economic growth of Bangladesh.