Foreign Banks Pros and Cons Essay
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Today with the blessings of tremendous development in the communication technology, relationship and interdependence among the countries have been growing rapidly which signifies globalization as an ongoing process. Globalization helps the international business- that is engaging in cross border expansion of sales, acquiring resources and diversifying risk. Factor that benefiting the foreign banks in Bangladesh: Bangladesh is a developing country with a huge population.
From the beginning of Bangladesh as an independent country it has been a desiring place for doing business for business organizations operating globally.
This circumstance is existed in banking and other financial service sectors. There are some factors that benefitting the foreign banks operating in Bangladesh.
1. Extended sales in an enormously populated country with a low competition: Bangladesh is a country with a large population, so this place is a big market for the banks in a single boundary with a simple set of legislations.
So the foreign banks operating in Bangladesh can serve a large group of customers with a single marketing policy.
As now a day the business transactions are taken place through banks and house hold savings are kept in banks so the foreign banks do not have to be concerned about the demand. The local banks can not give a big competition as well.
2. Minimizing risk: As usual the multinational banks like other multinational corporations minimize risk by operating in Bangladesh.
That means if the banking sector collapses in a country the multinational banks will not loose everything and it is a risk diversifying method. 3. Acquiring resources: The foreign banks operating in Bangladesh can acquire Bangladeshi capitals, information and human resources easily. The local expertise is keen to work in MLCs. So the foreign banks can acquire the local human resources easily at a very cheap rate compare to the global condition. Having the benefits in Bangladesh 10 local banks have established their operation in our country and working comfortably for years after years.
Influences of foreign banks in Bangladesh: Benefits: 1. A boast in banking sector: Local banks are expected to react as the foreign banks enter to the country. The local banks here have changed their police in a positive way caused by healthy competition. 2. Bringing ne management and advertising techniques: foreign banks typically bring newer and more modernized management and advertising techniques in our banking sectors. The local banks can learn the modern techniques to cope up with the changing economic environment and globalization.
3. Introducing new modernized technology: In Bangladesh most of the modern financial technology such as ATM, different types of cards, off balance sheet accounting and the latest computing technology brought by foreign banks and spread out in whole banking sectors. 4. Helping in international trade: Aiding in the development of trade and foreign direct investment are presented by foreign banks. Such as opening an L/C in a multinational bank may be more helpful for the merchants. Problems:
1). Foreign domination: the established foreign banks have far greater brand value and economic capability than the local banks. So they can easily dominate by attracting customers. They also are being magnets for local human resources, so the local banks do not get the local expertises which also pull the local banks behind the multinational banks.
2). Lack of local commitment: the foreign banks lack commitment towards the country for some reasons not meeting some social responsibilities.
3.) Cream skimming behavior: though there is not much data available to prove this fact many people think that the foreign banks cream skim the market- taking disproportionate share of best local business away from domestic banks.
4). Unhealthy completion: introduction of foreign banks has added pressure to the local banks by increasing competition which results in risk taking of local banks. So the foreign banks of Bangladesh have a great influence in our economy in the form of pros and cons which are effectively altering our banking sector, with their operation.