The decision to disband a number of non-bank financial institutions (NBFIs) due to inadequate financial conditions has caused further market panic. The central bank had already said that the shareholders of five weak Shariah-based banks would lose their whole investment upon the announcement of the merger, causing around Tk 4,500 crore in “paper assets” to vanish overnight. Eight more listed NBFIs are in danger of dissolving, and stock market players are now worried about losing everything before investors can recover from the shock.

Bangladesh Bank Governor Ahsan H. Mansur announced in August that nine NBFIs are beyond recovery and will be shut down. Among them, eight FAS Finance, Bangladesh Industrial Finance Company, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Peoples Leasing, and International Leasing are listed on the stock market.

The combined paid-up capital of these eight NBFIs is about Tk 1,450 crore. Of this, small and general investors hold shares worth around Tk 947 crore. Analysts believe that if these institutions indeed move toward dissolution, investors may lose this entire amount. In dissolution, the market value of shares (currently over Tk 100 crore) has little significance; repayments are made only from the proceeds of selling the company’s actual assets.

The main reason investors are unlikely to receive anything is that these NBFIs have liabilities far exceeding their total assets. The net asset value (NAV) per share of most institutions is deeply negative. This means that after selling assets and paying off debts and liabilities during liquidation, nothing would remain for general shareholders, since shareholders are last in the repayment hierarchy.

According to market stakeholders, this crisis has developed over many years. They say large-scale loan defaults and capital siphoning from banks and NBFIs have brought these institutions to a point where restructuring is no longer possible. They argue that auditors, credit rating agencies, and regulators must all be held accountable for this situation.

According to Bangladesh Bank data, at the end of last year, these eight institutions alone accounted for 52% of the total Tk 25,089 crore in defaulted loans in the NBFI sector.

Meanwhile, a senior official of the Bangladesh Securities and Exchange Commission (BSEC) said that although the government does not consult them before taking such decisions, they will communicate with authorities to protect small investors if the dissolution process begins. However, he could not specify any concrete way to ensure compensation.