B Mirror Report

The trustee of the biggest mutual fund in the nation, the Investment Corporation of Bangladesh (ICB), has requested permission to pay out at least 75% of the profit from the current fiscal year to unit holders in the form of dividends. In addition, it has been suggested that the remaining 25% of the earnings be retained for provisioning.

To allow impacted investors to receive at least some dividends, the ICB proposes to loosen the provisioning obligation to handle unrealized losses.
On May 22, the ICB brought this idea to the Finance Ministry’s meeting. The similar suggestion was previously made by the ICB on May 17 during a meeting with the Bangladesh Securities and Exchange Commission (BSEC).

ICB Managing Director Niranjan Chandra Debnath said that mutual funds are made up of investors’ money. But due to the market collapse, many funds had to end the year without paying dividends by keeping provisions. Only investors have been affected.

He also said that considering the current market situation, if some provisioning was relaxed, investors would have received at least some dividends.

ICB said that out of 62 mutual funds operated in 2024, 52 made losses. Of these, 49 could not pay any dividends, although 9 funds paid some dividends even in losses. Only 6 funds were able to retain profits in their portfolios.

Most of the funds suffered huge losses due to the decline in market prices and were forced to keep provisions accordingly. Although they made profits, they could not pay dividends.

Officials of the ICB trustee department said that the lack of continuous dividends has created a crisis of confidence among investors. As a result, the tendency to surrender units and withdraw capital has increased. If this trend continues, the liquidity crisis in the stock market may become more acute. DSE stock quotes

ICB Deputy General Manager Md. Sharikul Anam said that many are leaving the stock market as mutual funds lag behind bonds or FDRs in terms of returns. If dividends are not paid in the next fiscal year, many investors have said that they will withdraw their units.

According to Section 67 of the 2001 “Securities and Exchange Commission (Mutual Fund) Rules”, “If the market value of mutual funds’ investments falls below the purchase price, it is mandatory to make a provision against that loss before declaring dividends.”

The money utilized to make provisions in line with this clause. However, starting in 2023, 100% provisioning was required by BSEC’s verbal directive. Dividend payments have been hampered as a result.

The mutual fund industry is presently dealing with a liquidity and confidence crisis. In the interest of investors, it has become necessary to temporarily loosen the restrictions pertaining to provisioning. In order for investors to see the light of hope and for the mutual fund business to continue, a concentrated effort is now required to build the market.