Consumer Confidence in Financial Markets
Abstract (Md. Kabir Ahmed Chowdhury, G.M. Abul Kalam Azad, Md. Kabir Ahmed Chowdhury†G.M. Abul Kalam Azad)
The low level of consumer confidence in financial markets in many developing countries remains a serious bottleneck to the development of financial sector and the economy as a whole. In particular, it has been emphasized that asymmetric information, adverse selection and moral hazards are perversely related to consumer confidence in financial markets. Keeping the idea in view, this paper makes an attempt to identify major factors, like currency forfeiting, loan default, capital shortfall, capital flight, etc which undermine consumer confidence in the financial services sector of Bangladesh. The paper also provides a review of different legislative and regulatory measures introduced by the authorities over the past years to strengthen consumer confidence in the financial markets, such as enhancing the security features of currency notes, deposit insurance, capital adequacy requirement, loan classification and provisioning, credit rating for raising capital and putting in place a mechanism for prevention of money laundering. The paper concludes with some specific suggestions to further develop the country’s financial infrastructure, which include, among others, provision of missing markets and institutions to cater to the needs of consumers.