We Can Not Change the Capitalism; But We Change the Capital Management!


Dr. Sikder Md. Anowarul Islam

July 19,2014

(Published in LinkedIn)

The long term capital management is distortionary when we borrow the capital with high interest rate. Low savings rate and high interest on borrowings stagnate economic growth and productivity growth in long run. So called management of financial institutions of public sectors in developing countries are traditional. About 6% of finance is incurred into deadweight loss due to political estimation of inflation in developing counties. They cannot efficiently manage the financial sectors due to lack of digitalization and connectivity. Customers need efficient services from the financial sectors in these days.

Online banking is a prime source of financing and capital accumulation those who have limited infrastructure to penetrate the communication process. People may change their habit if they get opportunity to easy access in deposit finance. Financial institutions may increase their innovative instruments especially by analyzing the economic and political environment in the developing countries. These innovative instruments will encourage the poor peoples to save and accordingly encourage collective investment. We have already improved the level of poverty up to 60 percent in Bangladesh by initiating micro credit, which was very adverse selection in context of culture and religion in Bangladesh.

But we took these challenge and finally established micro credit model globally, but it is not enough so far. We have lot of things to do in financial sectors. Especially analyzing the culture of the country and accordingly accommodate them with the process of innovative financial instruments. We have to empower general people’s to accommodative activities and democracy with majority voting power. The western world provides us a very powerful communication tools that we called internet. But the act of the Government in the developing countries is still in go slow process due to inefficient management of public sector. Only private sector may boom if the Government of developing countries emphasize on regulatory framework rather than doing so called business to maximize revenue.

It is not so difficult if the Government of the developing countries take initiative to boost Public Capital in PPP (Private Public Partnership) method to produce public goods for the infrastructure development in the developing countries. This process is efficient and accordingly has theoretical evidence in my published research works. A developing country can supply the required capital from the money market and capital market but their unfortunate legacy is that they are waiting for the west for their innovation and technology. Sometimes they are very afraid to get the same by implicit transfer of wellbeing of the poor peoples. The negative trade balance put them negative game theory box to hire foreign technology and capital.

So far, the so called education curriculum that provides certificates for the easy access in labor market but not for empowering creativity and innovation. Still we have very little budget for research and development and very little scope to access in research and development due to low infrastructure in digitization and connectivity, especially in Bangladesh as well as developing counties. The Government of developing countries is still rationing the internet services with high pay for the end users. We are at the age of digitalization and connectivity but the peoples of developing countries are living like a closed economy with restrict culture due to lack of ample connectivity through internet services.

As soon as we get access in the internet services for the all in developing countries, we can overcome the level of so called poverty by introducing innovative financing instruments for increasing economic growth and productivity. General peoples don’t have to think so much to make intervention to the so called political and economic system, i.e. which economic system is best and welfare augmented for them; centrally planned economy, or the process of efficient market mechanism-led by the concept of capital management, so far.

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