- The Bangladeshi economy is defined by its resilience and a recurring investment cycle, with the most recent cycle expected to begin following the democratic elections in February 2026.
- Success for international financial institutions requires a high risk appetite and the cultivation of long-term, trust-based relationships to navigate a fragmented banking sector.
- Risk assessment must extend beyond standard metrics to include specific local factors such as foreign exchange liquidity constraints, the role of sponsor directors, and the use of offshore banking units.
In recent years, countries in South Asia have experienced significant political shifts, driven largely by mass mobilisation among a highly politically active youth. In 2024, student-led uprisings in Bangladesh led to the removal of Sheikh Hasina’s regime, which had been in place for over a decade. Last month, Bangladesh experienced free and fair elections.
Amid these changes, financial institutions operating in Bangladesh from abroad find themselves dealing with a system that requires a high risk appetite, yet one that proves its resilience time and time again. Mahika Ravi Shankar, Deputy Editor at Trade Finance Global (TFG), heard from Thomas Kürten, Director & Senior Regional Manager at ODDO BHF.
Together, they unpack what it means to be doing business in Bangladesh from abroad, and how it requires understanding the culture of Bangladeshi business networks, having a specialised approach to trade finance and financial exchange (FX) instruments, and, sometimes, taking chances.
Mahika Ravi Shankar (MS): Across various financial institutions in Europe, you have been a senior regional manager for South Asia for over 10 years. What has changed in the region in terms of trade, and what has changed?
Thomas Kürten (TK): Since I assumed responsibility for South Asia as a region, Bangladesh and India have been the fastest-growing economies of the South Asian Association for Regional Cooperation (SAARC) countries. However, in terms of trade, not much has changed.
Bangladesh has been and will be reliant on imports for many basic commodities, be it cotton, petroleum products, edible oils, sugar, other foodstuffs, and more. But Bangladesh is a vibrant and volatile market. Over the past decade, we observed at least three investment cycles, and another one is just about to start.
During the investment cycle of 2016-2017, the government incentivised and subsidised the construction of heavy fuel oil (HFO) fired power plants to improve the power-generating capacity of the country. In the next cycle in 2018-2019, large conglomerates started investing in high-quality capital machinery from Europe. Finally, during a short cycle in late 2021-early 2022, after the COVID Pandemic slowed down, the markets stopped investing almost fully.
Another investment cycle is soon to begin, following the national parliament election held in February 2026 – the first election since the 2024 uprising that ousted Sheikh Hasina’s government, which had been in power for 15 years.
MS: Why is Bangladesh the most important market in the region for you, from an ODDO BHF perspective?
TK: ODDO BHF works to enable international trade in emerging markets. We have been doing business in Bangladesh since the early 1990s, at a time when FX liquidity was poorly managed and delayed letter of credit (LC) payments occurred regularly. We have seen other international banks entering the market and leaving again after a few years.
To be successful in a place like Bangladesh, it’s important to build long-term relationships. And if you are successful, you can earn well. Over the years, we have gained a good understanding of the business culture in Bangladesh, as well as the perception of the risks particular to doing business here.
Prioritising maintaining a business relationship, built on mutual trust and a well-established personal relationship, is the prerogative to success in a country like Bangladesh.
MS: What types of businesses are you most involved in there? How does the ODDO BHF offering differ depending on whether business is short-term (like the LC business), or long-term (like the ECA-covered loan business)?
TK: Our product offering comprises the typical short-term trade finance instruments, such as LCs and the issuance of guarantees. In the long-term, we strictly focus on export credit agency (ECA) -covered loan facilities for European exports. Here, we prefer a bank-to-bank structure over the direct bank-to-corporate structure. Finally, as a Europe-based bank, we offer our correspondent banks in Bangladesh to maintain Euro (EUR) accounts with us.
MS: Bangladesh is an economy with strict FX regulations, imposed and overseen by the central bank of the country. How does this affect international trade?
TK: Banks in Bangladesh have lots of specific requirements that you wouldn’t consider when dealing with your first LC issued by a bank in Bangladesh.
But sooner or later, treating the Bangladeshi LC business as a standard business procedure could turn out to be a mistake. Banks have very limited access to FX liquidity, even in the Interbank FX market – a decentralised, 24-hour global network where financial institutions trade currencies directly with each other.
To combat this problem, banks in Bangladesh started generating FX liquidity for themselves and their clients by issuing usance payable at sight (UPAS) LCs, which combine immediate payment for sellers with deferred payment for buyers. The local banks are required to have an offshore banking unit (OBU), where all FX business has to be booked.
From the local Interbank market, banks can only purchase FX equivalent to a certain portion of their equity. If they don’t have access to sufficient FX liquidity, there may be payment delays under the LCs.
To avoid that, the risk assessment of a confirming bank needs to go beyond the typical considerations of asset quality, capital adequacy, and profitability.
MS: What kind of additional risks does a risk manager have to be aware of?
TK: Finding an appropriate risk approach comes with various challenges. A decent number of banks have piled up large amounts of non-performing loans (NPLs). But they were able to hide this, because loans can be reclassified after being restructured.
It was only the last central bank governor, Ahsan H. Mansur, who dared to change this regulation gradually, which led to improved transparency in the banks’ balance sheets. This was a welcome move by international banks, although the market average NPL ratio climbed to more than 30% in 2025.
There is also the principle of having sponsor directors in the banks. Sponsor directors are founding shareholders and their heirs who own more than 2% of the share capital in a bank. As long as they hold more than 2% they are automatically appointed to have a directorship in the bank. Understanding this principle allows a better approach when evaluating a bank’s capital ratios.
Finally, you should always know about the size of both the import and export businesses of a bank, as well as the amount of incoming remittances from Bangladeshis abroad.
MS: Bangladesh has seen significant geopolitical volatility in the last year. How has this affected your approach to the region, particularly playing into risk and insurance?
TK: The political turnaround in 2024 had almost no immediate impact on the economy. The central bank governor under the interim government managed to build up FX reserves again and even introduced a managed float FX regime, an exchange rate system where a currency’s value fluctuates based on market supply and demand. However, companies decided to hold back their larger investments until a new government was elected this February.
In recent years, we were convinced of the resilience of the Bangladeshi economy against external shocks, just as it had been during COVID. Therefore, we maintained our credit lines open at a time when many banks left the market. But we also observe that after the recent peaceful and democratic elections, most of those banks which had retreated try to re-enter the market with aggressive pricing, which don’t reflect a fair risk-to-return ratio.
MS: What advice would you give to international banks in the region, in terms of ensuring secure and consistent credit lines to clients, with minimal/ no payment delays?
TK: Bangladesh has a fragmented banking sector with more than 60 commercial banks. To operate in the country and finance LCs, you need to have a decent risk appetite. Not only are the risks higher than they are elsewhere, but there are also tenors.
When you have limited resources, you won’t be able to deal with each and every bank in the country. You will instantly find that the country’s largest banks don’t have the brightest credit metrics. You need to select your partner banks wisely, knowing that a severe payment delay can poorly impact the risk perception of your own institution.
For this exercise, you need to have in-depth knowledge of market specifics such as FX regulation, the offshore financing unit (OBU), and sponsor directors.
