Bangladesh’s 2013 demutualisation of stock exchanges—intended to separate ownership from management and strengthen transparency, accountability and corporate governance—has not produced the anticipated gains for investors, market participants say.
The reform was expected to stabilise the market and restore confidence. Instead, brokers, analysts and investor groups argue that the impact has been negligible.
Several independent directors appointed since the overhaul lacked capital-market expertise, they contend, leading to weak decision-making, eroded discipline and damage to investor interests, as well as a weakening of the Dhaka Stock Exchange’s (DSE) institutional base.
Critics say politically driven appointments compounded the problem, alleging that some independent directors pursued agendas unrelated to market development.
Listing of weak or non-operational companies during the previous administration further undermined trust, they add, allowing funds to be raised from the market without adequate scrutiny. As expectations diverged from outcomes, investor confidence slumped.
ANM Ataullah Nayeem, president of the Bangladesh Capital Market Investors’ Council, said the promises made around demutualisation remain unfulfilled, with no visible push by the Bangladesh Securities and Exchange Commission (BSEC) or exchanges to attract strong domestic or multinational issuers.
Market analyst and Arthosuchak editor Ziaur Rahman argued that, despite the formal split of ownership and management, influential owners still exert control and that neither transparency nor capacity has improved.
He also noted that exchanges did not list themselves, and the hoped-for technology and know-how from strategic investors have not materialised.
Calls for a reset are growing. The DSE Brokers Association of Bangladesh (DBA) has urged a review of the demutualisation law, arguing that chairs and independent directors have often been appointed on political considerations, limiting their effectiveness.
DSE director Minhaj Mannan Emon said the scheme envisaged a review after five or ten years—yet none has taken place—while numerous low-quality companies have been listed. The DSE has sold 25% of its shares to strategic investors, but the remaining 35% slated for public investors is yet to be offered, with officials citing weak market conditions and unfavourable pricing.
A DSE official, requesting anonymity, said demutualisation is a continuing process and that public share sales were delayed due to market distress and valuation concerns.
BSEC director and public relations officer Md Abul Kalam maintained that investors would benefit if exchanges operate strictly in line with the demutualisation scheme.
Market observers, however, argue that structural reform must be coupled with stronger policy support, professional management, effective supervision and a genuinely investor-friendly environment—or demutualisation’s benefits will remain largely theoretical.
SMS/
