Economic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is highest in the initial stage. Schumpeter (1933) regarded the banking system as one of the two main agents (other being entrepreneurship) in the whole process of development. Keynes also emphasized the role of bank services in the process of economic development of a country, while he was addressing the House of Lords regarding International and Monetary System (quoted in Sharma 1985). Moreover Alexander Gerschenkron (1962) in his popularly known “Gerschenkron’s Hypothesis” explained the banking system as the key role player at certain stage of the industrialization process.
Leaving aside the generalizations made above, the case studies of some particular developed countries also show the useful roles played by the banks in economic development process of those countries. Prior and after World War – II, Japan experienced very high rates of both industrial production and per capita income. Takeuchi (1970) credited Japanese banking system with making vital contributions to that growth.
Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programmes underway in the process of economic development. They collect savings of large masses of people scattered through out the country, which in the absence of banks would have remained ideal and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of world’s most underdeveloped economies. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking... [continues]
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