The silent birth of a new class of financial assets in Bangladesh, it’s time to talk about it!


Innovation in financial products is still rare and even more so in Bangladesh. Regulations, target group psyche versus needs, distribution – there are vital blocks to place just to deliver innovation that truly solves an investor’s problem. But, without new solutions/products, the new needs of the times remain unmet and there is a dead end – people continue to put their hard-earned money into financial products, depriving them of the optimized potential of their money.

There are only a handful of financial brands in Bangladesh that have innovation in their DNA and IDLC has been a consistent name in the league. Lately, the asset management wing of the IDLC Group – IDLC ASSET MANAGEMENT LIMITED (IDLC AML) – has launched not just a product, but a whole new asset class. Let it be known, starting with the gaps in needs it addresses.

In terms of ease of availability and use of investment avenues, it can be said that there are so far three major classes of financial assets in Bangladesh. “NSC – National Savings Certificate” or “Sanchaypatra”, “Savings Schemes” such as “FDR” and “Share” or “Stock”.

These three investment avenues differ from each other in three main dimensions: return, risk and tax refund.

Since the birth of Bangladesh till date, the most popular financial investment vehicle is “NSC or National Savings Certificate” or “Sanchaypatra”. This is the most suitable as it is a risk-free investment with a lucrative return and an investment eligible for maximum tax refund. But the individual NSC investment limit is an obstacle. Since an individual can invest up to a certain limit in Sanchaypatra, a number of investors have already exceeded this limit. Due to this limit constraint, despite lucrative return, maximum tax refund and risk-free investment, people have had to explore other financial asset classes to meet their higher return investment needs. as well as tax refunds.

Although the risk of FDR is higher than that of NSC and falls under the “moderate” risk category due to default risk (even recently some weak financial intermediaries have defaulted and have not returned the depositor’s money), NSC’s investment limit constraint has pushed investors to invest in FDR and it has become the second preferred investment avenue among available financial asset classes. But two major problems persist with FDR investing – it offers a low to moderate return, sometimes even below inflation and since FDR is not a tax-deductible investment, there is no tax incentive!

So, for a higher return, investors explore the stock market or the equity market – the 3rd class of financial assets. But, the stock market is very volatile and investing in stocks falls under the “high” risk category. As a result, this high volatility does not match the risk appetite of many investors, even though it offers the maximum tax refund.

NSC’s investment limit restriction, FDR’s lower return and no tax refund, and high stock market volatility ultimately call for a new class of financial assets that is safer than stocks/ shares, offers a higher return than FDR, at the same time, is able to provide the maximum possible tax refund and without any investment limits like Sanchaypatra.

This is where the mutual fund as an asset class comes to life and IDLC INCOME FUND is the very first mutual fund in Bangladesh which passed its first year in June. The objective of the fund is to provide stability by finding the optimal balance between return, security and tax management. Since the Fund invests primarily (40%-60%) in Government/Government Guaranteed Securities such as Treasury Bills, Treasury Bills, IDLC INCOME FUND falls into the “Moderate” risk category. And other investment opportunities of IDLC INCOME FUND are very high quality corporate bonds, FDRs of very well governed financial intermediaries and IPOs. This fund does not invest a penny in the secondary equity market.

Further, in accordance with the Income Tax Ordinance, 1984, 6th Schedule, Part B, paragraph 10, 1, b), this fund is an investment eligible for a refund of tax and as there is no There is no investment limit for this fund, an investor gets maximum tax refund from his investment to IDLC INCOME FUND.

Launched in June 2021, the fund generated a return of 7.51% in its first year, including a 3% interim dividend which was paid on January 6, 2022, after 6 months of the fund’s inception. Compared to FDR, the yield is higher and offers the maximum possible tax refund and investors did not have to move to the “high” risk category with their investment to derive much greater financial values!

IDLC INCOME FUND emerged quite quietly at the forefront of the fourth class of financial assets. And after its one-year run, it’s safe to say it’s poised to outperform FDR, offering maximum tax refund without raising its risk appetite to the “high” risk category. In a nutshell, IDLC INCOME FUND is the next product after using the NSC limit.


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