Concentration and Competition in the Non-banking Sector: Evidence from Bangladesh

Abstract

The development of non-bank financial institution as a financial intermediary complementary to commercial bank is noticeable not only in developed countries but also in developing countries, and Bangladesh is in no exception. Started in 1981, the size of the non-banking sector has been increased in both absolute and relative terms. However, the research on the sector remains substantially insignificant. Most importantly, analysis of the market structure of the nonbanking industry has been a lacking in the available existing literature. Keeping this in mind, this paper aims at addressing the market structure of the sector and its change over time by adopting concentration and competition measures based on asset and loan figures with a sample period of 14 years from 1997-2010. The findings report a highly concentrated market in 1997 and over the years there has been a considerable reduction in concentration, which means an increase of competition during the sample period.