Financial Sectors in Bengals: Towards Development and Inclusion

Abstract

Erstwhile Bengal was divided in 1905 into East Bengal and West Bengal, revoked in 1911 to again be reinforced in 1947. The two Bengals henceforth belonged to two different nations, viz. West Bengal as a state in India and East Bengal as East Pakistan (later independent Bangladesh). As the two Bengals parted ways, their trajectories in the context of financial sector development and financial inclusion are characterized by similarities as well as differences. This chapter tries to collate some important observations in the process of financial liberalization and financial development of the two Bengals. The analysis pertains to the role of the banking sector in both Bengals, the performance of microfinance institutions and Islamic banks in Bangladesh, and that of microfinance institutions, self-help groups, and regional rural banks in West Bengal. In both Bengals, the banking sector is the dominant sector, but loan disbursements are much higher in Bangladesh compared to West Bengal. However, West Bengal has progressed quite well in insurance penetration and retail participation in capital markets through mutual funds, while Bangladesh still lags behind. Regarding financial inclusion, the progress in West Bengal so far has been higher than in Bangladesh in achieving access to financial services and moving towards digital financial services for all.