Bangladesh’s mutual fund industry remains one of the most underdeveloped segments of its financial system. While neighbouring India has transformed mutual funds into a mainstream savings and investment vehicle, Bangladesh has barely begun to unlock their potential.
The industry is exceptionally small: estimates place its assets at roughly 0.2–0.3% of GDP in recent years. India, by contrast, reached 21.3% of GDP in March 2026.
The good news is that the Bangladesh Securities and Exchange Commission (BSEC), under its new leadership, has identified mutual fund development as an important reform priority. Its initiative to modernise mutual fund regulations is an opportunity to address longstanding weaknesses and lay the foundations for sustained growth.
Equally encouraging is the priority the new BNP government, and Finance and Planning Minister Amir Khosru Mahmud Chowdhury in particular, have placed on capital-market development. It has committed explicitly to strengthening the bond and equity markets, improving governance, attracting institutional investors and modernising market infrastructure.
The minister has repeatedly called for a deeper, more professional and technology-driven capital market. In my view, such sustained, high-level attention is a promising departure from the fragmented approach that has too often characterised capital-market development. It is an opportunity for the mutual fund industry, provided commitments translate into timely implementation and effective enforcement.
Bangladesh should now set an ambitious national target: raise mutual fund assets from roughly 0.2–0.3% of GDP to 3% within three years and 5% within five years.
Achieving this will require coordinated reforms across governance, investor education, distribution, technology and product development.
Restoring confidence through stronger governance
Perhaps the single greatest obstacle to mutual fund development in Bangladesh has been the erosion of investor confidence.
Serious governance failures and allegations of misconduct involving certain asset managers and funds have undermined public trust. Investors have understandably questioned whether their savings are adequately protected and whether fund managers act in their best interests.
Restoring confidence must therefore be the first priority.
The BSEC’s renewed emphasis on governance and accountability is particularly welcome. Asset managers, trustees and custodians must be subject to rigorous oversight, clear fiduciary responsibilities and meaningful enforcement.
Independent trustees must exercise effective supervision, custodians must safeguard fund assets, and asset managers must disclose portfolio holdings, fees, investment performance and related-party transactions transparently.
Regulatory breaches should attract timely and credible sanctions. Investor protection cannot remain merely a regulatory aspiration; it must become a demonstrable reality.
Without confidence, even the most innovative products or distribution strategies will struggle to attract substantial savings.
Demonstrating the value of professional fund management
A second challenge is the widespread perception among retail investors that they can achieve better returns by investing directly in the stock market.
Bangladesh’s equity market has historically been characterised by substantial retail participation, often driven by short-term price movements, market rumours and speculative trading.
Mutual funds offer an alternative investment approach.
Professional asset managers can deploy dedicated research teams, investment committees and disciplined portfolio management to identify fundamentally attractive companies and build diversified portfolios.
Diversification reduces exposure to individual company risks, while professional research and risk management can improve long-term decisions.
Active fund managers should seek to generate alpha, or returns above an appropriate benchmark after costs. However, professional management does not automatically guarantee superior returns. Fund managers must demonstrate their value through transparent, independently verifiable performance records.
Investor education should explain the advantages of diversification, long-term investing, compounding and disciplined risk management, rather than promising unrealistic returns.
Lessons from India’s mutual fund revolution
India offers particularly relevant lessons.
According to the Association of Mutual Funds in India (AMFI), India’s mutual fund assets increased from ₹15.80 trillion in September 2016 to ₹82.64 trillion in September 2026 — a 5.2-fold increase in assets under management. The assets-to-GDP ratio, a distinct measure, roughly doubled over the period, from approximately 10.8% in 2016 to 21.3% in March 2026.
This was no accident: it reflected improvements in regulation, distribution, technology, investor awareness and product accessibility.
One notable success has been the industry’s sustained investor education campaign, Mutual Funds Sahi Hai, which familiarised millions of households with mutual funds.
Just as important has been the rapid expansion of Systematic Investment Plans (SIPs), allowing individuals to invest relatively small amounts regularly rather than making large lump-sum investments.
India shows that mutual funds need not remain the preserve of affluent investors. They can become accessible instruments for ordinary households seeking long-term financial security.
Bangladesh should adopt a similarly coordinated approach involving the BSEC, asset managers, stock exchanges, financial institutions and industry associations.
Expanding distribution beyond traditional investors
A third major constraint is the limited distribution network for mutual funds.
Unlike banks, which have developed extensive branch and agent banking networks, mutual funds remain relatively inaccessible to large sections of the population.
The BSEC’s interest in broadening mutual fund distribution through agents could therefore become a transformative reform.
Bangladesh should establish a regulated network of mutual fund distributors operating through banks, licensed financial agents and approved digital platforms.
Properly trained agents could explain investment products, assist with onboarding and facilitate regular contributions.
However, distribution expansion must be accompanied by appropriate certification, transparent commissions and safeguards against mis-selling.
The objective should be to make investing in mutual funds as straightforward as opening a bank account or using a mobile financial service.
Making mutual funds part of household savings
Mutual funds should also be repositioned as instruments for long-term financial goals, rather than another way of trading in the stock market.
Households save for children’s education, homes, retirement and emergencies. Mutual funds can play an important role in these objectives, provided investment products are matched appropriately to individual risk tolerance and investment horizons.
Bangladesh should encourage a broader range of funds, including equity, fixed-income, money-market, balanced and eventually specialised real-estate investment products.
This diversification is critical: when equity markets perform poorly, investors should have access to professionally managed fixed-income and lower-volatility alternatives rather than abandoning mutual funds altogether.
Over time, a diversified mutual fund sector could also become an important source of financing for corporate bonds and other long-term instruments.
Digital technology and the potential of micro-investing
The greatest opportunity may lie in combining mutual funds with Bangladesh’s rapidly expanding digital financial infrastructure.
India has demonstrated how digital onboarding, electronic Know Your Customer (e-KYC) procedures, online distribution and automated payment arrangements can dramatically reduce investment barriers.
Bangladesh should enable individuals to invest as little as Tk500–700 per month through SIPs.
Consider the potential: if five million Bangladeshis invested just Tk500 monthly, this would generate Tk3,000 crore in annual contributions before investment returns.
At ten million investors, the figure would double to Tk6,000 crore annually.
Mobile financial services, banking applications and digital investment platforms could provide the infrastructure for this transformation.
Regulatory reforms should facilitate simplified e-KYC, low-cost digital transactions, automated recurring investments and interoperable investment accounts.
Robo-advisory platforms could eventually help investors select suitable portfolios based on their savings objectives and risk profiles, subject to appropriate investor protection rules.
Making regulation growth-oriented
Regulatory modernisation is just as essential.
One proposal worth serious consideration is reducing the minimum initial size for launching an open-ended mutual fund to Tk10 crore.
A lower threshold could encourage new asset managers, innovative products and greater competition, provided capital adequacy, governance and operational safeguards remain robust.
The BSEC should also simplify approval procedures, standardise disclosure requirements and establish clear timelines for launching compliant funds.
Meanwhile, reforms to facilitate high-quality initial public offerings would expand the investable universe available to professional fund managers.
A growing mutual fund industry and a stronger IPO pipeline could reinforce one another, supporting better price discovery, greater institutional participation and more stable capital markets.
A five-year national roadmap
Bangladesh needs a measurable, coordinated programme, not isolated regulatory changes.
During the first year, the priority should be restoring governance, implementing modernised regulations, introducing digital SIP infrastructure and launching a nationwide investor education campaign.
Over the following two years, distribution should expand through banks, licensed agents and digital platforms, while new equity, fixed-income and balanced funds broaden investment choices.
The aim should be mutual fund assets of 3 per cent of GDP within three years and 5 per cent by year five, supported by millions of regular investors, greater institutional participation and a more diversified product ecosystem.
These are ambitious targets, requiring substantial growth in assets under management, and they should be treated as national policy aspirations rather than forecasts.
Nevertheless, India’s experience shows what sustained reform and coordinated industry development can achieve.
Expanding mutual funds is about much more than growing one segment of the financial sector. It is about mobilising household savings, promoting long-term wealth creation, strengthening institutional investment and building deeper, more resilient capital markets.
With committed regulatory leadership, restored investor trust and a technology-enabled distribution revolution, Bangladesh has an opportunity to transform mutual funds from a marginal investment product into a cornerstone of national financial development.
