The Bangladesh government has decided to reverse its decision to liquidate the loss-making Janata Exchange Company (JEC) in Italy to maintain the country's image abroad.
Consequently, JEC will continue its operations, according to a letter signed by Meenakshi Barman, joint secretary of the Financial Institutions Division of the Ministry of Finance.
The letter, dated 29 May, was sent to the managing director and chief executive officer (CEO) of Janata Bank.
Initial closure directive
Bangladesh Bank ordered the closure of JEC, a subsidiary of Janata Bank PLC, in 2019 due to continuous losses and irregularities.
Dr Salehuddin Ahmed, former governor of Bangladesh Bank, told The Business Post, "There are both irregularities and management weaknesses within JEC. There is also a lack of oversight by the central bank. Therefore, the primary step should be to identify the causes of the losses and take action against those responsible."
He also believes that if JEC continues to incur losses, its operations should be shut down.
Government’s position on liquidation
The letter stated that liquidating JEC, which is established as a government spokesperson and service provider for expatriate Bangladeshis, could negatively impact remittances to the country and tarnish the image of the Bangladesh government.
Therefore, the government has expressed its disagreement with the liquidation of Janata Exchange Company.
Agent network and profitability plan
According to the opinion of the Bangladesh Embassy in Italy, JEC, established in 2002, sends remittances from Italy to Bangladesh through its two branches in Rome and Milan.
Currently, several private exchange companies in Italy collect remittances through agents and send more remittances to Bangladesh than JEC.
A "Time-bound Strategic Business Plan" to establish an agent network and make the company profitable was submitted to Italy's central bank, Banca d'Italia, in December 2022.
If approved, JEC will be able to appoint agents in key cities or locations in Italy and serve the Bangladeshi expatriates in those areas.
This would provide JEC with the opportunity to gradually become a profitable enterprise.
JEC is the only BD govt payment institute in EU
The Bangladesh Embassy in Italy further reviews that JEC is the only recognised payment institute of the Bangladesh government in the European Union (EU) region.
Therefore, if JEC is closed, it will be difficult to establish any government financial institution or licensed exchange house or payment institute in the EU region for any future long-term or immediate needs of the government.
Additionally, the presence of Janata Exchange Company forces private remittance service providers in Italy to offer a reasonable exchange rate to remitters.
If JEC is liquidated, these exchange rates will decline, leading to a monopolistic market dominated by private companies.
Consequently, expatriate Bangladeshis will send remittances at higher costs or through irregular or illegal means, negatively impacting them and tarnishing the government's image.
It has been reported that on December 9, 2021, the central bank approved €2,595,500 (approximately Tk 26.24 crore) from the state treasury to cover JEC’s losses.
The government had agreed to this financial support before the central bank. This financial assistance was termed “replenishment”.
Financial loss and challenges
According to inside sources, the two branches of Janata Exchange Company that Janata Bank PLC opened in Rome and Milan, Italy, in 2002, were profitable until 2008 but began incurring losses from 2009.
In 2018, JEC Italy's losses amounted to €1.2 million. Despite seeking permission for replenishment from the Financial Institutions Division, Janata Bank’s efforts were unsuccessful.
In September of that year, Bangladesh Bank rejected Janata Bank’s request and ordered the closure of JEC Italy’s operations.
However, this closure order was eventually halted. Following the advice of the Financial Institutions Division, JEC was asked to develop a two-year plan to make the company profitable, which they did.
More branch closures
Janata Bank PLC had also opened six branches in the United Kingdom. Among these, four branches have already been closed due to losses.
In December 2015, the Oldham branch was shut down. In 2013, the then-manager of the branch, Iqbal Ahmed, was accused of embezzling $250,000.
Facing continuous losses, the Luton, Camden, and Bradford branches were closed in 2020. Currently, only the Birmingham and London main branches remain operational.
However, these two branches are also struggling. To keep them running, the government and Sonali Bank PLC have provided over Tk 300 crore.
