AMCs get reduced tax benefits for addl 2yrs

The National Board of Revenue (NBR) has decided to extend to FY27 the 15 per cent income tax on the fees charged by asset management companies (AMCs) for mutual fund management services, which is 27.5 per cent without the waiver.

Continuation of this waiver to AMCs will boost the mutual fund industry – a new and growing sector of the country.

The Association of Asset Management Companies and Mutual Funds (AAMCMF) thanked the NBR for extending the tax rebate provided to the AMCs through the Statutory Regulatory Order (SRO), which was issued on Thursday.

AAMCMF said that the organisation has worked closely with the NBR to make them aware of the need for this extension for the AMC sector. Throughout the process, the NBR has shown a strong commitment to supporting the institutional fund management industry, and through it, the broader capital markets.

The organisation also thanked the Bangladesh Securities and Exchange Commission (BSEC) for supporting this initiative.

This institutional fund management and mutual fund industry pledges to keep its commitment to better serve our investors and promote the capital markets, AAMCMF said in its statements on Saturday.

Speaking to the Business Post, Shanta Asset Management Ltd Vice Chairman Arif Khan said, “Mutual funds in developed countries are one of the most popular investment tools.

“But Bangladesh is lagging far behind its neighboring nations, such as India, in terms of the size of the mutual fund industry. Now, the government gives waivers to AMCs to boost the mutual fund sector as a new and growing sector of the country.”

Without the tax benefit of the reduced rate, such companies would be liable to pay taxes at the standard rate of 27.5 per cent.

Meanwhile, the fund managers have reported the net asset value (NAV) of the closed-ended mutual funds for the last week.

Among the 37 mutual funds, 30 of them were trading at a discount. The market capitalization of 37 funds stood at Tk 35.7 billion, while the asset under management (AUM) of the sector stood at Tk 54.2 billion.

RACE holds the highest market share of 49.2 per cent with 10 funds and an AUM of Tk 26.7 billion.

The ratio of Bangladesh’s mutual fund assets to its gross domestic product (GDP) is only 0.4 per cent, the lowest among the peer countries, representing the sector’s exponential growth potential, which still remains untapped.

The assets under management (AUM) of Bangladesh’s MF industry, operated by 65 asset management companies (AMCs), stood at $1.6 billion as of the last year.

In this context, the AUM of the Indian mutual fund industry operated by 43 AMCs was $472 billion during the same period. AUM refers to the total market value of investments that fund managers make on behalf of their clients.

Analysts and stock market insiders have attributed a lack of investable funds and less confidence to the unpopularity of mutual funds in Bangladesh.

Mutual funds in developed countries are one of the most popular investment tools. In the USA, the size of the industry is larger than its economy,” said a stock market analyst.

The current ratio of mutual fund assets to Bangladesh’s GDP is only 0.4 per cent, which is 16.2 per cent in India, followed by 54 per cent in Malaysia, 1.3 per cent in Pakistan, 28.3 per cent in Thailand, 6.6 per cent in Vietnam, 195.7 per cent in the USA, and 180.8 per cent in Canada.

Commenting on the issue, an official at the Bangladesh Securities and Exchange Commission (BSEC) said, “Mutual funds play a pivotal role in the stock market. But mutual funds in the last ten years failed to meet investor expectations.”

Professor Abu Ahmed, a capital market analyst, said, “A fund manager needs to restore investor confidence by ensuring transparency in managing funds professionally and offering healthy returns.

“The industry should be regulated painstakingly, as anomalies related to fund management have already been detected. The country’s mutual fund AUM to GDP ratio remains significantly low at 0.4 per cent. It has enough room to grow.”

Meanwhile, VIPB Asset Management Company Chief Executive Officer (CEO) Shahidul Islam, CFA said, “The mutual fund industry is still at a nascent stage in Bangladesh.

“This NBR SRO extending the existing provision of lower taxes for asset management companies will help the industry grow further.”