The South Asia Corporate Governance Program will work in selected countries in the region at differing levels of intervention, from work with firms, institutions, and economy-wide market-level interventions to improve the enabling environment for corporate governance.
IFC provides advice to companies and banks on how to introduce and strengthen corporate governance practices based on international standards. Our activities include improving board practices, shareholder rights, internal and external controls, risk management, transparency, and reporting practices, as well as improving enforcement and resolving related disputes. We help build capacity and provide support so that institutions can be sustainable by working with regulators, corporate governance institutes, centers for directors and educational institutions and the media to support adherence to corporate governance practices at the country and corporate levels.
The overall goal of all corporate governance advisory projects is to improve financial performance (reduced costs of capital, higher valuations, and/or improved loan terms), and operational efficiency (improved operations and/or clearer roles) by promoting better corporate governance practices among financial institutions, listed companies, and unlisted medium-sized family businesses. By so doing, companies should also enhance their access to financing.
In addition, to sustain the advancement of corporate governance practices, the capacity of key intermediaries, such as institutes of directors or institutes of corporate governance, Securities Exchange Commission and/or Central Bank or their respective training entities, associations of banks, universities, etc, will be built to effect change in the market in the long run. Finally, regulatory reform through the launch or amendment of already existing corporate governance codes and/or listing rules is regularly addressed as well.
Progress Thus Far
The region has already been implementing a comprehensive Bangladesh Corporate Governance Project which aims to improve financial performance and operational efficiency by promoting better corporate governance practices among business enterprises in the country.
An impressive growth of over 5% in the last two decades has taken the Bangladesh economy to a new growth trajectory. However, sustaining the economic growth in the long-term is highly dependent on attracting patient capital and one of the key pre-requisites of this is ensuring good corporate governance framework and practice in Bangladesh.
Public and private sectors in Bangladesh have taken steps to improve corporate governance in recent years. The Securities and Exchange Commission issued Guidelines on Corporate Governance in 2006 and the creation of a Central Depository has made share ownership and transfers more secure. International standards for accounting and auditing have been partially incorporated into local standards and the development of the accounting and auditing profession has been assisted by a wide-ranging donor-supported programs.
In spite of the above efforts, there has been only moderate progress in advancing corporate governance practices in Bangladesh. The basic legal framework for corporate governance in Bangladesh is dated, and there are a number of contradictions and points of confusion between the various rules and regulations that apply to listed companies.
The Bangladesh Corporate Governance Project is funded by DFID, NORAD and the Netherlands Government.
Why is this important to the South Asia region?
The challenge for IFC in South Asia today is to sustain growth and continue to reduce poverty and inequality in a much less favorable global economic environment. Good corporate governance practices are key to attain sustainable growth as they support the creation of sustainable businesses, which can better raise investment and have improved access to markets. This is supported by strengthening the corporate governance legislative framework, the building of institutional capacity, and greater awareness of the benefits of good corporate governance practices.
Culture and Corporate Governance Principles in India: Reconcilable Clashes? Private Sector Opinion by Pratip Kar explores the dynamics of culture and corporate governance in India by calling attention to three areas where the clashes are strongest: related-party transactions, the promoter’s or large shareholder’s actions, and the board’s nominations, deliberations, and effectiveness.