Analyzing COVID-19's Impact on the Banking Sector in Bangladesh

This report provides a comprehensive analysis of the impact of the COVID-19 pandemic on the banking sector in Bangladesh. It examines the pre-COVID-19 state, the effects of the pandemic, and the challenges faced by banks, including increased lending rates, dependence on paper-based transacti...Read More

Impact of COVID-19 on Bank Performance:
Perception from Bangladesh
Abstract:
The COVID-19 pandemic has had an enormous impact on the worldwide economy. The banking
sector of Bangladesh has been seriously affected that contains three aspects: short-term, long-
term, and systemic risks. We have analyzed several research articles to reach on a concluding
remarks about the impacts of the issue. Support for differentiated financial services for pandemic
prevention and control is needed, with increased credit support. Medium-to-small enterprises
need to be supported through special credit lines, reduced interest rates on loans, deferred
repayments, and establishment of long-term credit systems. But the outbreak of the COVID-19
pandemic is an unusual shock to the Bangladesh economy causing the increase in the lending
rate of the banks. In Bangladesh, all banking transactions are still comprehensively dependent on
paper or documents. One has to fill out pages of forms, submit copies of identity documents,
photographs, TIN certificate, etc. in paper with wet signature for opening an account. To file
taxes or to buy a car or if a person receives remittance from overseas or even if a factory owner
needs to import raw material, For almost everything related to banking, it is essential to visit the
branch. So that a digital transformation needs to take place at a faster rate to improve intelligent
risk control systems. Besides, the economy of Bangladesh was already in a perilous state before
COVID-19 struck because of the high level of non-performing loan in the banking sector. After
the attack of the pandemic this situation have been worsen referring to the state that a fall in risk-
weighted asset values, capital adequacy ratio, and interest income at the individual bank and
sectorial levels. The economy is likely to face a protracted period of slow down because of the
prolonged country-wide lockdown, global economic downturn and associated disruption of
demand and supply chains. In this paper we have described the state of the Bangladeshi banking
sector in the pre-Covid-19 period and post-Covid-19 period and assess the possible influence of
the shock on various segments of the banking sector, also analyze the policies that have been
announced so far by the central government and the Bangladesh Bank to deteriorate the
economic shock and put forward a set of policy recommendations for specific sectors. As the
Banking companies which are backbone of Bangladesh economy are the main affected parties
after COVID-19, this article is an attempt to analyze bank stock prices around the world to assess
the impact of the COVID-19 pandemic on the banking sector. We have also analyzed the impact
under the comparison of the global banking industry and its consequences in Bangladesh.
Besides we have analyzed how the SMEs have fallen because of the COVID consequences
occurring laying down employees, cutting the salaries by 15-20%. So that, because of the falling
productivity of the businesses the demand for loans have been decreased causing distress in the
banking sector. We have also discussed in this paper how the result of increased new cases and
death due to COVID magnifies fear and stress among the people from banking sectors due to
direct exposure with the public and not being able to maintain proper social distance The

conclusion in this regard is based on the views expressed by several groups including
economists, financial institutions like IMF, World Bank and consulting firms.
Methodology:
After studying that COVID has put along a serious impact on various aspects like SME banking,
psychological consequences on the bank officials and also the interest rate, liquidity, capital
adequacy, non-performing loans of the banking sector, we conclude that the performance of the
banking sector of Bangladesh shows a negative remarks on that issue. Through the whole
research process we have used the secondary data collected by others and also some primary
data’s from different journals have been use. References are included later on. This research is
basically dependent on the quantitative data but various qualitative data such as the mental health
impact among bankers, Demographic Variables and Factors Related to COVID-19 are included
for analyzing the impact (Yasmin et al., 2021).
Here we have developed multiple methods of research designs such as in one study the concept
of descriptive studies has been developed. Such studies are mostly conducted to explain a
phenomenon of interest rather than making interpretations and judgments. The current study is
descriptive in nature. This research is explanatory in nature and provides useful information
about the impact of stress management of bankers in Bangladesh (Kunt et al., 2020).
We also used cross-sectional method of research design in another study which is used for
descriptive purposes. There is a significant positive correlation between depressions, anxiety
scale and COVID outbreak which have been developed by correlational matrix of the similar
study report (Yasmin et al., 2021).
I. Sample design:
The population for this research included the banking personnel from different private and public
commercial banks in Bangladesh. A convenience sampling technique was used to select the
organizations as well as employees of those organizations. Cluster sampling is use in the studies
which is a method of probability sampling that is often used to study large populations,
particularly those that are widely geographically dispersed. Researchers used pre-existing units
such as banks or cities as their clusters. Simply this sampling technique focuses on obtaining
relevant data from the people who are conveniently available. Both married and unmarried
employees have taken into consideration to understand their stress level at workplace (Yasmin et
al., 2021). There are 177 clusters in Bangladesh, of which 129 falls under Booster sectors and 48
under Non–booster sectors use in one study report (Qamruzzaman., 2020). and 3,043 firms, of
which 896 are commercial banks and 2,147 correspond to non-bank financials globally in
another (Kunt et al., 2020). Where the positions of the employees were categorized into top
level, mid-level, and lower level. The respondents were all either graduate or post graduate

employees who were considered as icons in the concerned positions of those organizations.
Respondents were assured that information will be kept confidential and used only for academic
purpose (Qamruzzaman., 2020).
II. Variables:
One study examines the impact of COVID-19, on banks liquidity of Bangladesh. In This study
the variables are examined through regression analysis by using the description of the variables
i.e. Bank liquidity as dependent variables and Trend in affected case, Trend in death case, Log
GDP, Inflation and Investment freedom as Covid19 variables. Log GDP (GDP) equals the
natural logarithm of annual gross domestic product (GDP). And Inflation (INF) is measured by
the Consumer price annual rate of inflation %. Authors' calculated based on data collected from
various rwweliable sources like John Hopkins, World Development Indicators database, World
Bank etc. (Rahman et al., 2020). Another study contains the variables like depression, anxiety,
and stress using International Journal of Mental Health and Addiction as the sources of
information (Yasmin et al., 2021).
III. Data Collection
Primary and secondary data were used for the study. Primary data were collected through the
printed survey questionnaires followed by direct personal visit. Around 246 usable responses
(82%) were received from 300 respondents who were working at different private commercial
banks in Bangladesh (Barua & Barua., 2021). The secondary data were collected from journals,
books, magazines, websites, and so on. We used survey methods of data collection in our whole
collection process. Survey research means collecting information about a group of people by
asking those questions and analyzing the results. Before we start conducting survey research, we
should already have a clear research question that defines what we want to find out. Based on
this question, we need to determine exactly who we will target to participate in the survey that
means the target population of our research. For example:
 The population of Bangladesh
 The public and private banks of Bangladesh.
Then we decide for the sample size and characteristics. Decision on the type of survey is
conducted afterward.
 Some of the studies conducted through questionnaire, where a list of questions is
distributed by mail, online or in person, and respondents fill it out themselves (Yasmin et
al., 2021).
 Again some uses interview method, where the researcher asks a set of questions by phone
or in person and records the responses.

Designing the survey questions like patterns of the questionnaire such as structured or
unstructured is the next procedure to follow. We have followed structured questionnaire
including both open ended and closed ended questionnaires (Qamruzzaman., 2020). Likert
scale has also been used here for survey (Yasmin et al., 2021). Then after distributing the survey
and collecting responses we reach a concrete result.
IV. Survey Instrument
The survey instrument was administered among the respondents in the different private and
public commercial banks of Bangladesh. A 38-item questionnaire was designed by the
researchers to gather primary data in the present study. The questionnaire had two different parts
whereby 1st part comprised of variables like- job demand, work life conflict, job performance,
burnout, turnover intention, job satisfaction and job; while the 2nd part of the questionnaire
included the information of respondents like gender, age, education, status, children, number of
children, years of experience, years worked at the present organization, highest educational
attainment, name of the bank, and the level of management. Some of these constructs in the
questionnaire survey were measured against 7 point Likert-type scale (Yasmin et al., 2021).In
this study, “Factor Analysis” was used to reveal the major dimensions of job stress.
V. Research Procedure
As per the convenience sampling technique, 300 respondents were selected from Dhaka,
Chittagong and various cities in Bangladesh. The questionnaire was circulated among the
respondents; who were also told about the intent and scope of the study so that they appear
confident and logical while solving the questions. A sum of respondents was observed as
authentic while the rest were discarded due to incomplete responses. SPSS software, version 17,
was used for further necessary analysis. Further that descriptive research is carried out to prove
all the developed hypotheses regarding the observable fact. Also statistical tools like mean,
median and standard deviations were used to conclude the correlational relationships between
variables, collected from the Table-2: Summary Statistics of the Variables, source Authors'
calculations (Rahman et al., 2020).
VI. Mode of Data Analysis
The study of five different but relevant articles indicate that it has used a sophisticated method of
statistics Factor Analysis. In order to obtain the interpretable dimensions, researchers have
subjected the initial factor matrices. Finally, dimensions of the turnover have been made on the
basis of factor scores (Yasmin et al., 2021). Before analysis the gathered data was prepared. The
dataset was checked for missing data and outliers. For this the “outlier labeling rule” was used.
All values outside the calculated range were considered outliers. The data was then analyzed
using statistical software SPSS. To analyze the data, a set of statistical tools have been applied.

For checking the reliability and consistency of study variables, scores of Cronbach’s alpha
coefficient (range 0 to 1) have been determined. Statistically significant variables were used in
ordinal logistic regression analyses (Yasmin et al., 2021). We have also done some hypothesis
testing in one study that comprises different assumptions about association between Covid-19
and Bank liquidity crisis, again the government actions variables substantially affect banks'
financial stability during COVID-19 period etc.
VII. Validity
Validity refers to the appropriateness, meaningfulness, and usefulness of the specific inferences
made from test scores. Validity also refers to the degree to which evidence and theory support
the interpretations of test scores entailed by proposed uses of tests.
However, given that in this study the instrument is designed to examine the impact of job stress
in the banks of Bangladesh. The validity estimation is mainly focused on content and construct
validity. Content validity evidence is collected and examined carefully by authors to determine
if the content and objectives measured by the test are representative of those that constitute the
content domain. Construct validity study uses correlational approach on the basis of factor
analysis, which is a statistical procedure for studying the inter-correlation among a set of test
scores with the purpose of determine the number of factors or constructs required to account for
the inter-correlations, and the percentage of variance accounted for by the factors. Results from
factor analysis studies contribute to demonstrate evidence for the construct validity of an
instrument. Factor analysis is a method of reducing a large number of variables like tests, scales,
items, persons, and so on to a smaller number of presumed underlying hypothetical entities
called factor. Factor analysis has two major objectives such as data reduction and substantive
interpretation. In the present study, ‘Principal Components Varimax Rotated Method’ of factor
analysis has been used to identify the major dimensions of job stress of employees in the banks
in Bangladesh.
VIII. Reliability Analysis
Reliability reflects the consistency of a set of items in measuring the study variables. It illustrates
the individual differences concerning the amount of agreement or disagreement of the concepts
or variables studies. Cronbach’ salpais most widely used method to measure the reliability of the
scale. Satisfactory value of it is required to be more than 0.60 for the scale to be reliable. Thus,
the data were tested for using Cronbach’s alpha to assess reliability. The job stress questionnaire
depicts the Cronbach‘s alpha of 0.78 which is more than the standard recommended value of
0.50. This clearly states that all of the items were reliable to monitor the job stress perceived by
the banking sector employees.

IX. Research limitations
Basically during the Covid-19 pandemic outbreak with a policy of social distancing and physical
distancing this study has been focused on the Dhaka city area (Barua & Barua., 2021). So that
there remains a problem about the authenticity of the sample size representing the population
parameter and the result cannot be generalized on the population as a consequence. The non-
responsiveness of the participants was also a problem in this sector. But we overcome all the
difficulties in our research by analyzing the related research reports and the information’s
collected by them from not only the Dhaka city, but also the other cities were included (Yasmin
et al., 2021).

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