The Impact of Bank Proliferation & Growth of MFS: A Study on Bangladesh's Financial Sector

Bangladesh's banking sector has undergone significant changes over recent years, driven by the dual forces of market concentration and digital transformation. This study explores the impact of these trends by examining how the dominance of a few large banks affects competition, profitability, and financial stability within the sector. Additionally, it assesses the growing influence of Mobile Financial Services (MFS) in expanding financial inclusion, particularly in underserved rural areas. The research utilizes secondary data from 2019 to 2023, highlighting that the top five banks control most small account deposits, leading to reduced market competition and challenges for smaller banks in achieving profitability. Large banks, benefiting from economies of scale, demonstrate greater efficiency and resilience, while smaller banks face higher operational costs and greater vulnerability to economic shocks. The rapid expansion of MFS has reshaped the financial landscape, offering accessible alternatives to traditional banking, but also posing new regulatory challenges. This study emphasizes the need for a balanced regulatory framework that supports financial inclusion, encourages competition, and ensures stability in a digitally evolving market. The findings offer insights for policymakers and banking stakeholders in navigating the sector's future. Keywords: Bangladesh banking sector, market concentration, digital transformation, Mobile Financial Services (MFS), financial inclusion, bank efficiency, financial stability, regulatory framework. DOI: 10.7176/RJFA/16-3-02 Publication date: March 30th 2025