Profitability of non-bank financial institutions is shrinking though their management strives to extract profits from a dull market this year, industry insiders said.

The situation is getting aggravated further due to early payoffs of loans by relatively good corporate clients.

"Banks, which are facing a dearth of business, are taking away our clients (credit lines). We cannot compete with banks as our cost of fund is higher than that of banks," said Asad Khan, managing director of Prime Finance.

Khan, also the president of Bangladesh Leasing and Finance Companies' Association, said some of his company's borrowers paid off loans worth around Tk 100 crore so far this year.

Almost all the 31 non-banks, except for a few who were able to collect deposits directly, are facing the same challenge, due to a poor demand for money from businesses.

The dull business and sliding profit of the non-banks were also evident in the latest Bangladesh Bank report released last week.

Their return on assets (ROA) and return on equity (ROE) that give an indication of an institution's profitability fell by 28 percent and nearly 24 percent respectively in two years, according to the BB report.

The ROA was 2.5 percent in 2011, but it came down to 1.9 percent in 2012 and 1.8 percent in 2013.

In other words, a non-bank made a profit of Tk 1.8 for every Tk 100 it invested in its assets in 2013, down fromTk 2.5 two years ago.

The ROE, also known as return on investment, has also been declining since 2011. Their ROE slid to 9.2 percent in 2013 from 12.1 percent in 2011, meaning their net income

returned as a percentage of shareholders equity fell by nearly 24 percent in just two years.

Industry players blamed the poor business on the tedious economic conditions that started with the stockmarket debacle in 2010 followed by last year's political crisis.

The investment situation did not improve much even after eight months of the national elections in January, they said.

In addition, nine new banks that started operations last year to take the tally of scheduled banks to 56 have further intensified the competition between banks and non-banks in netting new clients.

Stringent rules introduced by the regulator are also taking a toll on the business of the non-banks, officials said.

"We are struggling to survive. Our margin has gone down significantly and we are being forced to cut jobs," said Asaduzzaman Khan, managing director of 11D FC.

Some clients, especially the good ones, are paying their loans off, he said. "We are trying to retain the customers by offering lower rates of interest."