Most people in Bangladesh prefer to keep their funds in banks but lower interest rates on deposits are now turning them away from the risk-free income generating investment tool.

Currently, the deposit rate has declined to an average of 4.51 per cent while it was around 6 per cent a year earlier.

At the same time, the country's inflation rate rose to 5.32 per cent in February, reflecting negative returns.

This means that if you keep your money in a bank where the difference between the interest rate and inflation rate remains the same, then your fund's value would fall by Tk 0.81 for every Tk 100 by the end of the year.

However, the number of investment options in Bangladesh is very limited, according to Mahmood Osman Imam, a professor of finance at the University of Dhaka.

So, in cases where a bank offers a lower interest rate for saving than its inflation rate, people can either go for a savings certificate or invest in the stock market.

But since stocks are a very risky proposition, the general public should avoid making significant investments without first availing proper knowledge on it, Imam said.

If you are risk-averse, then you may choose to invest in savings certificates, namely a five-year Bangladesh sanchayapatra or three-monthly profit bearing sanchayapatra, he added.

Bangladesh savings certificates offer a 11.28 per cent profit while three-profit bearing savings schemes come with 11.04 per cent interest.

However, there is a limit to the amount that can be invested.

The investment ceiling for three-month profit bearing savings instruments is the same, according to the Department of National Savings website.

There are two-other instruments: family savings certificate and pensioner savings certificates.

However, only women above 18 years of age and persons aged 65 years and above can buy the instrument offering 11.52 per cent profit. The maximum limit for an individual investing in a family savings certificate is Tk 45 lakh.

The scope for investment in pensioner savings certificates, which offer 11.76 per cent profit, is limited to public sector employees.

A person cannot invest more than Tk 50 lakh in three savings instruments: the five-year Bangladesh savings certificate, the three-month profit-bearing savings certificate, and the family savings certificate.

Under joint accounts, the highest amount of investment in the three savings schemes will be Tk 1 crore, a cap aimed at discouraging wealthy people from putting in too much money in the high-interest-bearing savings instruments offered by the government.

Imam said some non-bank financial institutions offer higher interest rates but investing in these are risky while some of these businesses are struggling to survive.

Another option may be to invest in the stock market despite its high risk.

But according to market analysts, shares with good fundamentals and a good track record of dividend declarations may be an option. If a person chooses the right stock for investment, s/he is likely to gain.

An investor needs to choose a company that has potential and a good track record of giving high dividends, they said.

If anyone invests in stocks with good fundamentals for a long-term, he is likely to reap higher gains, the analysts added.

However, if the person cannot choose in which stock to invest, open-ended mutual funds managed by good asset managers could be another option.

Open-ended mutual funds are investment vehicles that gather a fixed pool of money from investors and re-invest them into stocks, bonds and other assets.

However, it is important to understand which funds are good, Imam said.

"In our country there is no benchmark to know which one is better," he added. Bangladesh has 48 asset management companies that manage 63 open-ended mutual funds.