Dhaka, Bangladesh (BBN)– Bangladesh’s corporate entities will be encouraged to raise capital through issuing bonds for meeting long-term investment instead of bank borrowing, officials said.
The issue was discussed at a meeting of tripartite committee, held at the central bank headquarters in Dhaka on Monday, with its chief Md Khurshid Alam in the chair.
The committee has already prepared a 32-page draft report that will be finalised by the end of June this calendar year through arranging seminars or meetings with the stakeholders.
“We’ll recommend providing insensitive to the issuers for encouraging floating their bonds in the market,” a senior member of the committee told the BBN after the meeting.
He also said the committee will also urge the authorities concerned for taking effective measures to reduce the cost for issuing bonds.
The tripartite committee was earlier formed with senior officials of the Bangladesh Bank (BB), Bangladesh Security and Exchange Commission (BSEC) and a representative from a primary dealer (PD) bank aiming to boost the country’s nascent bond market, particularly the corporate one.
The committee will also request the Dhaka Stock Exchange authorities to set up a separate platform for fixed income securities, according to the member.
The corporate bond market in Bangladesh, however, remains at a nascent stage mainly due to disclosure rules and strict governance norms of the market, according to the BB officials and experts.
For funds, corporate borrowers prefer to rely on banks instead of the bond market to avoid the need to comply with disclosure requirements and strict governance norms of market, they explained.
They also said the high cost of launching new debt products and high transaction cost of bond-registration fee, stamp duties, annual trustee fees and ancillary charges discourage the corporate entities to issue their bonds.
Currently, only one corporate bond — Islami Bank Bangladesh Limited (IBBL) Mudarba Perpetual Bond — is now traded on the country’s prime bourse, the Dhaka Stock Exchange (DSE).
Talking to the BBN, Mr Alam, also general manager of Debt Management Department of the BB, said: “We’re working to develop a vibrant bond market as a alternative source for long-term investment.”
“Actually, we need to raise a substantial amount of fund from the bond market as well as the banks to achieve the 8.0 per cent plus growth by the end of fiscal year 2020-21,” he explained.