ADB seeks govt nod to issue taka bond

The Asian Development Bank (ADB) has sought the government's permission to issue bonds through mobile money to mobilise investment for Bangladesh's development, officials said on Saturday.

The Manila-based lender plans to introduce the bond in local currency in the domestic market first and, upon its success, offload it to overseas investors, they said.

The ADB recently submitted its bond issuance proposal to the Economic Relations Division (ERD) under the Ministry of Finance for approval. Later, the government sought opinions from various stakeholders on the matter, officials added.

"The ADB proposal is under scrutiny, and we will respond to the lender shortly," a senior ERD official told The Financial Express. "We have already shared the proposal with the relevant ministries and agencies. If they find it viable for the country, only then will we approve it."

Another ERD official said the proposal has been sent to the Finance Division, Bangladesh Securities and Exchange Commission (BSEC), National Board of Revenue (NBR), Bangladesh Bank, and the Financial Institutions Division for their opinions.

"After receiving their feedback, we will review the inputs and then make a decision on behalf of the government," he added.

ADB officials said they intend to issue taka-denominated bonds in the local market first and, upon success, expand the initiative both domestically and internationally.

Since Bangladesh requires extended financing for infrastructure development and its private sector is expanding, this fund mobilisation will ultimately support public and private sector growth, an ADB official said, requesting anonymity.

ADB, the country's second-largest development partner, provides around US$2.0 billion in annual financing to the government for public sector development. In addition, it supports the private sector by offering loans for business expansion.

The ERD official noted: "We had a previous experience approving a bond for another multilateral agency, the International Finance Corporation (IFC). It also issued taka-denominated bonds in the London market, but that was not very successful. So, we are being very cautious this time."

"We will thoroughly scrutinise ADB's latest proposal before granting permission," he added. In November 2019, the IFC issued its first Bangladeshi taka-denominated bond, known as the "Bangla Bond," on the London Stock Exchange, valued at Tk 800 million (approximately US$9.5 million at the time).

Proceeds from the inaugural Bangla Bond were used to finance the PRAN Group, a major local food and beverage manufacturer, for business expansion and job creation.

In July 2022, the IFC announced an investment of up to US$50 million (around Tk 470 crore) in Bangladesh's first-ever domestic housing bond, issued by BRAC Bank, aimed at providing affordable housing finance to low- and middle-income groups while helping develop the local long-term bond market.

The ERD official said the ADB has taken a similar initiative to mobilise funds like the IFC, aiming to expand local currency financing in Bangladesh to support industrial and business growth.

"This initiative seeks to raise funds domestically and reduce the private sector's reliance on traditional bank loans," he added.