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The International Finance Corporation (IFC) has sought final approval from the government on Bangladesh Taka (BDT)-denominated bonds planned for the launch on the local market for industrial-and- business financing, officials said.
Country manager of the IFC for Bangladesh Martin Holtmann, in a letter early this month to the Economic Relations Division (ERD), made the request so that the borrowing instrument could be issued soon.
The IFC, the private-sector financing arm of the World Bank Group, had launched the discussion on issuance of the debt securities four years back and after a series of meetings it submitted initial request of consent in July 2021.
Ever since have the negotiations continued and the ERD and the Ministry of Finance had supported the IFC offer on certain conditions.
Officials said the ERD last Tuesday sought final opinion from the MoF whether the IFC can be given approval for issuance of the onshore bond.
A senior finance ministry official told the FE that they are "discussing the issue internally" before providing opinion for launching taka-denominated debt securities which will be sold on the domestic debt market in Bangladesh.
The taka-denominated bond will offer financial support to domestic industries and agencies in need of funds.
By issuing bonds on Bangladeshis bourses the IFC will mobilise money and invest in local firms.
The IFC currently lends to different Bangladeshi private companies and firms from its global funds.
Officials say Bangladeshi private-sector entities have huge demand for funds for expanding their business and setting up new ventures. "The taka bonds will help the IFC in financing these local firms to expand their business," says one official.
In November 2019, the IFC issued BDT-denominated 'Bangla Bond' on the London Stock Exchange, worth Tk 800 million (US$9.5 million), to help expand operations and distribution of funds in Bangladesh.
The government wants to make bond market vibrant to generate long-term investment from bourses instead of banks. However, the country's bond market has yet to get a shape until now, while banks reel from huge default loans stuck up with bid businesses and industrial ventures.
Long-term industrial investments are now totally bankrolled by the banking sector, which creates pressures on the banking sector. Banks' financial health becomes weak if a number of large borrowers become defaulters, bankers say.