• Monday, Dec 06, 2021
  • Last Update : 12:45 am

IFC's Taka Bond - A boon or bane for the local bond market?

  • Published at 08:25 pm October 27th, 2021
File photo: Dhaka Tribune

The multilateral lender has already informed the Ministry of Finance (MoF) of its interest in issuing Taka-denominated bonds

After successfully setting off Bangla Bond in London and various local business establishments, the International Finance Corporation (IFC) of the World Bank Group now wants to raise money from local bourses through Taka-denominated bonds, or "Taka Bonds."

The multilateral lender has already informed the Ministry of Finance (MoF) of its interest in issuing Taka-denominated bonds.

However, sources in the ministry said that their letter did not specify how much money would be withdrawn from the bonds, how much coupon rate would be given to investors to withdraw the money and at what interest the money would be reinvested.

Analysts, however, said that the Taka Bond may have a positive impact on the country's capital market, but before the country's weak bond market moves, they urged transparency and investor protection before bringing in foreign institutes in the local bond market.

On the other hand, those involved in the country's financial intuitions sector are already worried about the news.

They think the inclusion of this foreign investment company may shrink their business.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, suggested strengthening the weak bond market and protecting investors before giving foreign companies a chance to enter the bond market.

Speaking to Dhaka Tribune on Wednesday, he said: “So far, our bond market has not been strong. In this situation, the issuance of bonds means the interest of a few big companies like the bonds of Bangladesh Bank.”

Due to this weak bond market, a general investor does not want to put his money in bonds. This is because the policies have been set in such a way that any investor who is suddenly in need of funds, cannot sell their bonds even if they wanted to. Their money remains in limbo, he explained.

"The government needs to ensure financial security of investors in these foreign institutions. Undoubtedly IFC is a good organization. But if you judge in that way, what is the need to take a guarantee from them?" the former World Bank lead economist asked.

"If they invest in the country (Bangladesh), it is for the benefit of the country. However, if you can make extra profit by investing abroad, it is the profit of the investors in the bond market. They will get more and more dividends," Hussain added.

Asked about the current bond market and the IFC's bond issuance process, Mohammad Rezaul Karim, spokesperson of Bangladesh Securities and Exchange Commission (BSEC) told Dhaka Tribune that the BSEC was trying to strengthen the country's bond market.

Also Read - Bangla Bond listed on London Stock Exchange

"However, we have not yet received any letter from the IFC regarding the release of the taka bond," he informed.

The company had earlier invested in the country by raising money through a Bangla bond in London. Now if they want to do it in the country, they have to get permission from the Finance Ministry and BSEC. Apart from this, if there is a matter of money transaction from abroad, it is also under the jurisdiction of Bangladesh Bank.

“Moreover, before taking permission to issue bonds, the IFC must inform them about how much money they want to withdraw from the bond market and what the coupon rate will be,” he added.

IFC declined to comment on this matter. 

Earlier, the IFC for the first time had issued BDT-denominated “Bangla Bond” on the London Stock Exchange, worth Tk160 crore, to help expand operations and distribution of funds in Bangladesh.

The three-year bond, listed on the UK stock market, was placed with asset managers dedicated to emerging markets, with the deal arranged by Standard Chartered Bank and Bank of America Merrill Lynch.

The proceeds from the bond were used to provide financing to Pran-RFL Group to boost their processing capacities and deepen the rural distribution reach.

Facebook 51
blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail