The bond market has potential for private companies

The bond market is a very promising sector for financing private sector companies in the country. Pran Agro has raised a capital of Tk 210 crore through bonds. Experts have identified the success of Pran Agro as a major milestone for the country’s bond market. The experts expressed this opinion in a meeting held online on Monday.

For the first time in the country, a meeting was organized at Pran-RFL Group to celebrate the success of Pran Group in raising funds through internationally guaranteed bonds. It was informed at the function that the entire bond issued by Pran Agro has been bought by the multinational insurance company MetLife.

Salman F Rahman, Private Industry and Investment Adviser to the Prime Minister, who was the chief guest at the meeting, said the bond market is a very strong sector as an alternative source outside the bank in raising long-term capital. The bond market will be stronger if international guarantors and financiers are added to the bond market. Others will then leave bonds and become interested in raising money.

Speaking on the occasion, British High Commissioner to Bangladesh Robert Dixon said that the United Kingdom has always been a long-term development partner of Bangladesh. The development of the bond market is necessary for the economic development of Bangladesh. If this market is big, our investors will also be interested in investing.

Sirajul Islam, executive chairman of the Bangladesh Investment Development Authority (BIDA), said Pran Agro’s bond issue was an inspiration to others. This will encourage domestic companies to raise long-term capital. Bida has always been working to make the business environment in the country easier.

Shibli Rubaiyat-ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), the regulator of the capital market, said at the meeting, “The BSEC is working to take the bond market forward.” We hope that after the success of Pran, others will follow Pran now. ‘

Ahsan Khan Chowdhury, chairman and chief executive of Pran-RFL Group, said at the meeting, “The bond market has not developed like that in the country yet.” BSEC is working on this. I hope that in the future the bond market will take Bangladesh a long way. Private companies will be able to raise the necessary funds through bonds.

It was informed at the function that the transaction of non-convertible bond of Tk 210 crore of Pran Agro has been completed successfully recently. The bond will expire at the end of the term. This is the first internationally guaranteed Bangladeshi bond. The money raised through bonds will be used to expand the agricultural supply chain and the activities of Pran Agro Limited in the local and international markets.

Malaysia is the world’s largest issuer of sukuk. In 1990, a private company in the country first issued a lease of 125 million rupees in local currency. The country then launched the market 600 million global sukuk market in 2002. Sukuk’s market in Malaysia is gradually expanding due to specific policies.

The introduction of Islamic bond sukuk will create a new source of government funding. In addition to collecting revenue every year to meet budget expenditures, the government has been relying on the sale of savings certificates and bank loans. However, the government also collected Tk 16,000 crore from the surplus funds of government, semi-government and autonomous organizations in the last fiscal year 2019-20.

Sukuk is usually issued as a source of long-term financing such as infrastructure construction and implementation of development projects. For example, a plan was taken to build a bridge at a cost of Rs 500 crore. The project owner or an organization can issue a sukuk of the same amount to finance the project. Any person or organization interested in investing can buy Sukuk of the project and own the declared part or portion of the project. Sukukholders will benefit from the proceeds of the project in proportion to their ownership.

So the government has taken the initiative to leave Sukuk to meet the funding deficit. The government’s finance department and Bangladesh Bank have been working together for 9 months. Initially, the finance department estimated that it would be possible to raise at least Rs 30,000 crore through Sukuk, which could be used for government development activities. To this end, bonds worth Tk 5,000 crore may be released in the current 2020-21 financial year.

The government is observing that the share of Shariah-compliant banks in the entire banking system is about 25 percent. However, there is no Shariah-compliant material in the country to finance the government’s deficit. As a result, on the one hand, financial institutions are deprived of the opportunity to invest in a more secure sector, on the other hand, the government is unable to use the funds of institutions to finance its deficit. According to the finance department, the government’s interest expenditure will also be reduced if deficit financing is done through Sukuk.

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