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Bangladesh must develop its capital and bond markets to meet the long-term financing needs of infrastructure projects as bank loans are not viable for mega initiatives worth billions of dollars, said a top official of a state-run non-bank financial institution.
“Funds will have to come from the stock market or the financial sector. So, if we can’t develop the stock and bond markets, we will not have access to funds,” said SM Formanul Islam, executive director and CEO of Bangladesh Infrastructure Finance Fund.
He said a country could not implement infrastructure projects relying on bank borrowing.
Even if all banks in Bangladesh become one single entity, they will still not be able to bankroll a project like that of the Padma bridge or Dhaka-Chattogram expressway, said Islam.
“Investment is taking place in various sectors but we need more,” he said.
He said Bangladesh’s credit rating was not of investment grade, for which local businesses had to pay more if they wanted to borrow from international sources because the lenders take into account all factors, including risks, while fixing margins.
“If we could mobilise funds domestically, then the margins will be less and infrastructure projects would be more viable,” said Islam.
Islam is heading an organisation set up just a couple of years ago in 2011 to address the importance of infrastructure development and insufficient investment in the sector and to promote an attractive environment for sustainable private investment.
It is the biggest NBFI in the country with authorised capital and paid-up capital of Tk 10,000 crore and Tk 2,010 crore respectively.
Of the paid-up capital, the government has provided Tk 1,600 crore and the rest came in the form of profits from its investment in various projects.
It has invested in the elevated expressway project, three special economic zones, the Cox’s Bazar-Chittagong railway and Rooppur nuclear power plant.
It also has investment in liquefied petroleum gas projects, hospitals, hotels, energy efficiency projects, flyovers, textile mills and an electronics products maker.
The company is supporting projects aimed at producing green construction materials as part of efforts to protect the environment.
“Our pipeline is also very robust. There are 70 projects under our consideration,” Islam said.
The NBFI has disbursed Tk 3,400 crore as of May 2019 but it will require at least Tk 5,000 crore in the next few years to meet the minimum financing need of prospective borrowers, prompting it to explore various avenues to source funds.
Its board has approved a proposal to raise Tk 500 crore through issuing a bond. Since the rate is very high, the company is going slow, Islam said.
The board has also approved another plan to raise Tk 1,000 crore from the stock market.
source (TDS)
