Devolopment of Bond Market in Bangladesh
Opportunities in Emerging Corporate Bond: Chapter Bangladesh
Md. Shahriar Parvez*
Abstract:
Purpose: A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longerterm debt instruments, generally with a maturity date falling at least a year after their issue date. The study focuses on Bond market development in Bangladesh, an emerging market. The policy environment for bond market development in Bangladesh is studied with the initiatives by various sectors over the past decade (2001 – recent year). This paper also aims at understanding the hurdles Bangladesh is facing in developing its own local currency bond market over last decade. Design/ Methods: The study uses published secondary data from various relevant sources and the researchers have used personal observation and experience regarding the country’s socio economic and political background and their impact on the bond market. Findings: Developing bond markets is more complicated than developing equity markets. They operate best when they have money market and longer-term benchmarks. Numerous factors suggest that Bangladesh could not develop an active, local-currency, and fixed-income market. The obstacles include improper regulations, unwilling investors and borrowers, lack of market confidence and ineffective infrastructure. The market participants in Bangladesh are skeptical whether the government can succeed in this endeavor. Practical Implications: Because of large quantum of long-term fund requirement with the liberalization of the energy and communication sectors, major infrastructure sectors like oil & gas, power, telecommunications, shipping, airlines and port development, the government financing for such sectors would be lesser in the days to come. Existing financial system of the country does not have either the capability or the instruments to support these sectors. The rational
Md. Shahriar Parvez*
Abstract:
Purpose: A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longerterm debt instruments, generally with a maturity date falling at least a year after their issue date. The study focuses on Bond market development in Bangladesh, an emerging market. The policy environment for bond market development in Bangladesh is studied with the initiatives by various sectors over the past decade (2001 – recent year). This paper also aims at understanding the hurdles Bangladesh is facing in developing its own local currency bond market over last decade. Design/ Methods: The study uses published secondary data from various relevant sources and the researchers have used personal observation and experience regarding the country’s socio economic and political background and their impact on the bond market. Findings: Developing bond markets is more complicated than developing equity markets. They operate best when they have money market and longer-term benchmarks. Numerous factors suggest that Bangladesh could not develop an active, local-currency, and fixed-income market. The obstacles include improper regulations, unwilling investors and borrowers, lack of market confidence and ineffective infrastructure. The market participants in Bangladesh are skeptical whether the government can succeed in this endeavor. Practical Implications: Because of large quantum of long-term fund requirement with the liberalization of the energy and communication sectors, major infrastructure sectors like oil & gas, power, telecommunications, shipping, airlines and port development, the government financing for such sectors would be lesser in the days to come. Existing financial system of the country does not have either the capability or the instruments to support these sectors. The rational