South Asia Bond Markets South Aisa Bond Markets: Bangladesh

27 Pages Posted: 14 Jul 2007

See all articles by Yibin Mu

Yibin Mu

International Monetary Fund; Harvard University; World Bank

Date Written: April 2007

Abstract

The paper first analyzes the current situation of the bond markets in Bangladesh: The bond market has played a limited role in the Bangladesh economy. The Bangladesh bond market is also rather shallow compared to the neighboring countries.

Then, the paper analyzes the main impediments to the Bangladesh debt market include (i) the weak regulatory framework; (ii) supply-side constraints such as a lack of the benchmark bonds; (iii) demand-side constraints such as the limited investor base; (iv) a lack of intermediaries with expertise in debt products; (v) a lack of confidence in corporate borrowers; (vi) market distortions which are caused by the National Savings Scheme (NSS) offering above-market returns; and (vii) a lack of interest from private companies, including financial intermediaries and large business, in launching new debt products due to high fees.

Finally, the paper offers a roadmap for the development of the Bangladesh bond market:

1. Strengthen the development of the government securities market by (i) improving the efficiency and transparency of the government securities primary market, (ii) gradually increasing the volume of the marketable government securities and reducing the volume of the non-marketable securities, and (iii) strengthening the liquidity of the secondary market in the government securities.

2. Promote the corporate bond market development by (i) developing a comprehensive set of guidelines on issuing bonds and debentures under the direction of the Securities and Exchange Commission, (ii) further reducing issuing costs, and (iii) creating an enabling environment for the development of asset backed securitization.

3. Broaden the investor base by (i) promoting the pension sector reform, (ii) strengthening the insurance sector development, and (iii) adopting reforms to attract foreign investors.

Keywords: Capital Markets, Bangladesh, Finacial Sector, Development

JEL Classification: E6, G1, G2, H6

Suggested Citation

Mu, Yibin, South Asia Bond Markets South Aisa Bond Markets: Bangladesh (April 2007). Available at SSRN: https://ssrn.com/abstract=999713 or http://dx.doi.org/10.2139/ssrn.999713

Yibin Mu (Contact Author)

International Monetary Fund ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Harvard University ( email )

Cambridge, MA 02138
United States

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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