IFC moves to launch Taka Bond in Bangladesh

After launching Bangla Bond in London in 2019, the International Finance Corporation (IFC) of the World Bank Group has now taken an initiative to release Taka Bond in the country with a view to collecting the money to invest in various local industries.

The IFC plans to collect the bond money through releasing initial public offering (IPO) in the country’s stock markets. And the IFC thinks it will improve the country’s bond market.

The Economic Relations Division (ERD) gave its primary approval to the IFC’s Taka Bond on 17 October. The ERD said once the IFC releases the bond it will be considered as business and for that, the IFC will have to pay the taxes properly like other financial institutions.

Once the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) approve, the IFC’s Taka Bond will now take a final form. The IFC is now in talks with these two regulators. A high level delegation of IFC held a meeting with the central bank on Sunday. Besides, the visiting delegation has been continuing talks with officials at the various levels of the government.

To date, the IFC has been financing and investing in the country’s private sector from foreign fund. Now it wants to involve in business like other banks and financial institutions in the country. People concerned feared the IFC’s entry to bond market may reduce the business opportunity of the local financial institutions.

When contacted, IFC acting country manager (Bangladesh, Bhutan and Nepal) Nuzhat Anwar confirmed the initiative on the release of Taka Bond. She declined to disclose details since the matter is yet to be finalised.

Sources said the IFC is yet to determine how much money will be collected from releasing the bond. The coupon rate for investors and the interest on financing has also not been decided as yet.

The Bangla Bond was first listed in the London Stock Exchange (LSE) late in 2019. At that time, $19.5 million (1.95 crore) or Tk 1.60 billion (160 crore) were collected through the bond. There were further plans to accumulate more money in several phases, but that did not happen at last.

According to sources, the IFC first collected $9.5 million at 6.03 per cent interest and then another $10 million at 7.10 per cent interest. Foreign institutional investors poured money into the bond through Bank of America and Standard Chartered. The main facility of the bond was that payment of capital and interest money could be made in local currencies.

Businesses have borrowed fund from the IFC in the country. Pran-RFL Group is one of them. According to sources at the Pran-RFL Group, two companies of the Pran-RFL received Tk 1.60 billion (160 crore) in loans – Tk 800 million (80 crore) for Pran Agro Limited and Natore Agro Limited each.

The two companies received Tk 800 million (80 crore) in loan at 9.42 per cent interest with a term ending in July 2022. The companies also secure another Tk 800 million (80 crore) at 11.5 per cent interest with a term ending in February 2025. So, the Pran-RFL Group is paying interest at a rate higher than the bank rate. But the group is not worried about it since it is receiving finance for 5-6 year term through bond.

When contacted, Uzma Chowdhury, director (corporate finance) of PRAN-RFL Group, told Prothom Alo in a written statement, “Currently, the lending rate of the government banks is 9 per cent. Several banks have a lower rate too. But the term of these loans is 6 to 9 months. We need loan on long term. When we were getting loan at 10 per cent interest, at that time interest of the bond was also 10 per cent. The interest on loan may increase next year but the bond interest will remain unchanged.”

*This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna