Muhith to sit with biggies on long-term financing

Finance Minister AMA Muhith said on Thursday the state of long term financing in the country still remains 'poor,' as many banks and financial institutions choose to go for short-term and medium-term lending.

Keeping that in view, he said, he will take necessary steps to improve long-term financing for the sake of development of the country's infrastructure and capital market.

"After this budget, I will sit with some major market players in this field to improve long term financing," said Muhith.

He was speaking as the chief guest at the inaugural session of the 'Bangladesh Long Term Finance Conference 2018' held at a city hotel.

The Bangladesh Securities and Exchange Commission (BSEC) organised the conference in association with the World Bank Group under the guidance of the Financial Institutions Division of the Ministry of Finance.

The chairmen of the securities regulator and the National Board of Revenue (NBR), the governor of Bangladesh Bank as well as top officials of the World Bank and the International Finance Corporation (IFC) also spoke at the inaugural session of the conference.

The Finance Minister said one of the government's major tasks is to build the stock market as a source of long term investment.

"But the achievement in this field is very poor, because we do not have that much sources of long term financing yet," Muhith said.

The country's commercial banks avoid long-term financing, they are going for short and medium-term lending, which is not their job.

"Our requirement is to build the capital market as the source of long term financing," said Mr Muhith. They need to look into the matter very carefully, he added.

BSEC Chairman Professor M Khairul Hossain said one of the main problems in the country's capital market is that it still remains retail investors-driven.

"As a result, the market movement is often correlated with perception of small investors. Sometimes without reasons, they get upset or over-enthusiastic leaving a direct impact on the movement of the capital market," Khairul said.

He also said more than 75 per cent of the investment is needed to come from the private sector for achieving the objectives as set in the 7th Five Year Plan.

"In this regard, the capital market being the main source of long term finance should play its due role," Khairul said.

He stressed the importance of proper coordination among the regulatory bodies.

Ms. Esperanza Lasagabaster, practice manager, finance, competitiveness and innovation global practice, World Bank, stressed the importance of going beyond the banking system and developing the capital market financing routes to mobilise long term investment.

"Any form of long-term contract involves building trust and requires comprehensive protection and oversight," Esperanza said while speaking on the challenge of long term financing.

"Providing political and macro stability is vital. Capital markets cannot develop, if bank deposits and or government savings instruments offer high returns which crowd out other investments," Esperanza said.

She suggested efficient tax policies to encourage long-term savings and investments.

Ms. Wendy Jo Werner, country manager, IFC Bangladesh, pointed out the need for more investments in affordable housing facilities, small and medium enterprises (SMEs) and renewable energy.

In his keynote presentation, Leandro Puccini Secunho, senior financial officer at World Bank, said liquidity should be increased through bonds.

"Development of capital market can lead to lower fiscal cost." Secunho said.

Ashraf Ahmed, CEO, Riverstone Capital and ex-senior executive of HSBC Bank, presented the keynote paper on key issues of developing long-term finance in Bangladesh.

Mr. Qimiao Fan, World Bank country director for Bangladesh, Bhutan and Nepal, suggested removing policy distortion to facilitate the country's long-term financing.

"Long term financing is very important for Bangladesh in view of the possibility of high growth," Qimiao said.

He also said holistic efforts should be made to develop the stock market.

Md. Eunusur Rahman, senior secretary at the Financial Institutions Division of the Ministry of Finance, said the country's stock market lacks adequate products.

"The securities regulator should give importance to introducing new products in the capital market," Mr. Eunusur Rahman said.

NBR chairman Mosharraf Hossain Bhuiyan said tax incentives may facilitate infrastructure development along with promotion of long-term financing.

"Reforms in the regulatory framework are very important for long term financing," said Mr. Bhuiyan.

He stressed coordination among the regulatory bodies to improve the situation of long-term financing.

He also said banks and financial institutions may provide long-term finance to reliable customers.

Bangladesh Bank Governor Fazle Kabir said long-term financing should be mobilised through the bond market and pension funds, among others, as banks sometimes face liquidity problems.

Talking about the common allegation of delayed services rendered to overseas investors, the governor said, "There is no reason for delay, if the papers or documents are placed accordingly."

"Forex rules have also been eased more for repatriation of foreigners' money," Fazle Kabir said.

After the inaugural session, Arif Khan, CEO and Managing Director of IDLC, chaired the business session on 'Promotion of Institutional Investment'.

Arif Khan said Bangladesh will need $ 20 billion to $25 billion per year for infrastructure development.

"We have been talking about measures for long term finance for about last 15 years. But very few changes are there and we are yet to witness outcome as per expectation," Khan said.

In a presentation, Fiona Elizabeth Stewart, lead finance specialist at World Bank, said the long-term financing structure needs to be strengthened.

"Insurance academy and related bodies should work together to strengthen the long-term financing structure," Ms. Stewart said.

Dr. Swapan Kumar Bala, a commissioner of the BSEC, Mohammad Enamul Huque, managing director and head of global banking at Standard Chartered Bank Bangladesh, and Waqar A. Chowdhury, managing director and CEO of Vanguard Asset Management, were the discussants at the business session.

Commissioner Bala said institutional investors are the catalyst for building a sustainable investment base.

"If institutional investors are professionally managed, they have the capacity to give the policy push," Mr. Bala said speaking on promotion of institutional investment.

Waqar A. Chowdhury said mutual fund regulations should be looked into, although a lot has been done. He also suggested tax waiver on the funds.

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