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BB sees foreign investment potentials in green bond

Conducting joint study with IFC

Syful Islam | May 22, 2019 00:00:00

The central bank sees substantial potential in foreign investment if quality green bond is launched in Bangladesh.

The opinion came as Bangladesh Bank (BB) and the International Finance Corporation (IFC) recently started a joint assessment of green bond opportunities in the country.

Officials said the green bond study has been undertaken aiming to expedite the long-term financing scope for sustainable business practices.

Presently long-term financing in Bangladesh is dependent on the banking system, which is not viable.

This dependence on the banking system can be replaced with bonds by attracting foreign investments, said officials.

According to BB officials, the green bond joint study team has already held meetings at the ministry of finance, Bangladesh Securities and Exchange Commission (BSEC), and Sustainable and Renewable Energy Development Authority (SREDA) and has received positive feedback.

They said Bangladesh's foreign exchange reserves have remained stagnant for several years.

"If the banks which have interest in green financing launch good quality bonds, we believe foreigners will be interested to invest," said a BB official.

He said globally, there are various organisations that support sustainable business practice worldwide, will be interested to subscribe green bonds in Bangladesh.

He named trust funds and endowment funds in this case.

The central bank official also said local insurance companies, large corporate houses, and multinational companies also can be interested to invest in green bonds.

Since there is no bond market in Bangladesh, the joint study team will assess the types of incentives needed to encourage launching green bond in the country, he noted.

Abu Ahmed, honorary professor of the Department of Economics at the University of Dhaka, told the FE Bangladesh has to stop long-term financing from the banking sector first and launch a bond market in the country.

"If state-owned banks come with green bonds, I believe both local and foreign investors will subscribe," he said.

But the rate of interest must be a bit higher than that of fixed deposit receipt (FDR) in banks, Mr Ahmed argued.

Laying stress on activating the bond market, he said the government first should issue some bonds to evaluate public responses.

Large corporate bodies having considerable reputation and private sector banks and financial institutions also can launch bonds, he said, adding globally, corporate bonds are lucrative.

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