Local funds scanty for infrastructure financing

Bangladesh needs a vibrant bond market to meet the country's requirement for long-term financing for infrastructure development, speakers said at a webinar yesterday.

Besides, channeling the huge amount of liquidity currently available in the banking sector into bonds could be very helpful to this end, they said.

The webinar, styled "Bridging the infrastructure financing gap through credit solutions in Bangladesh", was jointly organised by the Dhaka Chamber of Commerce & Industry (DCCI) and commerce ministry as a part of the Bangladesh Trade and Investment Summit 2021.

Various business leaders, investors, policymakers and trade analysts attended the week-long event that ends today with as many as 552 companies from 38 countries having participated in 450 business-to-business matchmaking sessions since the conference began on October 26.

Salman Fazlur Rahman, the prime minister's adviser on private industry and investment, said the government's main job is to play the role of a facilitator for private sector development. "We need to think of more strategies to take long-term and sustainable infrastructure financing in Bangladesh to the next level," he added.

Nojibur Rahman, chairman of the Capital Market Stabilisation Fund, said that since domestic finance alone cannot cater to the country's booming infrastructure development, partnering with foreign lenders could ease the process.

"For example, GuarantCo is doing well in this regard," he added.

DCCI President Rizwan Rahman said infrastructure is a critical enabler of compounding industrialization and economic development and so, substantial investment is needed in the sector.

To improve the county's infrastructural competitiveness, investments are being made in wide-ranging infrastructure projects even though they are relatively inadequate.

"So, smooth infrastructural financing would bring far-reaching and result-oriented effects on private sector prosperity and game-changing economic transformation," Rahman added.

Yukiko Omura, chairperson of GuarantCo, said the company is a solution provider under the Private Infrastructure Development Group (PIDG).

"We are working with innovative and creative solutions in the form of structured credit guaranties," Omura added.

GuarantCo assists in the development of local capital markets and provides credit solutions to finance infrastructure projects that help boost economic growth and alleviate poverty in line with the UN's sustainable development goals.

GuarantCo financed Technaf Solartech, a 20 megawatt solar power project in Bangladesh, through a dual currency financing solution fund worth $13.5 million.

The company also provided a 100 per cent bond guarantee worth $25 million for a seven-year onshore bond to Pran Agro, according to Nishant Kumar, managing director of GuarantCo Asia.

Abul Kalam Azad, executive director of Bangladesh Bank, said the country needs more infrastructure financing as it is the backbone of the country's development.

"We have to build our own capacity. We can try long-term bonds in the capital market. Depending on only the banking sector will not suffice," he said.

Large infrastructure projects need financing of 12 to 15 years, according to Muhit Rahman, managing director of Standard Chartered Bangladesh.

"Our debt to GDP ratio is around 39 percent. There are many opportunities for Bangladesh to avail foreign currency solutions but for that we need to focus on attracting commercial loans and bond investments," he added.

Rahman went on to say that since domestic financing is not enough, a mix of local and foreign funding is required.

Ahsan Khan Chowdhury, chairman and chief executive officer of PRAN-RFL Group, said Bangladesh is growing and therefore requires alternative financing for infrastructure and private sector development.

Bangladesh also needs to improve its sovereign credit rating, which will be a challenge for the private sector.

"We need to raise bonds in the international market," Chowdhury added.