Prospects and Challenges of Bond Market Development in Bangladesh

The thin bond market in Bangladesh faces manifold challenges emanating from several sources including excessive reliance on bank credit, government debt instruments dominated by primary auction based activity, absence of benchmark yield curve, and lack of product variation. The situation calls for well prioritized policies and actions in several areas. Reduction in interest on government savings instruments and registration fees, tax exemption on interest income of bonds/debentures, rating of bond instruments by independent rating agency prior to issue are some measures that can be implemented without delay. Other policies proposed for implementation include: raising a part of debt through issue of marketable bonds for public utilities and infrastructure projects and debt securitization for existing ones, development of institutional investors, better corporate governance and improved disclosure and transparency in business transactions to create confidence of investors and issuers alike.