Investors distrust behind weak corporate bond market BB Governor
Business Report :
Bangladesh Bank (BB) Governor Dr Ahsan H Mansur on Monday said lack of investors trust is the primary reason behind the underdevelopment of Bangladesh’s corporate bond market.
The central bank Governor emphasizes on stricter regulation and stronger enforcement to restore confidence of investors for the development of Bangladesh’s corporate bond market.
He made the remarks at a seminar titled “Bond Market Development in Bangladesh: Challenges and Recommendations”, jointly organised by the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) in Dhaka.
The governor said weak enforcement of rules has significantly eroded investor confidence in the bond market.
Mansur said that in developed markets abroad, if a corporate issuer fails to repay even a single coupon, it is treated as a serious default.
“But in our country, there is hardly any consequence if a company fails to pay bond coupons. No one seems to care.”
The governor said restoring trust would require strict regulatory measures and effective supervision to protect investors.
As a push factor to energise the bond market, Mansur said the central bank may discourage excessive dependence on bank loans.
“If a company or group approaches banks for loans beyond the single borrower exposure limit, we may suggest that they raise funds from the capital market through bonds or shares instead,” he said.
He also highlighted several pull factors to attract corporate issuers, including tax incentives, reduced bond issuance time and lower costs.
Bangladesh currently has only 16 corporate bonds, 14 of which were issued by banks mainly to strengthen regulatory capital.
The total market size stood at Tk33.34 billion as of June 2025, with corporate bonds accounting for just 0.06 percent of GDP, compared to 5.73 percent for government bonds.
The concept note recommends phased reforms, including streamlining issuance, offering tax incentives, expanding participation, strengthening legal frameworks and improving secondary market liquidity through coordinated regulatory efforts.
The proposed actions are planned in phases – short-term by December 2026, mid-term by 2027 and long-term by 2030 – through coordinated efforts of Bangladesh Bank, BSEC, the finance ministry, stock exchanges and other stakeholders.
“To develop the bond market, the government and business community must take the lead,” he added.
Mansur further said a central committee, along with several sub-committees, should be formed to improve coordination among regulators.
The main committee would supervise and guide the work of the sub-committees to ensure effective implementation.
BSEC Chairman Khondoker Rashed Maqsood said bank loans remain easier to obtain than capital market financing in Bangladesh.
He noted that non-performing loans are high mainly due to mismatches between loan tenure and funding sources.
“Our concept note recommends encouraging companies as well as government to go to the capital market. After receiving stakeholder feedback, we will finalise regulations related to the bond market,” he said.
Finance Secretary Khairuzzaman Mozumder said that although the issue of double taxation has been resolved, new challenges have emerged in secondary bond trading due to frequent changes in ownership.
“These taxation issues cannot be solved at every stage manually; it is likely a software-related problem,” he said, adding that coordination between the National Board of Revenue (NBR) and BSEC is needed.
He also said the government is working to attract foreign investors to local currency bonds and has formed a committee to introduce secondary trading of savings certificates.
In his welcome speech, Bangladesh Bank Deputy Governor Habibur Rahman said Bangladesh lags far behind peer countries in bond market development.
“A vibrant bond market is essential to meet long-term financing needs,” he said.
According to a concept note prepared jointly by the finance ministry, Bangladesh Bank and BSEC, Bangladesh’s financial sector remains heavily bank-dependent, with about 80% of debt financing coming from banks.
Most bank deposits are short-term, with around 70% maturing within a year, creating maturity mismatches and liquidity risks.
The note said the corporate bond market remains underdeveloped due to factors such as the dominance of bank financing, high issuance costs, complex regulations, weak investor appetite for non-sovereign debt, poor enforcement and the crowding-out effect of high-yield government savings certificates.