ADB lends $3 mn to boost investor confidence in Bangladesh

Singapore, Mar 17 (UNI) The Asian Development Bank (ADB) aims to help reinforce investor confidence in Bangladesh's financial markets through a three million dollar loan to improve good governance practices in the capital market and the insurance sector.

The Manila-based infrastructure-and-national projects financing agency said investor confidence in the capital market has not fully recovered since the stock market crash in 1996, largely due to weak governance and market gaps.

Lack of market interest has, in turn, marginalised the role of the capital market in mobilising long-term funds for economic development, it said .

The insurance sector, on the other hand, is underdeveloped. It is characterised by a very limited range of products and services, poorly trained insurance staff, and few investment opportunities.

In addition, its legal framework is weak, leading to the industry's poor public image and reputation.

ADB senior financial/capital markets specialist Soo-Nam Oh said, ''With better governance and greater investor participation, activities in the capital market and the insurance sector should be revived. It will play a more significant role in mobilising long-term funds for infrastructure and industry, and for spurring economic growth.'' The project, he added, will support Government-led reforms being pursued in the insurance sector, including a revamp of the insurance legislation and the establishment of a new regulatory authority, based on international best practices.

''The Government's national poverty reduction strategy aims to substantially increase private investment, savings, and economic growth, and the development of the country's financial sector is critical to achieving this,'' Mr Oh added.

ADB's loan will meet 75 per cent of the project's total estimated cost of 4 million dollars. The loan comes from ADB's concessional Asian Development Fund and carries a 32-year term, including a grace period of 8 years. Interest is set at 1 per cent per annum during the grace period and 1.5 per cent per annum thereafter.

The Government will shoulder the balance of 1 million dollars.

The Finance Division of the Ministry of Finance has been appointed the executing agency for the project, which is due to terminate in December.

UNI SC SR KP2000