Abstract:
The easiest way of collecting long-term fund for financing Government and non-
Government projects is the issuing of bonds. Development of bond market in Bangladesh
is the need of the hour as it provides alternative savings instruments for people and can
promote higher investment and growth in the economy by mobilizing untapped
resources. In addition it provides benchmarking for long-term lending and opportunity
for diversifying financial institutions’ portfolios.
The bond market in Bangladesh has been found very inefficient with respect to number
of issues, volume of trade, number of participants, long-term yield curve, etc. In view of
this, the present study has been undertaken aiming at exploring the potentiality of bond
market development in Bangladesh, and identifying the problems that impedes the
growth and development of bond market in Bangladesh. There are many factors in our
economy to boost an effective bond market; some of the important factors are: consistent
GDP growth rate, GoB budget deficit, significant role of private sector in credit
disbursement, declining ability of state controlled banks to fund industrial loans,
moderate inflation and exchange rate, huge fund of insurance companies, increasing
investors confidence on the capital market, and benefits of bond market participants, etc.
The study has found that the size of debt market in Bangladesh is very low as compared
to other countries; has huge growth potentiality; and identified important impediments to
the growth and development of bond market in Bangladesh such as large size of market
lot of bonds, low interest rates of bonds, long term maturity of bonds, lack of strength of
primary dealers, unaccountable trustees, default culture of the issuers, lack of corporate
governance practices, dearth of expertise in credit rating, lack of awareness among the
market participants and investors, high cost of trading in secondary markets, and no
benchmark yield curve, etc. The study has suggested some important measures to
overcome these constraints.
