AHSAN HABIB
Bangladesh will require $172 billion in green financing by 2030 if its industries are to remain globally competitive. The funds must come from a well-balanced mix of financing sources rather than relying too heavily on the banking sector, said Syed M Omar Tayub, managing director and CEO of Prime Bank Investment Ltd.
Citing an estimate from the International Finance Corporation (IFC), he said the total climate-smart investment potential stood at nearly $172 billion for the period between 2018 and 2030.
This estimate was based on Bangladesh’s Nationally Determined Contribution (NDC) targets, with priority given to the energy, transport and industrial sectors.
In an interview with The Daily Star recently, the CEO said Prime Bank Investment has already started working with industries to help them raise funds from both domestic and international markets through instruments such as equity, bonds and sukuk.
“In the next few years, there will be a requirement of $100 billion in green buildings alone, in addition to financing for water management and agro-processing,” Tayub said.
He said industries will need the fund for making their industries green while many international organisations are also ready to invest.
“To connect this financing, we have already started working with global leaders in these fields and are trying to figure out how to mobilise funds,” said Tayub.
To play a more active role, Prime Bank Investment has launched an industry-wide initiative called “Capital Connect”.
“Through it, we are advocating that raising money is not limited only to issuing shares in the stock market, but there are also various products such as Shariah-compliant financing, bonds, sukuk, etc,” he said.
Prime Bank Investment has already engaged with senior executives of the pharmaceutical sector and will soon expand to textiles and other industries. It is also working with the Islamic Corporation for the Development of the Private Sector (ICD), a multilateral development finance institution, to attract overseas financing.
Although the process is new to Bangladesh and taking time, Tayub said he is optimistic that Prime Bank Investment would be able to provide strong support to the industry.
Speaking at his office in Banani of the capital, he said if corporates depend on bank loans only for long-term projects, it will not be healthy as it will aggravate the maturity mismatch in the banking system.
Rather, he suggested that the Bangladesh Bank could require firms borrowing large loans, for example, Tk 500 crore, to raise a portion through bonds or shares. “This approach can improve the situation.”
Tayub pointed to the example of SME lending. “In the banking sector, SME lending was very low at one time. After the central bank set specific targets, loans in this sector increased. Now, even though it is challenging, banks are lending more to SMEs.”
He said many companies prefer bank loans because they are easier, but argued that a mix of financing options benefits both businesses and banks.
Because issuing bonds helps banks manage single-borrower exposure risks, while subsidiaries can support clients with their financing needs. “However, it must be ensured that no issuer defaults on bonds; otherwise, this product will lose its reputation.”
He added that green bonds could open the door to concessional loans from development finance institutions and multilateral agencies.
“Many global agencies are sitting on large funds, and they are looking for sustainable and green bonds. It is also profitable for the corporates or issuers because repayment becomes smoother and they get some breathing space,” said the Prime Bank Investment CEO.
As part of its broader strategy to position itself as a top investment bank, Prime Bank Investment has introduced new products for retail investors.
“In Bangladesh, there is a huge demand for Shariah-compliant products. And what better place than the capital market, where there is no interest. You can earn dividends and capital gains from the investment,” Tayub said.
It has launched an equity-sharing product, in which both the client and the bank invest together, as well as tailored products for expatriates.
“Many Bangladeshis work abroad their whole life, but cannot build lasting assets in the country due to complications. With our products, they can invest from abroad.”
Other schemes include a three-year capital guaranteed plan, a monthly investment plan, and products designed specifically for women. These innovations, Tayub said, have already earned Prime Bank Investment recognition from Euromoney and Asian Banking and Finance.
The firm invests only in companies it considers fundamentally strong, with good governance and sound financials. “We have defined ‘investment universe’ using risk management tools; therefore, it can invest in around 70 companies only,” Tayub said.
Safeguards such as sectoral and stock caps are in place, and investment decisions are made collectively by a five-member committee. “Based on this approach, our analysis shows that it is very rare for a good stock to continue making losses for three consecutive years.”
According to Tayub, Prime Bank Investment’s strength lies not only in its Tk 300 crore capital but also in its strong board of directors.
“Essentially, we are working to establish the concept of investment banking in Bangladesh. Globally, many of the large financings, such as IPOs, bond or sukuk issuances, and mergers and acquisitions, are arranged by leading investment banks like Goldman Sachs, JP Morgan and Morgan Stanley, alongside other commercial banks. Bangladesh doesn’t have an investment bank at that level yet. We are not saying that we will reach that level overnight, but we have started the journey.”
Prime Bank Investment aims to offer a full suite of services, including equity and bond raising, underwriting, debt syndication, M&A advisory and balance sheet restructuring. To raise awareness, it has launched “Industry Alliance”, which seeks to build partnerships at home and abroad.
“Recently, we went to Kuala Lumpur as BMCCI delegates and signed an agreement with Amanie Advisors to work together on Shariah-compliant investments. Another objective of this initiative is to work closely with different international chambers of commerce.”
On the stock market, Tayub said Bangladesh needed to transform it into a genuine investment platform through new products and wider participation. While the country has 180 million people, 160 million bank accounts, 210 million mobile financial service accounts and 20 million agent banking accounts, the total number of stock market investors is only about 1.4 million, and that too with duplication.