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ADB, Bangladesh Sign Loan Agreement to Boost Capital Market, Insurance Sector

Dhaka, Bangladesh, 7 February 2007

The Asian Development Bank (ADB) and the Government of Bangladesh today signed a US$3 million loan agreement to improve good governance practices in the capital market and insurance sector.

ERD Secretary Md Aminul Islam Bhuiyan signed for the Government while Hua Du, Country Director of ADB’s Bangladesh Resident Mission, signed on behalf of ADB at a simple ceremony at ERD, Sher-e-Bangla Nagar, Dhaka. Kunio Senga, the visiting Director General of ADB's South Asia Department, was also present, among others, at the signing ceremony.

The project will strengthen the governance, regulation and supervision of the capital markets, boost the regulators' capacity and recommend increasing demand for and supply of securities by addressing market gaps. The project will also 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.

Despite recent pickup, the capital market in Bangladesh remains underdeveloped with market capitalization of only 7.5% of the GDP. "The assistance will help improve governance and reinforce investor confidence in Bangladesh's financial markets," says Country Director Hua Du. "With better governance and greater investor participation, activities in the capital market and the insurance sector should be revived, and will play a more significant role in mobilizing long-term funds for infrastructure and industry, and for spurring economic growth,"

The Finance Division of the Ministry of Finance will execute the project.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 67 members – 48 from the region. In 2006, it approved loans and grants for projects totaling $8.5 billion, and technical assistance amounting to almost $242 million. In 2006, ADB approved five loans totaling $685.1 million and six technical assistance grants of $5.45 million for Bangladesh for railway sector reform; rural infrastructure improvement; secondary education; secondary towns water supply and sanitation; improving capital market and insurance governance, and to support the government agencies to prepare projects and improve institutional capacity.

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