fbpx 45253-002: Third Capital Market Development Program | Asian Development Bank

Bangladesh: Third Capital Market Development Program

Sovereign (Public) Project | 45253-002 Status: Active

The Asian Development Bank is helping Bangladesh develop the local capital market to support infrastructure financing and other investments. The program supports policy reforms to establish a legal and regulatory framework for the market to grow. The third stage reforms include strengthening the Bangladesh Securities and Exchange Commission and broadening the supply of financial instruments.

Project Details

Project Officer
Takuya Hoshino South Asia Department Request for information
Country
  • Bangladesh
Modality
  • Loan
  • Technical Assistance
Sector
  • Finance
 
Project Name Third Capital Market Development Program
Project Number 45253-002
Country Bangladesh
Project Status Active
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 3318-BAN: Third Capital Market Development Program
Ordinary capital resources US$ 150.00 million
Loan 3319-BAN: Third Capital Market Development Program
concessional ordinary capital resources lending / Asian Development Fund US$ 100.00 million
TA 8994-BAN: Supporting Third Capital Market Development
Technical Assistance Special Fund US$ 400,000.00
Republic of Korea e-Asia and Knowledge Partnership Fund US$ 300,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Finance / Money and capital markets

Gender Equity and Mainstreaming No gender elements
Description The specific objective of the proposed Capital Market Development Program III (CMDP III) is the enhanced capacity and size of the capital market that is grounded on a strong legal and regulatory framework.
Project Rationale and Linkage to Country/Regional Strategy

The government's Vision 2021 lays out a roadmap for Bangladesh to attain middle-income status by 2021. It set target gross domestic product (GDP) annual growth of 10% by FY2021. If Bangladesh is to attain its GDP growth targets, it must address structural deficiencies in the capital markets by deregulating the financial system to support the real economy and promote private sector investment to reduce the infrastructure deficit, which is a major constraint to its sustainable and higher economic growth.

To address the structural deficiencies in the capital market, ADB introduced the Second Capital Market Development Program (CMDP2) in 2012. The CMDP2 was aimed at stabilizing the market since the stock market debacle in December 2010 and bringing about reforms that set the foundation for sustainable market development through the passages of critical legislations, such as amendment to the Securities and Exchange Commission Act, 1993, as well as the enactment of the Demutualization Act, 2013, and the Financial Reporting Act, 2015. Despite the major stride toward strengthening its capital markets, there remains constraints. The government and ADB agreed to deepen and broaden the outreach of the second program reforms through the CMDP3.

Against this background, the CMDP3 was designed to support several structural reforms, which includes (i) strengthening enforcement capacity of Bangladesh Securities and Exchange Commission (BSEC) and Insurance Development and Regulatory Authority (IDRA) , (ii) ensuring quality financial reporting by public companies as per international standard, (iii) facilitating demutualization of the two stock exchanges, (iv) facilitating recapitalization of intermediaries, (v) developing market infrastructure, (vi) introducing new regulations for Sukuk (Sharia-compliant bonds) and derivatives, (vii) developing mutual fund and private equity/venture capital industry, and (viii) developing more liquid government securities market.

A policy based loan was chosen as appropriate financial modality to promote and facilitate the implementation of the reform program which entails significant economic, financial, and social costs by providing a budgetary support to the government.

Capital market development and bond market development focusing on the provision of long-term infrastructure is one of ADB's focus areas in its Bangladesh public sector operations in line with the government's Sixth Five-Year Plan and the Midterm Review of ADB''s Strategy 2020 priorities.

Impact A well -functioning financial system that supports basic capital and investment needs, as well as Bangladesh''s longer term economic objectives.
Project Outcome
Description of Outcome Enhanced capacity and size of the capital market in a strong legal and regulatory framework
Progress Toward Outcome One of the three outcome indicators has been completed as of June 2018, specifically, enlistment of 570 new securities. Pending indicators are (i) stock market capitalization increases to 20.40% of gross domestic product and (ii) total value of corporate bonds issued increases to Tk. 19 billion.
Implementation Progress
Description of Project Outputs

Strengthened market stability

Enhanced market facilitation

Enhanced supply measures

Enhanced demand measures

Status of Implementation Progress (Outputs, Activities, and Issues)

First tranche under Loan 3318-BAN for 8 policy actions was released in December 2015 upon ADBs Board approval.

Second tranche under Loan 3318-BAN and first/last tranche under Loan 3319-BAN was originally planned for June 2017 (T2 release). Over these 2.5 years, 10 policy actions have been completed, including ones for (i) strengthening regulatory capacity of BSEC and IDRA, (ii) issuing new BSEC rules for IPO, takeover, and ETF, (iii) developing a liquid government bond market, and (iv) further promoting demutualization.

However, 8 out of 18 T2 release policy actions have not been completed as of June 2018, including on (i) BSEC capacity enhancement, (ii) derivatives and sukuk rules, (iii) risk-based capital rules for intermediaries, (iv) pilot issuance of floating rate notes, and (v) asset investment rules for insurance companies. Upon request from the government, the program was extended from 30 June 2018 to 30 June 2019.

The Technical Assistance (TA) supports the implementation of T2 policy actions. Due to delays in the government internal approval for Technical Assistance Project Proposal (TPP) over 2 years. The TPP was approved in April 2018 and ADB mobilized consultants to conduct inception mission in May 2018. The TA scope was expanded to cover 5 pending policy actions and extended to 30 June 2019 with the expectation that all the pending policy actions will be completed by then.

Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The capital market reforms under the program are likely to have no adverse environmental impacts.
Involuntary Resettlement The program has no involuntary resettlement impacts.
Indigenous Peoples The program has no impact on indigenous peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation ADB has been consulting public and private stakeholders in capital markets on a regular basis to effectively implement the program.
Business Opportunities
Consulting Services

ADB recruited a consulting firm to provide 17 person-months of international and 8 person-months of national consulting services for (i) installing and operationalizing BSEC new ICT system, (ii) drafting rules for derivatives by BSEC, (iii) facilitating establishment of a clearing and settlement company, (iv) drafting regulations for issuance of Sukuks by BSEC and (v) provide trainings to IDRA.

ADB mobilized consultants to conduct inception mission on 7 May 2018. During the TA implementation, all the disbursements under the TA will be made in accordance with ADBs Technical Assistance Disbursement Handbook (2010, as amended from time to time).

Procurement not applicable
Responsible ADB Officer Takuya Hoshino
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Bank and Financial Institutions Division-MOF
[email protected]
Bangladesh Secretariat
Dhaka-1000 Bangladesh
Timetable
Concept Clearance 25 Nov 2013
Fact Finding 08 Feb 2015 to 12 Feb 2015
MRM 03 Jul 2015
Approval 20 Nov 2015
Last Review Mission -
Last PDS Update 24 Sep 2018

Loan 3318-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
20 Nov 2015 22 Nov 2015 11 Dec 2015 30 Jun 2018 31 Dec 2019 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 150.00 Cumulative Contract Awards
ADB 150.00 20 Nov 2015 80.00 0.00 53%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 20 Nov 2015 80.00 0.00 53%

Loan 3319-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
20 Nov 2015 22 Nov 2015 11 Dec 2015 30 Jun 2018 31 Dec 2019 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 100.00 Cumulative Contract Awards
ADB 100.00 20 Nov 2015 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 20 Nov 2015 0.00 0.00 0%

TA 8994-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
20 Nov 2015 17 Jul 2016 17 Jul 2016 30 Jun 2018 21 Oct 2020 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
400,000.00 300,000.00 0.00 0.00 0.00 0.00 700,000.00 20 Nov 2015 292,548.00

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.