Ailing capital market: Brokers seek Tk 100b lifeline

FT ONLINE

Stockbrokers are seeking a Tk 100 billion fund from the government to inject new life into the moribund capital market.

The intermediaries said they are set to submit their proposal to the finance minister today (Thursday) seeking the fund as loans.

Dhaka Bank Securities and EBL Securities are among the 20 signatories to the proposal to be submitted to the government.

Stockbrokers said they want the fund for a period of six years at a flat interest rate of 3.0 percent.

They said all market intermediaries such as stockbrokers, merchant banks, and asset management companies will be allowed to avail the loan facility.

"Other stockbrokers will participate in the programme today (Thursday). If approved, we will pay the loans off along with interest in eight installments," said Mohammad Ali, CEO at the Dhaka Bank Securities.

He said the government can also ask for collaterals against its loans to be provided to the market intermediaries.

"The portfolios of the borrowers can be the collaterals of the proposed loans," Mr. Ali said.

He said the market intermediaries want this fund to play a supportive role.

"We hope the liquidity shortage of the capital market will go as soon as we get the fund support," he said.

Asked about the strategy for disbursing the fund, Mr. Ali said the Bangladesh Bank will decide on how the money will be disbursed.

"The central bank can engage one or more representatives to disburse and recover the loans," he added.

A representative of a stockbroker said the key players had an informal discussion with the finance ministry regarding the submission of their proposal.

"We want more fund from the government for different stockbrokers and merchant banks," the representative said

Meanwhile, the state-run Investment Corporation of Bangladesh has also sought a fund of Tk 50 billion from the government to support the market.

The state-run corporation has recently submitted its proposal to the finance minister.

After the 2010-11 stock market crash, the government provided Tk 9.0 billion under the capital market refinancing scheme. The fund was handed over to the corporation in three equal installments to reduce the sufferings of small investors affected during the market debacle.

Initially, merchant banks and brokerage firms disbursed the funds against the portfolios of affected investors at an interest of 9.0 percent.

Later, the interest rate was reduced following the plea from merchant banks and brokerage firms.

Finally, the borrowers received funds at an interest of 5.0 percent and they disbursed the fund against investors' portfolios at an interest of 7.0 percent.

On completion of disbursement and recovery, out of Tk 9.0 billion, around Tk 7.61 billion was again disbursed to the ICB following its plea made to support the capital market.

Mohammad Saifur Rahman, an executive director of the Bangladesh Securities and Exchange Commission, said the remaining portion of the fund will be distributed to some merchant banks and brokerage firms.

"Their proposals are in the pipeline," Mr. Rahman said.