Raising fund by issuing bonds is a very good option for the non-bank financial sector and banks as medium and long-term debts will reduce overall costs, said a top executive of LankaBangla Finance. 

"A 3-year or 5-year bond is fantastic option for us," said Khwaja Shahriar, managing director and CEO of LankaBangla Finance, one of the country's 34 non-bank financial institutions (NBFIs), in a phone interview with The Daily Star.

This is also a better option in comparison to deposits as the latter usually fluctuates because of withdrawals by savers, he said.

"By borrowing from issuing bonds, we can prepare excellent business plan in order to lend and do business," he said.

The CEO shared the views after Bangladesh Bank last week asked the NBFIs to take initiatives such that they can mobilise funds issuing bonds instead of relying much on the interbank call money market.

The central bank issued the directive after it came to know that some NBFIs were failing to repay depositors due to a mismatch of the maturity period of funds.

This mismatch was arising due to the fact that loans were being disbursed among borrowers for long terms from short-term loans taken from the interbank call money market.

Shahriar said call money loan was an overnight loan and there was no scope to do long term business with such a kind of short loan.

He said the NBFIs with a sound financial health usually borrow from overnight money market but they also lend to others through the interbank market as part of their day-to-day liquidity management.

He said LankaBangla has already issued three bonds to raise funds from the market.

Now, a fourth bond is under subscription by investors. It is a 3-year tenure zero coupon bond and the NBFI wants to borrow Tk 300 crore from the market, according to Shahriar.

"But not all will be able to attract investors. The NBFIs with sound financial condition will be able to find investors," he said.

Shahriar said the bond market was developing and some steps were being taken by the regulators to facilitate trading of bonds in the secondary market. Bonds of non-listed companies can be traded in alternative trading board (ATB), he said.

Early January this year, Dhaka Stock Exchange launched an ATB to facilitate the secondary trading of non-listed companies, corporate bonds, open-ended mutual funds, and exchange-traded funds.

He said through the latest directive, Bangladesh Bank suggested that the NBFIs focus on arranging long-term financing.

"For this, we have to ensure that the NBFs stand with a sound footing, to have strategy and business plan to win confidence of investors," he said.

Improving corporate governance is very important in this regard, he said.