ICB seeks 5-year extension for Tk900cr special fund
Urging the extension, ICB – the state-owned institution mandated to develop the capital market and manage the special fund – has written to the finance ministry, according to officials involved with the fund.
Considering the current capital market situation, the Investment Corporation of Bangladesh (ICB) has urged the government to extend the Tk900 crore special fund by another five years, until 2032.
Urging the extension, ICB – the state-owned institution mandated to develop the capital market and manage the special fund – has written to the finance ministry, according to officials involved with the fund.
Officials say the special fund, initially formed to rehabilitate small investors after the 2010 debacle, is now helping capital market intermediaries boost their investment capacity.
"With the fund set to expire in December 2027, we have urged the ministry to extend its tenure for another five years, until December 2032, with the option of recovery by March 2033," an official from ICB told TBS on condition of anonymity.
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Over the last fiscal year, due to political instability, the capital market witnessed a bearish trend that wiped out significant market capitalisation and indices, according to the Dhaka Stock Exchange (DSE).
According to DSE data, at the beginning of the 2024-25 fiscal year, DSEX, the benchmark index of the premier bourse, was 5,340 points, which declined to 4,836 points at the end of the fiscal year.
After the end of the last fiscal year, since July this year, the stock market has begun to turn around, riding on bank stock and also fundamentally stocks.
In this situation, if the tenure of the fund is not extended, the lent money provided to intermediaries will need to be refunded, which will affect the market, as the intermediaries have invested the fund and may be forced to sell stocks, the officials argued.
A managing director of a brokerage firm, which had taken loans from the fund, told TBS on condition of anonymity, "We took the fund to invest in the capital market, and we did so as planned. But due to the downturn in the market, we saw significant erosion of funds. It will be hard to repay the loans if the market continues to remain volatile."
The fund
Over a decade ago, the government formed a special support fund for small investors affected by the 2010 market crash, aiming to stabilise the capital market and rehabilitate investors.
Following the debacle, the finance ministry provided Tk900 crore in three tranches between 2013 and 2015 to lend to small investors at low cost.
Using the fund, ICB assisted more than 34,481 affected investors through 18 merchant banks and 17 stockbrokers. Against the loan, Tk900 crore as principal and Tk68.70 crore as interest have been recovered.
After the fund was fully recovered, the ministry later allowed ICB to reuse the fund on a revolving basis with the aim of preventing sluggish trends in capital market transactions in 2019.
Since then, ICB has been lending the fund to intermediaries – stockbrokers, merchant banks, and asset managers – on a revolving basis to invest in the capital market.
According to the audited financial statement as of 30 June 2023, the size of the fund increased to Tk1,098.71 crore.
The lending
As per ICB data, on a revolving basis, a total of Tk2,472.32 crore in loans was disbursed for investment in the capital market through 67 companies – two alternative funds, seven asset managers, fourteen merchant banks, and 44 stockbrokers.
Against the loan, Tk1,466.08 crore as principal and Tk113.24 crore as interest were recovered as of December 2024.
Of the institutions, merchant bankers have taken the highest Tk2,076 crore loans and stock-brokers Tk379.80 crore and against the loans, repaid to ICB Tk1,311 crore and Tk258.66 crore, according to ICB.
