Loan amounts are typically small with limits imposed by Bangladesh Bank on single party exposure

Loan amounts are typically small with limits imposed by Bangladesh Bank on single party exposure

  • Investment banks are relatively new entrants into the commercial lending business and lend to less profitable, more leveraged firms than do commercial banks.
  • The presence of a dual market maker is found to increase liquidity in the secondary market for syndicated bank loans. (Jahan, A. and Akter, B., (2006))

Local commercial banks are largely limited to making loans with a maximum tenor of 5-7 years and generally require equity of 25 % – 35% of total project cost. Syndications and club financing are the favoured means to increase pooled finance, but it has been estimated that projects in excess of $70 – 100 million are difficult to finance locally (largest syndication to date has been $57 million). As such, local banks are unlikely to provide significant amounts of long-term financing for large projects. Inexperience with large scale new infrastructure projects requiring consortium lending – on a non-recourse basis – pose difficulties which local banks are unlikely to overcome in the short-term. Continue reading « Loan amounts are typically small with limits imposed by Bangladesh Bank on single party exposure »