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‘Role of private equity funds cannot be underestimated in post-Covid-19 world’

  • Published at 09:31 pm April 17th, 2021
Managing Director and CEO of BD Finance Kyser Hamid Collected

Says Kyser Hamid, managing director and CEO of BD Finance, in an interview with the Dhaka Tribune

The US-based Sovereign Infrastructure Group (SIG) recently signed a memorandum of understanding (MoU) with BD Finance — a concern of Anwar Group — in what is set to be the largest foreign direct investment (FDI) effort by a financial institution in Bangladesh. 

The agreement was inked earlier this month in Washington for a project pipeline of more than $2 billion, to be invested in infrastructure projects in the next two years. If SIG maintains at least 4% shares in BD Finance during the term of the memorandum, the US firm will be guaranteed a seat on the board.

At present, BD Finance is being led by its Managing Director and CEO Kyser Hamid, who assumed the role in September last year. Before joining BD Finance, he served as the deputy managing director and head of Retail Business at IPDC Finance, where he played a strong role in making the financial institution AAA-rated. Kyser is also widely recognized as the man who transformed Brac Bank's retail business. 

Dhaka Tribune recently caught up with Kyser for an interview, where he discussed the expected outcomes of the MoU and elaborated on the post-Covid-19 investment scene of Bangladesh.

How will the MoU signed with SIG change the foreign investment scene in Bangladesh?

This is a commitment for the largest-ever foreign funding brought by a Bangladeshi financial institution. Foreign funding is usually a very slow process in terms of disbursement. But since BD Finance, as a non-bank financial institution, possesses the skill-set of credit assessment for both short and long-term loans, the disbursement process of the international fund is going to be faster.

What are the long-term benefits to your partnership with SIG?

We have already mandated SIG on the initial financing of a direct loan of $40 million to be used for on-lending to SMEs, green energy projects, women entrepreneurs, social housing, economic empowerment initiatives for transgender individuals, and refinancing of existing BD Finance obligations. 

Moreover, since the process of international funding involves high standards of compliance and corporate governance, the receiving end also reaps those benefits. And apart from helping the economy recover from the impacts of the pandemic, the flow of international funds decreases the cost of funding by 2-3%. 

Additionally, the partnership will also focus on prioritizing projects in economic zones and export processing zones, bolstering the government’s development trajectory.

Do you think SIG's presence will usher in more private equity investment in Bangladesh?

The importance of private equity funds, especially in a post-Covid-19 world, cannot be underestimated as this will play a key role in developing and sustaining the economy. Under the collaboration framework, SIG will be bringing in capital market investors from the US, as it is a globally structured financing company that works with project sponsors and development finance institutions, and national and local governments in originating and structuring infrastructure investments in growth markets. 

The sole purpose of SIG is to bridge the global infrastructure investment gap by mobilizing US institutional investor capital into growth markets such as Bangladesh.

Do you anticipate any regulatory roadblocks during the tenure of the MoU?

No. In recent years, the government has launched numerous infrastructure projects — the project to build a road and rail bridge over the Padma River and the Dhaka metro, for example.

The Bangladesh government has been actively seeking to attract FDI, particularly in the areas of energy and infrastructure to help the country compete on a global scale. Many initiatives have been implemented through industrial policy, a growth strategy applied through exports, and a public-private partnership (PPP) program launched in 2009. 

Aligned with the government, relevant support wings such as the Bangladesh Investment Development Authority (BIDA) and the Bangladesh Bank have drafted policies that favour such collaborations.

Can you elaborate on BD Finance's plans regarding infrastructure development in Bangladesh?

The major FDI recipient sectors in Bangladesh are energy and power, textile, food, banking, leather, service, telecommunication, information and communication technology, trading, engineering, and a few others. 

Bangladesh is currently on track to investing an impressive $417 billion in infrastructure by 2040. 

The inked agreement [between BD Finance and SIG] will serve as a long-term collaboration framework intended to enable SIG to bring American capital market investors to infrastructure projects in Bangladesh through BD Finance, potentially attracting more FDIs, with infrastructure being a crucial variable for FDI.

What are the challenges currently being faced in attracting foreign investors?

Compliance is an issue. As I have said before, funds from FDIs are subject to strict compliance and corporate governance. Attracting funds require proper documentation and paperwork entailing tax, VAT, etc. Bangladesh tends to be lenient in these matters, which is a challenge. The coordination pace and process between regulatory bodies in terms of project approval pose a challenge as well.

How does BD Finance plan to bridge those gaps?

Having been affiliated with big conglomerates, corporations, and industrial powerhouses for the last 20-21 years, we have been able to create an index of potential recipients who are eligible to access such funds rapidly. They have the right documentation, compliance, and good corporate governance practice.

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