12 Jul 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, https://loansolution.com/title-loans-tn/ 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. Currently, interest rates are high and stand at about 12.5% (base rates of around 8% + margin of 4.5%). Importantly, beyond supply side issues, demand side factors – the impact on investor returns of competitively bid projects, suggest that sponsors have an advantage in opting for international finance sources at lower interest cost and longer tenors.