850 million under such scheme for Sea Pearl Beach Resort and Spa Limited in Cox’s Bazar, which is set to be the first five star resort in Bangladesh promoting international time sharing.
Earlier, the bank also played a pioneering role in raising syndication loan for the country’s first vacuum evaporated salt re-crystallization plant, the first hydrogen peroxide project and the first ever float glass manufacturing plant
In 2006, the bank arranged the first ever Sharia’h based syndicated investment facility and at the same time, it has imparted training on syndication techniques and practices for central bank officials, officials said.
“Years ago, only the multinational banks used to take the leading role in syndicated financing but lately the local private banks have come forward to dominate the scene”, Ehsanul Haque said.
Main syndication motives, such as loans portfolio diversification, regulatory pressure and management costs reduction, also influence syndicate structure in emerging markets
Terming the syndicated loan scheme as the future in the banking sector, he said, “The greater opportunity for risk sharing in syndicated financing would enable the local banks to finance a greater number of up and coming infrastructure projects requiring sizable investments”.
Haque called for quicker initiation of the government’s Public Private Partnership (PPP) projects, underlining these large-scale infrastructures would require joint financing by the government and private sector to take off.
“Until now, the local private banks have largely opted out of financing large-scale power sector projects as they usually involve long term investment and pose greater risk
Syndication or club financing is a growing concept in Banking Arena of Bangladesh. Syndicated finance diversifies the risk of one bank on a single borrower and increases the quality of loan through consensus or cumulative judgment and monitoring of different banks / financial institutions.
- There should be specific guide lines from Bangladesh Bank to operate Syndication Finance in Bangladesh.
- Establishment of separate Syndication Unit in all Banks.
- Banks should narrow lead time of approval process in case of Syndication Finance though giving more delegation to the Management.
- Review pricing process including alternative instruments, relative value and secondary loan market.
- There should be specific code of conduct among agent banks in Bangladesh that they resolve any dispute regarding syndication advance among themselves.
- Sending the officials of the syndication unit in the training program on Loan Syndication (domestic foreign).
- Understanding the nature of work of syndication unit by the top management of Lead Bank and the participating bank regarding time frame for completion a syndication deal successfully.
The advantages of syndicated loans for banks and borrowers show that they provide an important financing vehicle for emerging ent as they contribute to enhance the sources of external finance in these countries. Moreover, if syndicated loans reduce the cost of borrowed funds, they also contribute to favor the financing of companies. The expansion of syndicated loans increases the diversification possibilities for banks in terms of risk and income, which decreases the likelihood of bank failures. As a consequence, the expansion of syndicated loans contributes to financial stability, which is a fundamental issue for emerging economies. Bangladesh is also emerging economy who can benefit from syndicated lending based project financing
While these benefits are especially important for emerging markets finance, the agency problems related to syndications can have severe consequences for the financial stability of these markets A crucial input to mitigate these problems is the structure of the syndicates that, if adapted, can reduce agency costs related to the syndication process.
Overall, the structures of syndicates are adapted to enhance monitoring of the borrower and to increase the efficiency of re-contracting process in case of borrower’s distress.