The road to a robust and vibrant capital market in Bangladesh continues to be marred by a number of significant obstacles, with top entrepreneurs and industry experts expressing concerns over persistent valuation gaps, regulatory complexities, and lengthy approval processes that deter the nation’s best-performing companies from going public. At a high-profile discussion organized by the Bangladesh Merchant Bankers Association (BMBA), leading voices from across business and financial sectors called for urgent reforms to ensure sustainable economic growth and broader access to capital.

Concerns from Industry Leaders: Why Top Companies Keep Distance

Syed Nasim Manzur, Managing Director of Apex Footwear and a prominent voice in Bangladesh’s corporate sector, highlighted a pervasive trend: many firms are reluctant to raise long-term funds from the stock market, instead opting for short-term bank loans to meet investment needs.

“We don’t receive proper valuation or incentives. Earlier, listing in the stock market came with notable tax benefits. Now those have reduced significantly, making public listing less attractive to strong companies,” said Manzur, who also served as president of the Metropolitan Chamber of Commerce and Industry.

Manzur argued that the compliance burden, documentation requirements, and regulatory pressure—often described as excessive and unpredictable—contribute to the wariness of established firms. He noted that while it typically takes three to six months to bring an initial public offering (IPO) to market in India, the process in Bangladesh can stretch up to two years, sapping business momentum and discouraging new entrants.

He also questioned the interventionist tendencies of the Bangladesh Securities and Exchange Commission (BSEC) in areas such as dividend policy, warning that such oversight can undermine both business flexibility and investor expectations.

Regulatory Hurdles and Weak Implementation Hamper Progress

Uzma Chowdhury, Director at PRAN-RFL Group, echoed similar concerns over the depth and dynamism of Bangladesh’s capital markets. While acknowledging some positive steps from BSEC, she criticized the slow and uneven implementation of capital market policies. Chowdhury stressed the need for pragmatic incentive structures and effective policy follow-through, warning that without these reforms, leading firms will continue to bypass the market for other financing avenues.

The slow adoption and limited offerings of innovative financial instruments—such as Sukuk, a Shariah-compliant bond—underscore the lack of market evolution. “There is strong demand among Bangladesh’s Muslim population, but a proper balance between supply and demand is lacking,” she noted, highlighting the importance of a mindset shift toward innovation in capital markets.

These views are consistent with the broader regional context: while neighbouring markets in India, Malaysia, and Singapore enable quicker, more flexible capital raising and impose fewer pre-listing burdens, Bangladesh’s relatively rigid regimes slow market entry and stymie growth.

Efforts to Streamline IPO Processes and Boost Investor Confidence

Dhaka Stock Exchange (DSE) Chairman Mominul Islam conceded that Bangladesh’s IPO process remains much-criticized for its length and inefficiency. No new IPOs were issued in the past year—a telling sign of stagnation—and the DSE is now targeting a much tighter six-month window for the approval and listing of new stocks. To this end, responsibilities for IPO approvals are being increasingly delegated from BSEC to the exchanges themselves, a move designed to reduce red tape and accelerate access to capital markets.

“In the last 15 years, 66 merchant banks have brought only 138 companies to market. This raises undoubted concerns about market depth, pipeline quality, and the effectiveness of merchant banking as a conduit for growth,” Islam said, signaling the need for professional and regulatory introspection. He further cautioned against investor misconceptions: not every stock is destined to rise, and sustained irregularities will take time to rectify.

Chief adviser’s special assistant, Anisuzzaman Chowdhury, described the stock market as ‘relatively stable’ but called for more dialogue among stakeholders to address chronic mismatches and build resilience.

Reform Recommendations: Learning from Global Best Practices

In keynote papers presented by BMBA President Majeda Khatun and LankaBangla Investment CEO Iftekhar Alam, experts outlined an array of persistent obstacles stalling Bangladesh’s capital market expansion: complex listing procedures, protracted regulatory approvals, weak valuation transparency, shrinking tax benefits, and fears of loss of control post-listing.

Comparative analysis with regional peers reveals Bangladesh’s disadvantage. In India and Malaysia, companies enjoy greater autonomy in utilizing IPO proceeds, and exchanges show flexibility in valuation methodologies and issue sizing. The streamlined processes and lower compliance barriers enable far more rapid capital formation and market growth.

Moreover, international investors often cite a lack of sufficient corporate governance, transparency in financial disclosures, and inadequate legal protections for minority shareholders as deterrents. Recent World Bank reports highlight that, as of 2024, Bangladesh’s stock market capitalization stands at roughly 17% of GDP, trailing far behind India (114%) and Malaysia (120%). This gap underscores both an opportunity and an imperative for reform.

Looking Forward: Structural Improvements, Incentives, and Stakeholder Collaboration

The Bangladesh government and BSEC have acknowledged these challenges and, in the 2025–26 national budget, have introduced marginal corporate tax cuts for publicly listed companies to encourage more firms to consider the stock exchange. However, the reductions—typically about one to two percentage points—are not viewed by most analysts as sufficient to trigger a major wave of public offerings.

Additionally, there is a renewed focus on digitization of capital market operations, increased regulatory coordination, and transparent oversight. Market analysts believe that without streamlining regulatory bottlenecks, clarifying valuation norms aligned to international standards, and enforcing strong audit and corporate governance regulations, Bangladesh may continue to struggle to attract its most successful, export-oriented or high-growth corporations to the capital markets.

Proposed measures include:

• Fast-tracking IPO approvals to match the 3–6 month benchmark set by regional peers
• Developing institutional investor participation (such as pension funds and insurance companies) to deepen the market
• Launching diversified products, particularly green bonds and Islamic finance instruments
• Enhancing investor education and protections to increase retail investor confidence

With the South Asian economic landscape evolving and increased scrutiny from international investors, Bangladesh’s capital market reforms could play a decisive role in boosting economic growth. A more inclusive and dynamic capital market will not only reduce dependence on bank lending but will also help drive innovation, job creation, and long-term development across the country’s corporate sector.