Much has been said about the tremendous growth momentum of the Bangladesh economy. It was amongst the fastest growing nations in the world in the past decade, as per data from the state-run Bangladesh Bureau of Statistics -- and the trend is expected to continue into the near future, too.

But, some are sceptical of the figures and the growth trend given the facts on the ground, such as the rising inequality and unemployment during the period. 

Now, whether the official Bangladesh growth narrative has legs will be put to test with the debut of the Bangla Bond, a taka-denominated debt instrument, on the London Stock Exchange yesterday. 

Issued by the International Finance Corporation, the Bangla Bond will give global investors the chance to make a profit from Bangladesh’s growth process, from which they have been shut out thus far for the rudimentary state of the local bond market, cumbersome registration processes, foreign exchange administrative procedures and capital controls.

IFC eventually plans to float $1 billion in Bangla bonds, but the private sector arm of the World Bank Group is testing the waters by issuing just $9.5 million for now. Based on the response of this tranche, more amounts would be raised.

How fast this first tranche is snapped up would be a testament of the veracity of Bangladesh’s growth story. Are global investors, who are heavy on due diligence, excited about Bangladesh’s future? Are Bangladesh’s economic fundamentals actually that solid?

In other words, it would be a nice morale booster for the nation.

But the success of the Bangla Bond is important for another reason too: it opens up a handy financing avenue for Bangladeshi companies.

Interested parties will be snapping up the bond in dollars. The bond proceeds would be converted to taka and lent out to Bangladeshi companies by the IFC.

After the end of the three-year tenor of this tranche the investors would be paid back the taka amount they signed up for at the going rate of the dollar.

So, the currency risk lies with the investor and not the issuer, unlike offshore borrowing.

While offshore borrowing allows Bangladeshi companies to take advantage of the lower interest rates in international markets, the cost of hedging the currency risk can be significant and has to be borne by the companies themselves.

If unhedged, adverse exchange rate movements can have significant negative impact to the borrower and thus the overall cost of borrowing can end up being much higher than the international market rates.

 Since the currency risk is borne by the investor in the Bangla Bond, the cost of borrowing can work out much lower compared with offshore borrowing.

IFC would be lending out the proceeds of the first tranche of Bangla Bond -- about Tk 80 crore -- to Pran Group to boost their processing capacities and deepen the rural distribution reach.

The interest rate for the local agro processor would be 11 to 11.5 percent, which, according to Kamruzzaman Kamal, a director of Pran-RFL Group, is lower than what they would have to count were the borrowing made from local banks.

At present, the interest rate on term loans range from 11 percent to 14 percent.

And, last but not the least, the success of the Bangla Bond would pave the way for the government to float sovereign bonds of its own and get the funding needed to develop infrastructure befitting of the country’s growth ambitions, which is become an advanced nation by 2041.

In the absence of a pricing benchmark and a solid yield curve, the international bond market is more or less sealed for the Bangladesh government as most investors tend to invest in AA-rated bonds and steer clear of Baa3/BBB-/BB+ rated Bangladesh government bonds.

But if the IFC pulls off this Bangla Bond experiment, both the problems would be solved.

As is often said, it is the little things that make big things happens -- and success of the Bangla Bond can be a turning point for Bangladesh.