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Development of Bangladesh through Cooperative Micro-bond

A debt-free strategic model

25 Aug 2016, 13:30 | updated: 25 Aug 2016, 13:54

Prof Dr Mohd Ma’sum Billah

History witnesses that, the World had been dominated by the debt-based economy with risk transferring mechanisms. Factually, today the debt-based economy failed to rescue the world with material self-reliant and prosperity. Alternatively, an asset-based economy with risk sharing techniques may be a guaranteed platform to direct the world with economic prosperity ahead.

It had been a common culture of any nation particularly among the 3rd world countries including Bangladesh, relying on borrowing habits towards any form of development be one either private or government’s project, resulting the nation carry the life-long debt curse, which eventually compels the nation and its citizens tying their necks in to paying the price of liability and thus, darkens the future of the nation as an ultimate destine.

To rescue the nation and its people of Bangladesh, Cooperative Micro-bond is among the right rescuer platforms to discover a way ahead towards creating a debt-free developed nation in the wake of globalization.  A Cooperative Micro-bond scheme is also justified under the broad principle of Shari’ah as a holistic mechanism based on mutual cooperation, brotherhood and solidarity in view of noble achievement and common good for all humanity and creatures as enshrined in the holy Qur’an: “… cooperate amongst you in righteousness and piety….” (5:2).  

Cooperative Micro-bond is a discovered strategic mechanism, which enables any nation (with no exception to Bangladesh) develops its major sectors by having a debt-free financial power through a holistic cooperative micro-spirit with sharing and caring culture in view of creating a nation self-reliant, progressive, prosperous and proud in this advanced tech-era.

The rational outlook of Cooperative Micro-bond is to make a nation enjoy with a debt-free fund solution required for any project development within the spirit of mutual cooperation, maturity and common sensitivity towards creating a self-reliant nation visioning prosperity. This is among the sustainable promising mechanisms, which may ease the nation from undesirable dependency and debt while moving forward to create an enterprising and entrepreneur based nation as the way ahead in today’s socio-economic and political reality.

In the model and structure of a Cooperative Micro-bond where the government or the private sector shall first identify a sound project requires financing in its development. The project then shall be listed in the project index with accrual value (justifiable required project financing). The total project-financing shall be packaged with shares at a minimum per value affordable to all levels of citizen so to enable them to participate full-heartedly in the national development plan within the holistic spirit of mutual cooperation, solidarity and brotherhood towards common goal of national prosperity. Such move eventually makes them proud through having the profit oriented micro-stake in the national projects. The shares shall be ultimately opened for public for subscription as per one’s ability with affordable equity financing in view of profit making. The shareholders shall hold the opportunity to participate in the secondary market. The follow-chart is the organisational action plan:

In the total management with successful outcome in a Cooperative Micro-bond shall be facilitated by a team force where the government undertake the appropriate policies, securities and effective enforcement. A Project central body shall be positioned in project related decision making. The Project management office, which shall be responsible for the total management and duly operation of the project. The central bank shall be assigned in issuance of ordinary bond (profit-sharing in equity financing) with limited liability as per the central guidelines while a credible bank shall be authorized to manage the total project funds besides managing the share certificates issued in the name of the central bank as per project directives. An audit and compliance unit shall be established at both central as well as management levels to ensure the total compliance in all aspects of the policies, project, funds and the management. A special unit shall also be established comprising of several experts to advise the project board so to facilitate them in making appropriate policies and decision. There shall other vital units be established under the management office, among them are intelligence unit, which shall undertake the total risk management and attractive income oriented business plan of the project. The project management office (PMO) shall be designed under the management office, which shall be responsible for the total development of the project with successful result. For the continuing maintenance of the entire components of the completed project a project maintenance unit shall be established under the management office.  

In other word, the total discipline, management and operation in a Cooperative Micro-bond arrangement shall be centralized with regulatory action, but with separation of power, assignment and due accountability.

The issuer of Cooperative Micro-bond shall be the Central bank in terms of capital guarantee (in its capacity as the fund guarantor) to the subscribers while the fund management bank shall hold the total accountability (in its capacity as the fund manager) to the Central bank for the fund release as per the Central bank’s guidelines and subsequently the Project board shall be the end accountable (as the Principal liability) for the right management of the fund.

The total investment in the Cooperative Micro-bond scheme shall be treated as conservative Public fund by empowering neither capacity for the government nor any party to influence over or misuse the fund, which shall be strictly regulated by the standard policy and be closely audited by the Audit and Compliance Unit at both Central as well as Micro-levels. To protect the subscribers against any unexpected risk on their fund shall be ensured by a compulsory project Insurance policy to be purchased in the name of the Project board.

Among the sectors may potential be included for development with the funding facilities under the Cooperative Micro-bond scheme are public, private or semi-government projects namely: highways, bridges, power plants, water supplies, gas supply, mono-rail, industrialization, digitalization, refineries, tourism spots and other commercial oriented mega projects.

Subscribers in the Cooperative Micro-bond scheme may be any one regardless of one’s status, background, gender, nationality or religion so long one participates with the share price at par value. The par value of shares shall be nominal affordable to all categories of people so to give an opportunity to participate in the national development mission besides having the chance to participate in the share market in view of possible legitimate money making. The shares shall be allowed to be traded in both the primary as well as in the secondary markets so to enable the Project to be rated highly with gradual effect.

The total net income of the project under Cooperative Micro-bond scheme may be suggested to be distributed as: 60% for the shareholders as dividends; 20% shall be allocated for the continuing maintenance of the project; 10% shall be reserved in a special security fund (SSF) in view of contributing to the settlement of the national debts and; 10% shall be reserved in to a project foundation account (PFA) for the possible humanitarian services.

Among the general benefits for the government in the Cooperative Micro-bond scheme are: the sustainable support to the national development scheme, all categories of standard taxes to be imposed over the project income at its all components, creating a nation with utmost cooperation and maturity, political gain through a smart government’s policy and; internally popular for moving towards a debt-free self-reliant developing nation with smart planning.   

 It is indeed submitted that, a Cooperative Micro-bond scheme is a new dimension designed in view of rescuing the 3rd world and in particular Bangladesh from being hanged with debt, while discovering a way ahead to develop the nation with debt-free cooperative micro-bond based on holistic principles of cooperation, utmost care and concern leading to make the nation self-reliant, peace, harmony, progress, prosperity and proud in the modern reality.

*The writer is a Professor of Finance at King Abdul Aziz University in Kingdom of Saudi Arabia