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The October 2023 issue examined why Lebanon, despite bond legislation dating back to 1933 and a Capital Markets Authority created in 2011, never developed a domestic corporate debt market. The authors attributed this to the 1990s reconstruction model financed by government bonds that banks subscribed heavily, a concentrated banking sector that favoured sovereign paper and short-term revolving overdrafts, and banks' interest in keeping depositors' funds away from alternative instruments.
The issue presented the reopening of a corporate bond market as a pillar of financial-sector restructuring: it would diversify corporate funding, offer an alternative to bank deposits and help stabilise interest rates. It set out the required ecosystem of independent intermediaries for advisory, underwriting, syndication and distribution, an accredited local rating or scoring agency, a liquid secondary market and wider reforms in banking, governance, procurement and legal protection for investors.
The authors mapped potential investors, from fresh-dollar depositors and insurers holding idle technical reserves to the diaspora, frontier-market funds and development finance institutions.
Key findings
- Before the crisis, only seven banks and two non-bank corporates had issued bonds, the most recent bank Eurobond maturing in 2012.
- The effective cost of short-term corporate bank facilities reached 21% in 2019.
- At the time of writing, an estimated $8–10 billion in fresh US dollars was circulating outside productive investment.
- With typical SME issues not exceeding about $1.5 million, Beirut Stock Exchange listing costs were prohibitive, making a central bank–initiated Electronic Trading Platform essential.
- The authors estimated a domestic security market with a liquid secondary market could exceed $1 billion a year, against a bank corporate loan book of about $22 billion in 2018.
Archive: written in Oct 2023; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.