Bangladesh Securities and Exchange Commission (BSEC) has allowed a non-governmental organisation to raise Tk 1.0 billion from the capital market by issuing green bonds for the first time in Bangladesh.
The regulator took the decision at a meeting on Wednesday, reports bdnews24.com.
The NGO, SAJIDA Foundation that focuses on improving health outcomes of the poor, aims to use the funds raised through the Green Zero-Coupon Bond to increase the outreach of its microfinance programme as well as ensure environmental development.
The price of each unit of the bond has been set at Tk 1 million, with a maturity period of two years.
The bonds will be non-convertible, unsecured and redeemable, meaning that these cannot be converted into shares.
No collateral is required to issue the bond and the money will be refunded with interest at the end of the two-year term.
Public financial institutions, mutual funds, insurance companies, listed banks, cooperative banks, regional rural banks, organisations, trusts and autonomous corporations can buy these bonds.
Sena Kalyan Insurance is the trustee of the bond while Standard Chartered Bank is the lead arranger.
In the global capital market, green bonds, just like other debt instruments, require investors to pay interest at the end of the term.
Typically, the company issuing the bonds must also fulfil certain commitments to ensure environmental development.
There are very few cases in the world where the company gets special benefits for this. However, in the interest of environmental development, investors are usually satisfied with the lower returns or interest on these bonds than on ordinary bonds of the same quality.
Asked about the matter, BSEC spokesperson Rezaul Karim said SAJIDA Foundation would spend the money generated from the green bonds on agriculture, sanitation and solar projects.
“In other parts of the world, interest rates on green bonds are lower. That is not possible in Bangladesh right now as the interest rate on savings certificates is much higher here. If the interest rate was low, it would be difficult to raise funds from it.”