Maiden green zero-coupon bond for SMEs

Standard Chartered Bank has arranged the first green zero-coupon bond in Bangladesh for Sajida Foundation, a non-governmental organisation.

A zero-coupon bond, also known as an accrual bond, is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face-value.

Sajida Foundation will use the proceeds to finance expansion of its microcredit and SME lending portfolio, through investing in new and existing projects with environmental benefits, said the bank in a press release yesterday.

The issuance of the security will provide Sajida Foundation with an

alternative source of fund, compared to a conventional term loan.

Standard Chartered was the mandated lead arranger for the transaction. The total face-value of the bond is Tk 100 crore.

The announcement was made at a ceremony at the head office of the Bangladesh Securities and Exchange Commission (BSEC) on Thursday.

Speaking in the press release, Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh, said in order to achieve the country's collective ambition of transforming into a high-income country by 2041 while building resilience to climate change and other delta challenges, more of business-as-usual would not be enough.

"Green finance holds verdant possibilities for the next phase of our growth journey."

Prof Shibli Rubayat-Ul-Islam, chairman of the BSEC, said, "Green bonds have the potential to become powerful financial tools in creating positive climate action for Bangladesh, with the growing demand for investments addressing climate risks."

"We commend Sajida Foundation and Standard Chartered for leading the way for green finance in the MSME sector, setting a milestone in the development of vibrant green bond market in Bangladesh." 

Sajida Foundation's microfinance programme offers a diverse range of collateral-free financing for MSMEs along with customised savings products to meet the needs of a population segment that can't readily access formal financial services.

The programme is being run through 228 branches in 22 districts, serving over half a million clients, according to the NGO's 2019-20 annual report. Outstanding loans stood at Tk 1,785 crore in FY20, up from Tk 461 crore a year ago.

Last month, Standard Chartered Bangladesh arranged the country's first-ever green bond for Pran Agro Ltd, a concern of Pran-RFL Group. The total face value of the bond is Tk 150 crore.

In October last year, the international lender received regulatory approvals for issuing Tk 850 crore zero-coupon bond, the first by a bank in Bangladesh.

Zahida Fizza Kabir, CEO of Sajida Foundation, was present at the event.