Secure Investing: Bonds and Sukuks
Be it for education, vacation, or retirement, people strive to save as much of their income as possible. With the right strategy, these savings can grow meaningfully over time. Our goal is to create and build awareness of the opportunities available to secure a stable financial future. In this article, we explore bonds and sukuk as investment options that can help those who save and achieve their financial goals.
Insights
Bonds as a saving instrument
From an investor’s perspective, a bond is essentially a loan to a company. When you invest in bonds, you get back the amount you invested (the "principal") along with interest payment (the “coupon”) set on an agreed upon schedule. A bond is an investment that typically has a steady income and has higher yields than bank fixed deposits. As the capital market allows investors to invest in bonds of various maturities, it allows investors to invest strategically to achieve long term financial goals. It also allows you to diversify your investment across different industries when investing, thus reducing the overall risk of your investment. Bond investments help to combat inflation and maintain the real value of money.
The main difference between sukuk and bonds
A sukuk is a financing agreement structured in accordance with Shariah principles, enabling borrowers to raise finance through the capital market. Like bonds, sukuk provide investors with scheduled income. However, instead of receiving interest payments, investors earn returns derived from the profits of an underlying asset, property, or project.
Recent Bond Market Issuances
As the lead arranger, we have facilitated the following companies to raise finance via the issuance of bonds or sukuks in the capital market:
| Company | Amount | Tenure | Rate | Type |
|---|---|---|---|---|
| Eyecare Pvt Ltd | MVR 30,000,000 | 5 Years | 8.00% | Sukuk |
| Maldives Ports Limited | MVR 50,000,000 | 7 Years | 7.00% | Bond |
| MedTech Pvt Ltd | MVR 30,000,000 | 7 Years | 9.00% | Sukuk |
| Euro Marketing Pvt Ltd | MVR 25,000,000 | 4 Years | 7.50% | Bond |
| MWSC Pvt Ltd | MVR 111,000,000 | 5 Years | 7.50% | Bond |
| ADK Hospital Pvt Ltd | MVR 50,000,000 | 5 Years | 8.00% | Bond |
In addition to the above, IUM Holdings Pvt Ltd and MFLC Pvt Ltd have also raised finance via issuance of debt instruments.
Key factors to consider before investing
Before investing in bonds, investors shall consider the following:
- Board of Directors and Management of the Company
- Historical growth of the company
- Audited financial statements
- The project proposed by the company for financing
- Professionals involved in the preparation of the company's prospectus
- Return on investment in the company compared to the risk-free rate
- Whether the company has sought the relevant approvals from the regulator
- Other risks associated with the investment
For more information on the capital market, contact us.
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