BSEC cuts SME board entry threshold to Tk10 lakh to boost liquidity

Infographic: TBS

Liquidity on the small and medium enterprise (SME) board of the Dhaka Stock Exchange is expected to improve after the Bangladesh Securities and Exchange Commission (BSEC) decided to significantly lower the minimum investment threshold required for investors to trade on the platform.

Under the new decision, investors with at least Tk10 lakh invested in the secondary market will now be eligible to buy and sell shares on the SME board. The threshold had previously stood at Tk30 lakh, a level widely criticised by market participants for limiting participation and suppressing trading activity. The decision was taken at the regulator's 990th commission meeting held on 30 December 2025, according to sources familiar with the development.

As per the revised requirement, both local and foreign investors must maintain a minimum portfolio value of Tk10 lakh in the secondary market of the Dhaka Stock Exchange (DSE) to qualify for SME trading. To implement the change, the commission will amend its earlier directive issued on 21 September 2022, which had raised the investment requirement to Tk30 lakh.

A senior BSEC official said the move was intended to resolve a long-standing inconsistency between the regulator's rules and subsequent directives. In September 2022, the commission notified the Bangladesh Securities and Exchange Commission (Qualified Investor Offer by Small Capital Company) Rules, 2022. Under those rules, resident and non-resident Bangladeshi individuals who have been active investors for at least one year and hold a minimum portfolio investment of Tk10 lakh are defined as qualified investors for the SME board.

However, shortly after issuing the rules, the then commission led by Shibli Rubayat Ul Islam increased the eligibility threshold to Tk30 lakh through a separate directive. This created a mismatch between the rules and the directive, leading to confusion among investors and market intermediaries. The current commission has now decided to align the directive with the original rules, the official added.

The SME board was created to provide small and medium-sized companies with an alternative route to raise capital through the stock market. Companies with paid-up capital of at least Tk5 crore and up to Tk30 crore can list on the platform through a qualified investors' offer. The platform was designed to support growing businesses while offering investors access to high growth but relatively riskier companies.

Market participants have long argued that the higher investment threshold discouraged participation and undermined the core objective of the SME board.

Saiful Islam, president of the DSE Brokers Association of Bangladesh, told The Business Standard that brokers had consistently opposed the Tk30 lakh requirement, as it contradicted the qualified investor offer rules approved by the regulator itself.

He said the latest decision would make it easier for investors to participate in SME trading, which should help improve liquidity on a platform that has remained largely inactive since its launch.

According to him, excessive and frequent regulatory interventions over the years eroded investor confidence and made many market participants hesitant to engage with the SME segment.

Since its inception, the SME board has struggled to gain traction. Trading activity has remained thin, and investor interest has gradually waned. In 2025, the SME index, known as DSMEX, fell by more than 21% to close at around 855 points. Daily average turnover hovered around Tk5 crore, highlighting the lack of depth and participation in the market. No new companies were listed on the SME platform during the year, further reflecting its stagnation.

The investment threshold for SME trading has been revised multiple times since the platform's introduction, adding to uncertainty. Initially, the BSEC set the minimum investment requirement at Tk50 lakh in September 2021, when trading on the SME board formally began. The threshold was later reduced to Tk20 lakh in February 2022 before being raised again to Tk30 lakh in September 2022. The frequent changes made it difficult for investors to plan and contributed to declining interest.

The regulator has traditionally justified higher eligibility requirements on the grounds that SME stocks tend to be more volatile due to their lower paid-up capital and limited public float. The platform has also been considered riskier for retail investors, prompting the regulator to restrict access to so-called qualified investors. However, critics argue that overly restrictive rules defeated the purpose of creating a vibrant secondary market for SME shares.

The SME board itself has a relatively short history. The BSEC framed the SME rules in November 2018, and the stock exchanges introduced the platform in September 2019. Actual trading began in September 2021. At present, shares of 20 companies are traded on the platform, but most of them see limited daily transactions.