The government has raised Tk 5,500 crore by issuing the first-ever short-term Bangladesh Government Investment Sukuk (BGIS). However, the interest of Islamic banks and financial institutions in this Sukuk was much higher than expected.
Bids of about Tk56,607 crore have been received against the money called by the government, which is more than 10 times the target.
Bankers say that Islamic banks have shown great interest in Sukuk as the pace of investment in the private sector has not yet reached the expected level and safe Shariah-compliant investment options are limited.
On Sunday (June 28), the Bangladesh government organized the auction of 273-day Ijarah Sukuk for the first time. The annual rental (return) rate for this Sukuk has been fixed at 9.36%.
Amid huge demand, the government has accepted applications of Tk5,500 crore.
This money will be spent on financing the important Rural Infrastructure Development Project-2 on a priority basis.
Among the banks participating in the auction, Al-Arafah Islami Bank alone submitted an application of Tk4,400 crore. But due to excess demand, the bank was allocated only Tk440 crore.
A senior official of the bank said that while conventional banks can easily invest in government treasury bills and bonds, the scope of Sharia-compliant government investment for Islamic banks is relatively limited. As a result, Sukuk has become their most important investment vehicle.
He said that there has also been a significant response from the individual level. Applications worth about Tk6 crore were submitted through their banks and all the individual level applications have been accepted by Bangladesh Bank.
This is the first short-term Sukuk in the history of Bangladesh.
Earlier, the government issued 10 Sukuk, but their tenures were 5 and 10 years.
This time, for the first time, a 273-day lease Sukuk has been introduced, which, according to those concerned, will create new opportunities in the short-term liquidity management of Islamic banks.
At the end of the term, investors will receive a one-time profit along with the principal. The minimum investment opportunity was Tk10,000.
Individual investors, expatriate Bangladeshis and various institutional investors also participated in it.
So far, the government has raised a total of Tk53,500 crore through 11 Sukuk issues.
The target for raising Tk29,500 crore through five Sukuk issues in FY27 has been set close to Tk30,000 crore.
Meanwhile, the government is planning to raise about Tk30,000 crore through Sukuk in the upcoming FY28.
At the same time, there are plans to further increase the use of Sukuk in the future to finance large infrastructure projects.
According to economists, the expansion of this Shariah-based financing system in addition to conventional government bonds will, on one hand, be helpful in managing the surplus liquidity of Islamic banks, and on the other, it will also play an important role as an alternative and sustainable source of funding for the government in the long term.
