The Bangladesh government has issued a
Sharia-compliant investment instrument called Sukuk on December 28, 2020, for
the first time in its history. The Sukuk is an Islamic financial certificate
similar to a treasury bond and structured to generate returns in compliance
with Islamic finance principles.
The debut Sukuk project funded through Sukuk is the
Safe Water Supply Project in the Country implemented by DPHE. The total Sukuk
proceeds are BDT 8000 crore in two tranches, with BDT 4000 crore in each
tranche. The offered rate is 4.69% and tenure is 5 years from the date of 1st
issuance.
The main objective of issuing Sukuk are to reduce
the cost of government borrowing through the widening of its debt portfolio,
create an additional as well as a secured investment opportunity for the Islamic
banks and financial institutions and individual investors, and implement more
projects through Sukuk issuing regularly in the future.
The Shariah-based bond is expected to help the government
manage its deficit financing at a time when it is struggling to collect revenues
due to economic hardship caused by the coronavirus pandemic.
The central bank has fixed the rate based on the
Bangladesh Government Islamic Investment Bond (BGIIB). The last declared
profit-sharing ratio of the six-month BGIIB is 3.69 per cent, and the central
bank has added one percentage point to decide the rate for the sukuk.
Profits will be paid on a half-yearly basis. So,
banks prefer the sukuk, which offers a higher fixed profit rate, as a safe
haven for their investment, a central banker said.