Government Issues First Short-Term Sukuk for Rural Infrastructure Development
Govt to issue first short term – The Bangladesh Bank (BB) is set to auction a nine-month sukuk on June 28, marking the country’s debut in this shariah-compliant investment tool. The Tk 5,500 crore issuance aims to fund critical rural infrastructure projects, addressing the growing need for such initiatives. This follows a pattern of strong market interest in sukuk, as seen in recent auctions.
Rising Investor Confidence
With demand for short-term returns increasing, the government has tapped into a new financial avenue. Istequemal Hussain, director of the Debt Management Department at BB, highlighted the positive response, noting that the bids reflect robust market appetite. “The amount of interest indicates that there is significant demand for these instruments,” he stated.
“At present, there are 91-day, 182-day, and 364-day treasury bills, but no government-issued instrument with a nine-month maturity,” Hussain added. He emphasized the potential for sukuk to diversify investment options.
Previous Sukuk Successes
Earlier this year, the BB successfully raised Tk 5,600 crore through a sukuk auction to repair rural infrastructure damaged by Cyclone Amphan and flooding. Bids exceeded the target by nearly eightfold, totaling Tk 44,490 crore. This trend continued last month, when bids reached 12 times the face value of a Tk 5,900 crore sukuk.
Sukuk issuance began in December 2020, and since then, the government has mobilized approximately Tk 48,000 crore. The upcoming auction is expected to push the total to over Tk 53,000 crore. The return on this sukuk will be 9.36% annually, paid as a lump sum upon maturity.
Eligibility and Incentives
Investors can participate in the auction with a minimum of Tk 10,000. The BB confirmed that both resident and non-resident individuals and institutions are eligible. Participation is open through accounts held at any bank or financial institution, with tax rebates available as incentives.
Shariah-compliant banks, specifically those with Al-Wadeeah current accounts, can join the auction directly. The central bank also noted that the existing sukuk market, combined with the 27% share of shariah-based banks in the sector, presents a substantial investment opportunity.
Broader Financial Strategy
In the fiscal year 2026-27 budget, the government plans to expand sukuk use alongside corporate bonds, mutual funds, and green bonds. This strategy seeks to reduce dependence on traditional bank financing. The budget also outlines plans to boost infrastructure funding for long-term public and private projects.
With outstanding government securities nearing Tk 5 lakh crore, the sukuk initiative is part of a broader effort to tap into alternative funding sources. Hussain reiterated the central bank’s goal to raise Tk 25,000 crore via sukuk in the upcoming fiscal year, underscoring its strategic importance.
