Sovereign investment Sukuk in Bangladesh

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Dhaka

Bangladesh issued first sovereign investment Sukuk for raising funds aiming at implementing a project titled ‘Safe Water Supply for the Whole Country’ on December 28, 2020.

The maiden Sukuk was over-subscribed by nearly four times, signaling that investing in such Sukuk is a new potential avenue for the financial markets of Bangladesh.

Likewise, the growing share of Islamic banking in Bangladesh, the huge over subscription of this maiden Sukuk reflected investors’ interest in Islamic financial products of capital market.

Besides, the issuance of such Sukuk provides a scope for the government of Bangladesh to explore financing prospects in Shari-ah-compliant projects.

Moreover, current huge excess liquidity with Islamic banks is exerting adverse effects since the Islamic banks cannot invest in interest-bearing government securities because of non-Shari ah-compliance issues.

The newly issued Sukuk also offers an avenue of investing the excess liquid assets into such Shari-ah-compliant securities.

Against this backdrop, this paper explains the structure of the maiden Sukuk in order to delve further scopes of developing such types of Sukuk in the country, considering huge excess liquidity in Islamic banking sector.

It is to be noted that Sukuk is the plural of Arabic word sakk. In Arabic language, the word Sukuk means ‘legal instrument’, ‘deed’ or ‘check’.

In Islamic financial concept, Sukuk refers to Shariah-compliant financing instruments, which differ from conventional bonds in terms of structure, rate, legal rights and the underlying contracts, among others.

Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) defines Sukuk as the certificates of equal value representing undivided shares in ownership of tangible assets, usufructs and services, or equity of a given project or equity of a special investment activity.

The government planned to raise Tk 80 billion through issuing Sukuk for implementation of a five-year ‘Safe Water Supply to the Whole Country’ project which began in January, 2021.—Agencies

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