First short-term sukuk oversubscribed by 10 times

Bangladesh’s first-ever short-term shariah-based sukuk drew overwhelming interest from individuals and institutions at its debut auction yesterday.

Investors submitted bids worth Tk 56,607 crore for the 273-day sukuk, more than 10 times the issuance target of Tk 5,500 crore.

The shariah-based bond, issued by the government to finance the Important Rural Infrastructure Development Project-2 (IRIDP-2), carries an annual rental rate of 9.36 percent. The Bangladesh Bank (BB) held the auction in Dhaka on behalf of the government.

Shariah-based banks and financial institutions, Islamic banking branches and windows of conventional banks, institutional investors, and individual investors participated in the auction, the BB said in a statement. Given the overwhelming demand, the sukuk was allotted to investors on a pro-rata basis.

Interest in shariah-compliant instruments has been rising since their launch in December 2020. With yesterday’s auction, the total amount raised by the government through sukuk has exceeded Tk 53,000 crore.

The BB said the introduction of a short-term sukuk, alongside existing long-term Islamic securities, would strengthen liquidity management for shariah-based banks and financial institutions. The central bank plans to issue more sukuk bonds in days to come.

In this regard, Istequemal Hussain, director of the Debt Management Department at BB, told The Daily Star that they plan to raise Tk 30,000 crore in the next fiscal year through the issuance of various sukuk bonds, which will be open to individual investors.

The BB said the issuance expands shariah-compliant investment opportunities for Islamic financial institutions and individual investors.

The short-term sukuk will qualify as a Statutory Liquidity Reserve (SLR) asset for eligible banks and financial institutions, while Islamic banks will be able to use it as collateral to access the central bank’s Islamic Banks Liquidity Facility (IBLF).

Trading of the sukuk in the secondary market will begin today, allowing banks, financial institutions, insurance companies, provident and mutual funds, and individual investors to buy and sell the instrument. According to the BB, 727 successful bids from individual investors, provident funds, mutual funds, and deposit insurance entities were allotted sukuk worth around Tk 87.37 crore.