What is Sukuk; why is Bangladesh Bank introducing investment Sukuk worth crores?
Sukuk is structured so that investors earn profit from real assets or economic activity rather than interest. The return comes through mechanisms such as rent or profit-sharing
Sukuk is a Shariah-compliant investment instrument often described as an alternative to conventional bonds.
The Bangladesh Bank will issue its 7th investment Sukuk, worth Tk2,500 crore, in December to finance the Important Rural Infrastructure Development Project in the Noakhali, Feni, and Lakshmipur (IRIDPNFL) districts.
Sukuk differs from traditional bonds in multiple ways. In a traditional bond, the issuer borrows money from investors and pays them interest over a fixed period. This interest-based return is considered non-compliant under Islamic finance principles.
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Sukuk, on the other hand, is structured so that investors earn profit from real assets or economic activity rather than interest. The return comes through mechanisms such as rent or profit-sharing.
For example, when the Bangladesh Bank issues Sukuk to finance public development projects, the funds are used to build or improve physical infrastructure, such as roads, markets, and water systems.
Investors then receive profit generated from these assets, such as lease payments under the Ijarah method.
Different Sukuk structures can be used depending on the nature of the project.
Under Ijarah, the asset is leased and rent is distributed to investors.
Under Istisna, an asset is constructed and later delivered, with returns generated during its use.
These structures ensure that investment is tied to productive activity and real economic value.
The why
Previously, Shariah-compliant banks had limited opportunities to invest in government Treasury bills and bonds because these instruments are interest-based. As a result, large amounts of funds in these banks often remained idle.
In this context, the government launched the Shariah-compliant "Bangladesh Government Investment Sukuk" in 2020 to enable participation by Islamic banks and financial institutions.
Sukuk helps bridge the gap between faith-based financial practices and public infrastructure financing, while supporting broader socio-economic development.
The latest issuance will mark Bangladesh Bank's 7th government Sukuk, following six previous issuances totalling Tk24,000 crore.
