Sixth sovereign Sukuk bond's auction held at central bank

The auction for the 6th government investment Sukuk (Islamic bond) of Bangladesh was held at the Debt Management Department of Bangladesh Bank's Head Office today (19 May).

This Sukuk has been issued to fund the "Widening and Strengthening of Important Upazila and Union Roads in Rajshahi Division Project" and is a seven-year Ijara Sukuk (lease-based Islamic bond) with an annual rental yield of 10.50%. The total issue size was Tk2,000 crore.

Investors submitted bids totalling Tk8,347.609 crore, more than 4.17 times the announced amount, resulting in allocation to investors on a pro-rata basis.

This marks the sixth Sukuk issuance by the government. Over the past few years, the government has raised a total of Tk22,000 crore through five earlier Sukuk issues. These instruments allow the government to tap into Shariah-compliant liquidity held by Islamic banks and financial institutions for development projects.

The Sukuk programme has not only offered an Islamic investment alternative to institutions but also opened up Shariah-compliant investment opportunities for individual investors in a Muslim-majority country like Bangladesh.

Banks and financial institutions can use their acquired Sukuk as Statutory Liquidity Ratio (SLR) instruments. Moreover, Islamic banks and Islamic windows of conventional banks may use them as collateral to obtain Islamic Liquidity Support (ILS) from the Bangladesh Bank.

Although the primary auction was limited to Islamic banks or financial institutions, Islamic branches or windows of conventional banks, individuals, and provident funds, these Sukuk will be tradable in the secondary market, making them accessible to all scheduled banks, financial institutions, insurance companies, individuals, and other institutional investors.

Unprecedented Retail Participation

Notably, the sixth Sukuk saw unprecedented participation from individual and provident fund investors, with 139 successful applications totalling around Tk350 crore, accounting for 17.50% of the issued amount. By comparison, the total participation from this category in all previous five Sukuk issues was only Tk307.28 crore across 77 applications, representing just 1.40% of the total Tk 22,000 crore issued earlier.

Meanwhile, Islamic branches or windows of conventional banks submitted bids nearly 18 times their allocated quota, indicating a strong appetite for Shariah-compliant investments.

This sixth Sovereign Sukuk issuance is expected to play a positive role in improving the socio-economic conditions of the project areas in Rajshahi Division.