Govt to issue first short-term sukuk for rural infrastructure

The government is going to float its first short-term sukuk, a shariah-compliant investment instrument similar to bonds, as strong demand builds among both individual and institutional investors looking for short-term returns.

For the government, the Bangladesh Bank (BB) will hold auctions on June 28 for the nine-month tenure instrument to raise Tk 5,500 crore. The amount will be used for the development of important rural infrastructure.

“We have been receiving a huge response to investment in sukuk, as reflected in the bids. This means that there is demand in the market,” said Istequemal Hussain, director of the Debt Management Department of BB.

The move comes amid continued strong appetite for sukuk.

Yesterday, the central bank raised Tk 5,600 crore through an auction for a sukuk issued to finance the rehabilitation of rural infrastructure damaged by Cyclone Amphan and floods. It received bids worth Tk 44,490 crore, nearly eight times the target amount.

Last month, the BB received bids worth 12 times the face value of a Tk 5,900 crore sukuk from banks, finance companies and individuals.

Interest in the shariah-compliant instruments has been rising since their launch in December 2020. So far, the government has raised around Tk 48,000 crore through sukuk issuance. The total will cross Tk 53,000 crore after the upcoming short-term auction.

Hussain said there is currently no government-issued investment instrument with a nine-month maturity.

“At present, there are 91-day, 182-day and 364-day treasury bills for investment,” he said. “So, we see a good prospect.”

The short-term sukuk will offer a 9.36 percent annual return, termed as annual rental (profit). The profit, estimated at Tk 385 crore, will be paid in a lump sum upon maturity.

The minimum investment has been set at Tk 10,000, according to the BB.

“All resident and non-resident individuals and institutions can invest in sukuk,” the central bank said, adding that investments can be made through accounts maintained with any bank or financial institution.

It also said tax rebate facilities will be available, similar to those offered on other government securities.

Banks and financial institutions maintaining Al-Wadeeah current accounts, a shariah-compliant banking arrangement, with the BB will be eligible to participate directly in the auction.

Local and foreign individuals, corporate bodies, investment firms, insurance companies, provident funds and deposit insurance funds can also participate through banks and financial institutions, it added.

In the proposed national budget for fiscal year 2026-27, the government has prioritised expanding the use of sukuk alongside corporate bonds, mutual funds and green bonds to reduce excessive reliance on bank-based financing.

The budget mentions that the use of sukuk, along with infrastructure funds, will be increased to support long-term public and private projects.

Hussain said the central bank looks to raise Tk 25,000 crore through sukuk in fiscal year 2026-27.

He noted that total outstanding investment in government bills and bonds stands at around Tk 5 lakh crore. Taking into account the 27 percent share of shariah-based banks in the banking sector, there is a potential sukuk investment pool of nearly Tk 1 lakh crore.

So far, the government has issued sukuk with tenures of five to seven years, raising about Tk 48,000 crore in total.