Final auction for Islamic bond on Jun 9

The final phase of the auction for Bangladesh Bank's Tk 4,000 crore sukuk bond is going to be held on June 9.

A sukuk is an Islamic financial certificate, similar to a treasury bond and structured to generate returns in compliance with Islamic finance principles.

The government will raise Tk 8,000 crore through the issuance of the sukuk to implement a safe water supply project. In the first phase of the auction held last December, various banks and individuals placed 39 bids worth Tk 15,153 crore against the targeted amount of Tk 4,000 crore.

Any local or foreign individual or bank can participate in the auction between 9:00am to 11:59am following the central bank's format.

A client will have to invest a minimum of Tk 10,000 in the security, and there is no upper limit. Banks, corporate institutions and individuals will be permitted to invest.

Investors will receive a profit of 4.69 per cent on their investment in the Islamic bond.

The central bank has fixed the rate based on the Bangladesh Government Islamic Investment Bond (BGIIB).

The last declared profit-sharing ratio of the six-month BGIIB is 3.69 per cent, and the central bank has added 1 percentage point to decide the rate for the sukuk.

Profits will be paid on a half-yearly basis.

The profit rate of the sukuk is higher than the five-year treasury bond, which now offers an interest rate of 4.64 per cent.

The sukuk will mature in five years and the government looks to implement the safe water supply project by June 30, 2025.

The overall cost of the project is estimated at Tk 8,851 crore, of which Tk 851 crore will be provided by the government, according to a prospectus prepared by both the central bank and the finance ministry.

The Department of Public Health Engineering will implement the project.