Bangladesh's 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 today.

Investors submitted bids worth Tk 56,607 crore against an issuance target of Tk 5,500 crore through the 273-day sukuk, making the auction oversubscribed by 10.29 times.

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 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.

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 on June 29, 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.

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.

Interest in shariah-compliant instruments has been rising since their launch in December 2020. With the auction of the first short-term, or nine-month, sukuk, the total amount raised by the government has exceeded Tk 53,000 crore.