Investors seek govt assurance on Sukuk

Nearly 40 per cent institutional investors want the government provide guarantee against their investment in the Islamic bond – Sukuk.

At the same time the investors are cautious about using the proceeds from the bond in a Shariah-compliant way.

The information came in a survey report unveiled on Tuesday in a seminar titled Sukuk: A new investment avenue for institutional investors in Bangladesh.

The seminar was organised by the Bangladesh Institute of Capital Market (BICM).

SM Kalbin Salema, lecturer of the institute, prepared the report based on the opinions of 26 institutional investors.

In the report 38.46 per cent of respondents expressed the need for government guarantee against their investment into the financial instrument.

Green Sukuk was the first corporate Sukuk in Bangladesh issued by the private company Beximco in August 2021.

The company will raise Tk 3000 crore for implementation of environmentally friendly projects.  

Asked about the government guarantee for Sukuk, Masuma Sultana, deputy general manager and one of the members of Shariah Advisory Committee at the Bangladesh Bank, said if compliance is ensured, there is no need for government guarantee.

“In this context my recommendation is to expand monitoring and rating options for corporate Sukuk and ensure review by a third party independent agency,” suggested the seasoned banker.

Golam Mostfa, DGM of Investment Corporation of Bangladesh (ICB), said while the state-owned entity such as the ICB is acting as a trustee for Green Sukuk, there is no need for government guarantee.

The survey finds that most respondents think investment in Sukuk has overall low risk and high returns while more than 50 per cent responders want that the bond tenure be extended to one to five years.

Discussants at the seminar call for steps to make sure that Sukuk be Shariah-compliant.

Mufti Yusuf Sultan who is a Shariah specialist in financial sector suggested that Shariah supervisory board for Sukuk should have more strength and apply the Sukuk policy properly.   

Mohammad Abu Yusuf, joint secretary to the Finance Division, agreed with the suggestion.

He urged the government to comply with the Islamic bonds from Malaysia and Saudi Arabia.

According to the report, investment in green projects and infrastructural development projects is fond of most investors.

The respondents in the survey expressed interest in investment in short-term projects while tax exemption is a major concern for most of the interviewees.

In the current budget the government exempted 5 per cent source tax to attract the Islamic bond and create a strong bond market.

The future investment in Islamic bonds is huge. According to the BICM survey report, around 27 per cent of respondents want to invest in Islamic bonds and 23 per cent in conventional bonds whereas 50 per cent in both segments.

The speakers at the seminar called for steps to ensure the use of project funds in a Shariah-compliant manner, make timely payment of expected dividends, facilitate changing ownership in the secondary market and enact separate Sukuk laws.

In May 2019 the Bangladesh Securities and Exchange Commission issued Sukuk rules for investment.

Similarly the Ministry of Finance also laid out its Investment Sukuk Guideline 2020 in October.

The government planned to raise Tk 8,000 crore for implementation of a project titled five-year ‘Safe Water Supply to the Whole Country’ through issuing the first sovereign Sukuk in December 2020.