Govt to raise Tk5,000cr through Sukuk

The government is going to raise Tk 5,000 crore by issuing shariah-compliant bond Sukuk to finance ‘need-based Government Primary School Development Project (1st stage)’.

The auction will take place from 10am to 12pm on December 29 at the Bangladesh Bank (BB) head office, the central bank said in a press release on Tuesday.

The bond will have a maturity period of five years and will mature on December 30, 2026.

BB said that any local or foreign individual and organisation located in Bangladesh will be able to submit bids in the auction through any bank or financial institution having current account with the central bank.

The investors will receive a profit of 4.65 per cent on their investment in the Islamic bonds and the profits will be paid on a half-yearly basis.

Sukuk is an Islamic financial certificate, similar to a treasury bond, complying with Shariah laws.

A senior central bank official said that a client would have to invest a minimum of Tk 10,000 in the bond but there is no upper limit.

In the last fiscal year, the government issued Sukuk for the first time to raise Tk 8,000 crore to implement a safe water supply project.

Meanwhile, the government plans to raise another Tk 5,000 crore through the Islamic bond. As a special-purpose vehicle (SPV) for the issuance of the upcoming government securities, the central bank has completed all preparations to issue the second set of Sukuk.

As per provisions, there are usually three parties involved with an Islamic Sukuk - originator, SPV and investors. The government is the originator of the Sukuk.

The central bank is acting as an SPV to administer risk-free securities. It will also act as the trusty to resolve any potential conflict between the investors and the government.