Bangladesh’s sovereign sukuk programme has raised Tk 53,000 crore so far but has not succeeded in establishing a true Islamic capital market, as per a report. The country’s central bank recently auctioned its first short-term sukuk, amounting to Tk 5,500 crore for rural infrastructure development, as reported by The Daily Star based in Bangladesh.
The report highlights that these sukuk are essentially traditional government debts repackaged using Islamic terms. Despite the Islamic terminology, the transactions involve a sale-and-leaseback model where investors depend on the government’s commitment to repay, rather than true ownership of assets.
According to the report, the current sukuk structure does not foster a genuine Islamic capital market. It suggests a shift towards sukuk that fund new income-generating projects like roads, ports, and power plants, rather than one-off sale-and-leaseback arrangements.
The report emphasizes the importance of issuing asset-based sukuk that genuinely represent ownership of assets and share risks and returns with investors. It advocates for the issuance of new-asset sukuk across various maturity periods without buy-back clauses to address development needs and establish a reliable benchmark yield curve.
Bangladesh issued its inaugural sovereign sukuk in December 2020 for a national safe-water project, with plans to raise approximately Tk 30,000 crore through this channel in the upcoming fiscal year.
