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Bangladesh’s first-ever short-term Shariah-compliant sukuk attracted overwhelming investor interest at its debut auction on Sunday, with bids exceeding the government’s target by more than tenfold, highlighting strong demand for Islamic financial instruments.
According to the Bangladesh Bank (BB), investors submitted bids worth Tk 56,607 crore against an issuance target of Tk 5,500 crore for the 273-day sukuk, making the auction 10.29 times oversubscribed.
The government issued the Islamic bond to finance the Important Rural Infrastructure Development Project-2 (IRIDP-2). The sukuk offers an annual rental rate of 9.36 percent and was auctioned by the Bangladesh Bank on behalf of the government.
The central bank said the overwhelming response came from a broad range of investors, including Shariah-based banks and financial institutions, Islamic banking branches and windows of conventional banks, institutional investors and individual investors.
Given the exceptionally high demand, allocations were made on a pro-rata basis among successful bidders.
The Bangladesh Bank said the successful launch marks a significant milestone in the country’s Islamic capital market by expanding Shariah-compliant investment opportunities for both institutional and retail investors.
The new short-term sukuk will also strengthen liquidity management for Islamic banks and financial institutions. Eligible banks will be able to count the instrument as part of their Statutory Liquidity Reserve (SLR) requirement, while Islamic banks can use it as collateral to obtain funds under the central bank’s Islamic Banks Liquidity Facility (IBLF).
The central bank said trading of the sukuk in the secondary market will begin on June 29, enabling banks, financial institutions, insurance companies, provident funds, mutual funds and individual investors to buy and sell the security before maturity.
According to the BB, 727 successful bids from individual investors, provident funds, mutual funds and deposit insurance entities received allocations worth approximately Tk 87.37 crore, reflecting growing participation by retail and institutional investors in Shariah-based government securities.
Officials said the introduction of a short-term sukuk complements the government’s existing long-term Islamic bonds and provides Islamic financial institutions with a more effective tool for short-term liquidity management.
Demand for Shariah-compliant government securities has grown steadily since Bangladesh introduced sovereign sukuk in December 2020. With the successful issuance of the country’s first nine-month sukuk, the government’s cumulative fundraising through Islamic bonds has now exceeded Tk 53,000 crore.
Economists say the strong investor response demonstrates increasing confidence in Bangladesh’s Islamic financial market and is expected to encourage the government to expand the range of Shariah-compliant investment products to support infrastructure financing and deepen the domestic capital market.