Banks, financial institutions show huge interest in 2nd Sukuk auction
The country's first Shariah-compliant bond, Islamic Investment Sukuk, has drawn over eight times applications from investors in the second round and the final phase of auction held on Wednesday, a Bangladesh Bank (BB) press release said.
BB officials said that the central bank received 67 bids worth Tk 32,726 crore from banks, non-bank financial institutions and individuals against offering of Tk 4,000 crore bond, the second phase of the Tk 8,000 crore bond auction.
The fund is being raised for implementation of the government's safe water supply project for the entire country. The project implementation tenure is five years and the bond also has a maturity period of five years.
The government introduced the BGIIS (Bangladesh Government Investment Sukuk) on October 8 with a view to creating investments opportunities for idle money at Shariah-compliant banks and to widen investments opportunities from them. The BB said that the Shariah-based banks were holding 45 per cent of the country's idle money.
Bangladesh Bank spokesperson and executive director Md Serajul Islam told The Daily Observer that the bond drew a huge attention mainly of the Shariah-complient banks and from NBFIs as the scope of investments for them was limited compared to traditional banks.
Due to the Shariah-compliant nature of the bond, the banks and Non-Bank Financial Institute (NBFI) took the scope for safe investments and getting satisfactory returns, he said.
Another official of the central bank said that the returns on investment would be higher in the Bangladesh Government Islamic Investment Sukuk (BGIIS) compared with interest rates of Bangladesh Government Treasury Bonds (BGTB).
At present, the cut-off yield on the BGTBs stands at 3.98 per cent whereas the profit rate of the BIIS is set at 4.69 per cent.
The final auction for Sukuk bonds was held on Wednesday, instead of June 28, to raise Tk 40 billion for implementation of a safe water supply project by June 30, 2025.
The BB official also said that the bond was allocated among the bidder on a pro rata basis on the day.
As per the rules, 70 per cent of the Sukuk certificates were allocated among the Shariah-based Islamic banks, NBFIs and insurance companies, while the conventional banks and other financial institutions received 15 per cent of the bonds.
Of the rest, 10 per cent of the Sukuk was allocated among Islamic branches and windows of the conventional banks and 5 per cent among the individual investors.
In the first phase of the auction held in December 2020, different banks and individuals placed 39 bids worth Tk 15,153 crore against the targeted amount of Tk 4,000 crore.