Islamic investment bond’s net balance hits all-time high of Tk157bn

The net balance of Bangladesh Government Islamic Investment Bond hit an all-time high of Tk157 billion in the last fiscal year, thanks to the introduction of Sukuk and its huge response from investors.

The balance swelled by 145.31% year-on-year from Tk64 billion in FY20, according to data from the Bangladesh Bank. 

Similarly, sales of Islamic investment bonds increased to over Tk170 billion in FY21, which was Tk132 billion in FY20. 

The investment bond, introduced in 2004, was the only approved Shariah-compliant security before the issuance of Sukuk to maintain the Statutory Liquidity Ratio (SLR) by Islamic banks. 

But the government cannot borrow from the Islamic investment bond owing to the absence of Shariah-compliant projects. Given this, only Islamic banks can borrow from this fund in case of liquidity shortage, which is mobilised through selling of such bonds based on mudarabah principle. 

On behalf of the government, the Bangladesh Bank issued its maiden sovereign investment Sukuk on 28 December in 2020 to raise Tk80.00 billion for the implementation of a safe water supply project across the nation. 

Sukuk issuance was oversubscribed by nearly four times in the first auction and by eight times in the second auction. 

The huge oversubscription indicated a vivid prospect of the Sukuk market in Bangladesh. Sukuk holders will receive a 4.69% profit on their aggregate investment. 

Profits will be paid to investors on a half-yearly basis. An investor will have to invest a minimum of Tk10,000 in this security and there is no upper limit. Banks, corporate institutions and individuals will be permitted to invest in the bond. Sukuk will mature in five years.

Total deposits of Islamic banking amounted to Tk3765.78 billion in July-September in FY22 with an increase of Tk84.15 billion or 2.29% as compared with the last quarter of FY21. And, the deposits registered 17.82% growth year-on-year. 

The share of total deposits of Islamic banks accounted for 25.75% of total deposits and the investment accounted for 28.37% of the whole banking sector. 

At present, 10 full-fledged Islamic banks have been operating with 1619 branches out of 10,803 branches of the whole banking sector.

In addition, 40 Islamic banking branches of nine conventional commercial banks and 194 Islamic banking windows of 13 conventional commercial banks are also providing Islamic financial services in Bangladesh.