Bangladesh
7 years ago

BB suggests BSEC encourage Sukuk in capital market

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Bangladesh Bank has suggested encouraging Islamic Shariah compliant investment certificate Sukuk in the capital market.

The central bank made the suggestion in its latest quarterly report on ‘Capital Market Developments in Bangladesh’.

A Sukuk is an Islamic financial certificate, similar to a bond in mainstream finance that complies with Sharia or Islamic religious laws.

Instead of interest bearing traditional bond, the issuer of a Sukuk generally sells a certificate to an investor group, and then uses the money to purchase an asset.

The investor group has to have partial ownership on the asset and the issuer has to make a contractual promise to buy back the bond at a future date at par value.

Capital market regulator BSEC may motivate government infrastructure developing bodies and private sector to issue Sukuk for financing the large infrastructure projects, the BB said in its report.

It pointed out that other Muslim majority countries such as Malaysia, Indonesia, KSA, UAE as well as non-Muslim majority countries like the UK and Singapore have Sukuk in their capital market.

The review report also stressed on some pragmatic steps to be taken by the BSEC to ensure good corporate governance, motivate good companies for floating bonds,

shares and continue legal facilitation with more attractive incentives, especially for the foreign participants.

“Banks are not in a position to finance a long term productive investment activities continuously following higher level of non-performing loan and risk of maturity mismatch of funds,” it observed.

“Given this, Bangladesh needs to undertake measures to expand capital market for financing productive investments and infrastructural projects,” the report believed.

Finance Minister AMA Muhith has recently expressed his plan to assign 'a small group' within two months to build capital market efficiency to pave the way for its long-term financing.

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