Sukuk, a sharia-compliant bond-like instrument used in Islamic finance, can play a vital role in financing infrastructure projects in Bangladesh, speakers told a webinar on Saturday.
Islamic banks have excess liquidity for lesser options to invest for sharia compliance. Sukuk can open a new horizon of investment under sharia finance, they added.
Although Bangladesh is preparing to launch its first Sukuk this year, they said, it needs to formulate a comprehensive legal and regulatory framework for getting optimum benefit from the instrument.
The speakers said there must be a market ready and trust-building among people for Sukuk before launching the product and regulator should work on that.
They made the observations during the inaugural session of a four-day international workshop styled 'The Issuance and Management of Sukuk in Bangladesh'.
Central Sharia Board for Islamic Banks of Bangladesh (CSBIB) and International Shari'ah Research Academy for Islamic Finance (ISRA), Malaysia, co-hosted the event.
Speaking as the chief guest, finance secretary Abdur Rouf Talukder said Bangladesh needs huge investment in infrastructure and Sukuk may be a very good infrastructural finance alternative.
The market share of Islamic banks in the country is 35 per cent and it is expanding, he added.
Mr Talukder said neither the government can borrow much from Islamic banks nor the banks can participate in the government's development agenda due to sharia constraints.
"We've been working on this for the past one year and a half. We consulted sharia experts and Islamic bankers.
Now, we're very close to making a deal on this."
The government is keen on Sukuk and the first Sukuk bond will be launched by this December.
Mr Talukder said a delegation comprising representatives from finance ministry, central bank, securities commission and sharia board will visit Malaysia soon for hands-on knowledge in the bond.
Bangladesh Bank executive director Syed Tariquzzaman said Islamic finance is gaining popularity in both Muslim-majority and Muslim-minority countries attracting all faiths.
The Sukuk market can play a pivotal role in facilitating the country's economic growth, he cited.
Islamic banks may use Sukuk as statutory liquidity ratio (SLR) to meet regulatory requirements.
Mr Tariquzzaman said they are working with the ministry concerned to launch Sukuk as soon as possible.
The central bank has already drafted the Sukuk policy and sent it to the ministry for gazette notification.
CSBIB executive board chairman M Azizul Huq said it is an ideal time to launch Sukuk in the Bangladesh market.
"But there is an undefined fear about the instrument for lack of knowledge in the product," he observed.
Mr Huq stressed the need for acquiring more knowledge in the product before launching it in the market.
ISRA executive director Prof Dr Mohamad Akram Laldin said Sukuk has already become a significant liquidity management tool in the Islamic finance market.
The global capital market has recognised Sukuk as an important alternative to asset management, he stated.
Omar Mustafa Ansari, secretary general of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions, said an industry first needs to gain trust before launching a product.
Sukuk is not a simply bond, he said, adding that it is a bond which has asset at the back end.
Mr Ansari wished success for Bangladesh and said the world finance market has a lot to learn from Islamic banks in Bangladesh.
Bangladesh Institute of Bank Management director general Dr Md Akhtaruzzaman, Social Islami Bank chairman Prof Md Anwarul Azim Arif, Standard Bank chairman Kazi Akram Uddin Ahmed, Al-Arafah Islami Bank chairman Abdus Samad and Bank Asia executive committee chairman Rumee A Hossain, among others, spoke.
The Financial Express is one of the media partners of the webinar.