High-powered body suggests introduction of Sukuk bond

A high-powered committee has recommended issuing Sukuk bond on priority basis to help spur dynamism in the fixed income market.

Meanwhile, the Malaysian government which has strong command over the global Sukuk market has expressed its willingness to extend their support to developing Sukuk bond market in Bangladesh.

Sukuk is the Arabic name for financial certificates, also commonly referred to as 'Sharia compliant' bond.

The Bangladesh Bank formed the high-powered committee comprising senior officials of five Islamic banks in June last, asking them to make detailed recommendations to launch the bond as a shariah compliant product.

"We've already finalised our recommendations which would be submitted to the authorities concerned shortly for consideration," a member of the committee told the FE on Friday.

"The government should issue Sukuk bond for developing the Islamic finance market in Bangladesh," he said while replying to a query.

Malaysia is the global leader in terms of the Sukuk market, issuing US$17.74 billion worth of the Islamic bond in 2014, over 66.7 per cent of the global total of $26.6 billion.

The Southeast Asian country also accounts for around two-thirds of the global outstanding of the Sukuk market, controlling $178 billion of the global total of $290 billion.

"We're looking forward for developing the Islamic financial instrument in Bangladesh," Amir Farid Abu Hasan, acting High Commissioner of Malaysia in Bangladesh, told reporters while replying to a query at media engagement in conjunction with 62nd Independence Day of Malaysia held at its high commission office in Dhaka on Friday.

The Malaysian envoy also said his country is the biggest Sukuk issuer in the world.

Talking to the FE, another Malaysian diplomat said the central bank should take proper initiatives for issuing Sukuk bond in Bangladesh.

The Bangladesh Bank (BB) had taken the move to make Islamic bonds popular by enhancing the volume of Islamic Bond Fund and creating scopes of the bonds' multiple uses.

The committee had already finalised 13-point policy recommendation to bring dynamism in the country's Islamic bond market.

"Both short and long-term policy measures have been included in our recommendations," the committee member added.

As part of short-term measures, the committee recommended introducing repo facility by the central bank against the Islamic bonds to meet short-term liquidity requirements of the Shariah-based Islamic banks and non-banking financial institutions (NBFIs).

The committee also recommended launching inter-bank repo facility by using the Islamic bonds.

Currently, two Islamic bonds- three-month Bangladesh Government Islami Investment Bond (BGIIB) and six-month BGIIB- are in operation.

The committee had given opinion on issuing two-year BGIIB instead of the existing three-month BGIIB and six-month BGIIB to attract investment in the Islamic Bond Fund.

Besides, the government had been advised to issue three-month, six-month and 12-month Bangladesh Government Islami Investment Bills.

Currently, eight private commercial banks, out of 40, are operating in accordance with Islamic Shariah in Bangladesh. The banks have their own Shariah councils to decide on banking operations under Islamic rules and regulations.

In addition, 19 Islamic banking branches of nine conventional banks and 35 Islamic banking windows of seven conventional banks are providing Islamic financial services in Bangladesh.

Two NBFIs are also operating their business based on Islamic Shariah.

Islamic banking industry holds almost one-fourth share of the entire banking industry in terms of deposit and investment at the end of the first quarter of the current calendar year, according to the central bank report.

At the end of the January-March quarter of 2019, deposits and investments of Islamic banking industry grew by 2.0 per cent and 2.76 per cent respectively compared to the previous quarter.

But its remittance and excess liquidity dropped by 36.24 per cent and 41.85 per cent respectively, according to the BB's latest report titled Developments of Islamic Banking in Bangladesh.

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