Bangladesh’s short-term sovereign Sukuk was oversubscribed 10.3 times, with investors submitting bids worth Tk56,607 crore against a Tk5,500 crore issue, according to Bangladesh Bank.
The 273-day Shariah-compliant security was auctioned on Sunday.
The auction came just six days after another sovereign Sukuk linked to a rural infrastructure rehabilitation project drew Tk47,491 crore in bids against an issue size of Tk5,600 crore, or 8.5 times the amount on offer.
The back-to-back oversubscriptions indicate strong demand for government-backed Shariah investment instruments, even as confidence in parts of the Islamic banking sector has come under pressure.
The surge in demand also comes against the backdrop of a prolonged crisis in Bangladesh’s Islamic banking sector.
Years of large-scale loan irregularities and alleged fund siphoning during the previous Awami League government’s tenure pushed several Shariah-based banks into severe financial distress, undermining depositor confidence across parts of the sector.
In response, the interim government initiated a resolution programme to merge five troubled Islamic banks into a new state-owned institution, Sammilito Islami Bank. The newly elected government has since confirmed that it will continue with the restructuring initiative as part of its broader banking sector reform agenda.
The demand also comes as Bangladesh Bank continues efforts to stabilise several Islamic banks facing liquidity pressure.
While the central bank has not linked the surge in Sukuk subscriptions to developments in the banking sector, market participants say sovereign Sukuk have become increasingly attractive as they combine Shariah compliance with sovereign backing.
Unlike bank deposits, sovereign Sukuk are directly linked to government development projects and carry sovereign credit support, making them an alternative investment option for Islamic financial institutions and Shariah-conscious investors.
The latest Sukuk is backed by the Important Rural Infrastructures Development Project on Priority Basis-2 (IRIDP-2), while the previous issue financed the Cyclone Amphan and Flood Damage Rural Infrastructure Rehabilitation Project.
Bangladesh Bank said the latest Sukuk carries an annual rental return of 9.36 per cent.
As demand exceeded supply by more than ten times, the central bank allocated the securities on a pro-rata basis among successful bidders.
The issue attracted bids from Shariah-based banks and financial institutions, Islamic branches and windows of conventional banks, provident funds and individual investors.
Bangladesh Bank said the introduction of short-term Sukuk would broaden investment opportunities for Islamic banks and financial institutions while improving liquidity management across the sector.
Banks and financial institutions can use the securities to meet Statutory Liquidity Reserve (SLR) requirements, while Islamic banks and Islamic banking windows can obtain liquidity support from Bangladesh Bank under the Islamic Banks Liquidity Facility (IBLF) by pledging the Sukuk as collateral.
The securities will begin trading in the secondary market from 29 June, allowing banks, financial institutions, insurance companies and individual investors to buy and sell them.
