BB launches weekly sukuk issues

The central bank has launched a weekly Islamic bond issuance programme, providing local lenders with a new short- term liquidity management tool and boosting the prospects of Islamic finance in the majority-Muslim country.

bbBangladesh has developed a sizeable Islamic finance industry but a lack of sharia-compliant instruments such as sukuk threatens to limit further growth of the sector.

The central bank has had a sukuk programme since 2004 which has sold six-month paper, but more frequent issuance and a wider range of tenors are increasingly needed for an industry which has doubled in size in the past four years, bankers said.

The central bank auctioned three-month and six-month sukuk on Jan. 1, selling 855 million taka ($11 million) and 936 million taka respectively, it said in a statement.

Future auctions of the profit-sharing sukuk will be held every Thursday. Last week, the central bank auctioned 50 million taka worth of three-month sukuk and 452 million taka worth of six-month sukuk.

Islamic banks now represent close to a fifth of total bank deposits in Bangladesh, which has a Muslim population of about 160 million.

In June, the Malaysia-based Islamic Financial Services Board said the south Asian country needed to develop its sukuk market, as well as a sharia-compliant lender of last resort facility and Islamic deposit insurance. ($1 = 77.7000 taka)

– Reuters