BB sets 10% quota for individual investors in Sukuk bonds

To boost retail participation in Shariah-compliant financial instruments, Bangladesh Bank has set aside a dedicated 10 percent quota for individual investors in Sukuk bond issuances.

The Debt Management Department of the central bank issued a directive to the Managing Directors and Chief Executive Officers of all scheduled banks and financial institutions across the country on Monday.

Under the newly defined distribution framework, 50 percent of Sukuk allocation will be reserved for full-fledged Shariah-based Institutions: Islamic banks, financial institutions, and insurance companies.

Thirty percent will go to Islamic Branches & Windows:  Islamic branches and windows of conventional banks.

Ten percent is exclusively earmarked for general individual retail investors.

The remaining 10 percent will be allocated among conventional banks, financial institutions, insurance firms, provident funds, deposit insurance, investment companies, corporate bodies, gratuity funds, and mutual funds.

Previously, there was no exclusive reserved allocation for individual investors.

Under the previous policy, 15 percent of Sukuk was jointly allocated to individual investors along with provident funds, deposit insurance, investment firms, corporate entities, gratuity funds, and mutual funds.

Meanwhile, 80 percent was allocated to Shariah-compliant entities alongside Islamic branches and windows of conventional banks, and 5 percent was reserved for conventional institutions.

The central bank's explicit 10 percent quota ensures that individual retail investors will no longer have to compete directly against large institutional funds for their entire allocation share.

Sukuk bonds are Shariah-compliant investment instruments issued by the government to raise capital for various national infrastructure and development projects. Unlike conventional interest-bearing bonds, Sukuk offers returns structured around profit-sharing principles, reports UNB.