Bangladesh sukuk raises Tk 53,000 crore but fails to build Islamic capital market
Synopsis
Bangladesh has raised Tk 53,000 crore through sovereign sukuk since 2020, but a new analysis argues the programme is little more than conventional government debt in Islamic clothing. The core problem: sale-and-leaseback structures where investors rely on a government promise to pay, not real asset ownership — the very thing that separates genuine Islamic finance from a rebranding exercise.
Key Takeaways
Bangladesh's sovereign sukuk programme has raised Tk 53,000 crore since its first issuance in December 2020 .
On 28 June , Bangladesh Bank auctioned a nine-month sukuk — the country's first short-term Islamic instrument — to raise Tk 5,500 crore for rural infrastructure.
Critics argue the sukuk are asset-based , not asset-backed — meaning investors rely on a government repayment promise, not genuine asset ownership or shared risk.
The sale-and-leaseback structure is described as conventional government debt repackaged in Shariah terminology, limiting its ability to build a real Islamic capital market.
Analysts recommend shifting to sukuk financing new infrastructure projects — roads, ports, power plants — to establish a credible Islamic benchmark yield curve.
Approximately Tk 30,000 crore more is reportedly planned to be raised via sukuk in the next fiscal year.
Bangladesh's sovereign sukuk programme has mobilised Tk 53,000 crore since its launch in December 2020, yet a new analysis argues it has not succeeded in creating a genuine Islamic capital market — because the instruments issued so far are, in substance, conventional government debt dressed in Shariah-compliant terminology.
The Latest Auction
On 28 June, Bangladesh Bank sold a nine-month sukuk — the country's first short-term Islamic financial instrument — to raise Tk 5,500 crore for rural infrastructure. The auction marks a new maturity milestone for the programme, which began with a longer-tenure sovereign sukuk to fund a national safe-water project nearly five years ago.
Why Critics Say It Falls Short
According to a report by The Daily Star, the sukuk issued so far are structured as sale-and-leaseback arrangements — meaning the government sells an asset it already owns, leases it back, and commits to repurchasing it at a future date. Analysts describe this as 'asset-based sukuk', distinct from the more rigorous 'asset-backed sukuk' model.
'The state sells something it already owns, rents it back, and promises to buy it again. Financiers call this asset-based sukuk, not asset-backed sukuk. In an asset-backed structure, investors genuinely own the asset and share in its risks and returns. In an asset-based one, the asset is mostly a legal formality,' the report noted.
Because investors ultimately rely on the government's promise to pay rather than the performance of an underlying asset, critics argue the instruments provide little that distinguishes them from conventional treasury bills in economic terms.
Structural Limitations of the Current Model
The report identifies several constraints inherent in the asset-based approach. Such sukuk can only be issued when there are existing public assets available to repackage, raising concerns about valuation and repurchase pricing. They also require substantial legal documentation and, by their nature, can only be issued in volumes limited by the stock of repackageable assets — insufficient scale to anchor a benchmark yield curve or attract a broad investor base.
Notably, Bangladesh has no shortage of development financing needs, which the report argues makes the current approach a missed opportunity.
The Path Forward: Asset-Backed, Project-Linked Sukuk
The analysis urges Bangladesh to pivot toward sukuk that directly finance new, income-generating infrastructure — roads, ports, power plants, and schools — rather than recycling ownership of existing assets. Such instruments could be issued across a range of maturities without buy-back clauses, scale with the country's development pipeline, and help establish a reliable Islamic benchmark yield curve.
'The harder path is to use sukuk to finance genuinely new assets — roads, ports, power plants, schools — and let the instrument work as it's meant to work. Governments often take the easy path. Bangladesh did too,' the report said.
What Comes Next
The government has reportedly earmarked approximately Tk 30,000 crore more to be raised through the sukuk route in the next fiscal year. Whether that fresh issuance will follow the existing asset-based template or shift toward a more structurally authentic Islamic finance model remains to be seen. Regulators and Islamic finance practitioners will be watching closely.
Point of View
No complex cash-flow modelling, and no genuine risk transfer. But they also produce no benchmark yield curve, no secondary market depth, and no real alternative to conventional debt. With Tk 30,000 crore more planned through this route, Dhaka risks entrenching a model that satisfies the optics of Islamic finance without delivering its economic logic. The harder question — whether Bangladesh's regulatory and legal infrastructure can support genuine asset-backed issuance — is one the report raises but policymakers have yet to answer publicly.
NationPress
1 Jul 2026
Frequently Asked Questions
What is Bangladesh's sovereign sukuk programme?
Bangladesh's sovereign sukuk programme is a government initiative to raise funds through Islamic financial instruments compliant with Shariah law. Launched in December 2020 with a sukuk to fund a national safe-water project, it has since raised Tk 53,000 crore in total.
Why has Bangladesh's sukuk programme failed to build a genuine Islamic capital market?
According to a report by The Daily Star, the sukuk issued are 'asset-based' rather than 'asset-backed' — structured as sale-and-leaseback deals where investors rely on a government promise to repay rather than genuine ownership of an underlying asset. Critics argue this makes them economically similar to conventional government debt, preventing the formation of a real Islamic capital market.
What is the difference between asset-based and asset-backed sukuk?
In an asset-backed sukuk, investors genuinely own the underlying asset and share in its risks and returns. In an asset-based sukuk, the asset serves largely as a legal formality — the government sells an asset, leases it back, and promises to repurchase it, with investors' returns dependent on that government promise rather than asset performance.
What did Bangladesh Bank auction on 28 June?
Bangladesh Bank sold a nine-month sukuk on 28 June — the country's first short-term Islamic financial instrument — to raise Tk 5,500 crore earmarked for rural infrastructure development.
What is the recommended alternative for Bangladesh's sukuk programme?
Analysts recommend that Bangladesh shift from sale-and-leaseback structures to sukuk that directly finance new, income-generating assets such as roads, ports, power plants, and schools. Such instruments could be issued across multiple maturities without buy-back clauses, scale with development needs, and help establish a reliable Islamic benchmark yield curve.
