The government has decided to issue Tk 3,000 crore worth of sukuk, a Shariah-compliant bond, in March to fund the construction of bridges to connect rural roads.

This move aims to boost agricultural production and improve socio-economic conditions at the grassroots level.

A sukuk is an Islamic financial certificate, similar to a treasury bond, structured to generate returns in compliance with Islamic finance principles.

This will be the fifth sukuk issued by the government, which has moved to raise funds through the Shariah-based bonds at a time when overall tax receipts witnessed a downturn, making it more reliant on borrowing to finance public expenditure.

In the July-October period of FY25, the government's net domestic borrowing from the banking system and from non-banking sources rose to Tk 39,218 crore. It stood at just Tk 2,295 crore a year ago.

The central bank said the government has so far raised Tk 19,000 crore through sukuks to finance various projects since launching the bond by raising Tk 8,000 crore to implement a safe water supply project in December 2020.

The government will float the bond in March this year, the Bangladesh Bank said in a press release yesterday.

The central bank's disclosure comes a day after it hiked sukuk subscription opportunities for individuals, provident funds, and deposit insurance to 20 percent from the previous 5 percent to attract high-net-worth individuals.

The BB said 70 percent of the sukuk will be allocated to Shariah-based banks, finance companies, and insurance companies, down from the previous 85 percent.

Islamic branches and windows of conventional banks will be able to subscribe to 10 percent of the sukuk bond.

The BB said part of the money raised will be used for a Tk 6,500 crore project titled 'Construction of Important Bridges on Rural Roads', taken by the previous government at the beginning of 2017. The project is scheduled to close in June of 2026.

The funds raised will also be used for social development projects, the central bank said.

"This project aims to ensure the development of rural road communication systems, improving socio-economic conditions and increasing agricultural production in rural areas," the central bank said.

"The rural road communication is also enabling transportation of agricultural and non-agricultural products, reducing costs, and ensuring employment opportunities."

The BB added that all conventional banks, financial institutions, and insurance companies can participate in the auction, subject to conditions.

If the required subscription is not met in the three categories, the remaining sukuk will be proportionately allocated among them.

"Resident individual investors can invest in the sukuk through their own bank accounts. Non-resident individuals or institutional investors can invest through non-resident foreign currency accounts or non-resident taka accounts maintained in any bank operating in Bangladesh."

"Profits, sale proceeds, and principal received at maturity will be repatriable in foreign currency after deducting applicable fees and taxes," said the BB.

The government has plans to borrow Tk 160,900 crore from domestic sources in the current fiscal year out of its total borrowing plan of Tk 251,600 crore.