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Thursday, July 18, 2024

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Bangladesh eases rules on social impact Sukuk to be tradable in secondary market at negotiated prices

Bangladesh Bank (BB) has allowed the trading of the Important Rural Infrastructure Development Project on Priority Basis-3 (IRIDP-3) Social Impact Sukuk in the secondary market at negotiated market prices following 30% completion of the project.

In a circular, BB said Sukukholders may now bargain for higher prices to trade in the secondary market amid high inflation in the economy.

“In view of this, IRIDP-3 Social Impact Sukuk can be bought and sold at an agreed price,” BB said.

Prior to the relaxation of the rules, banks and financial institutions were only allowed to trade the Sukuk at par value.

On the 20th April 2022, BB issued the IRIDP-3 Social Impact Sukuk worth BDT50 billion (US$450.6 million) with a rental rate of 4.75% per annum and a tenor of five years.

The government undertook a five-year tenor project named IRIDP-3, which aims at increasing the socioeconomic development of the rural people through development of rural infrastructure including roads, bridges/culverts connecting the business centers, growth centers, union ‘parisad’, ‘upazila’ headquarters and health complexes.

The project is expected to contribute to the national policies of Bangladesh that emphasize on the significant roles of infrastructure in poverty reduction.

The project commenced on the 1st July 2020 and is estimated to be completed on the 30th June 2026. The overall cost for completion of this project is estimated at BDT64.77 billion (US$583.71 million) and the capital expenditure portion of the project is BDT59 billion (US$531.71 million).

According to the prospectus, the Sukuk will be tradable at a negotiated price after development and delivery of the one-third portion of the Sukuk assets which will be notified by BB. Prior to that, the Sukuk can only be traded at face value. Any banks and financial institutions or any resident and non-resident individuals/institutions may purchase the Sukuk from the secondary market.

Bangladesh has seen several significant milestones in its Islamic capital market over the last three years including its debut sovereign Sukuk in 2020, and its first-ever corporate Sukuk and first-ever green corporate Sukuk both in 2021.

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