Sukuk Financing for Infrastructural Development in Bangladesh

Abstract

The infrastructure development is one of the most vital areas in achieving national as well as sustainable development goals. Without availability of infrastructure and other public services, the basic social needs cannot be met appropriately. Infrastructure is the basic tool to handle logistic constraints to develop the freedom of movement of citizens and circulation of products and services, which are essential to drive the financial progress of the country. Recently the Bangladesh Government has put a strong importance on infrastructure development such as Flyovers, Highways, Ports, Railways, River Ports, Sea Ports, High-Tech Parks, Metro Rails, Universities, Hospitals, U-loops, Export Processing Zones (EPZ), Free Trade Zones, Special Economic Zones, etc. Sovereign Governments and corporate bodies are getting easy access to the available liquidity pool of Islamic finance. 1 However, Bangladesh Government needs huge amount of funds to run the significant infrastructural development missions. Islamic finance is evolving as an alternate basis of fund for addressing key advancement obstacles faced by many Organization of Islamic Cooperation (OIC) countries. 2

As Islamic Shariah compliant financing mechanisms, Sukuk have achieved generous appreciation during last two decades for issuing corporate as well as sovereign issuances. Thus, the issuances of Sukuk have increased rapidly. Malaysia, Bahrain, Saudi Arabia, Gambia, Pakistan, Turkey, Brunei, Sudan, United Arab Emirates, Qatar, Singapore, Indonesia, Luxembourg, United Kingdom, Hong Kong, Nigeria, Germany, South Africa, Yemen, Senegal, etc. countries issued Sukuk for raising their required funds. Malaysia is considered as the biggest issuer of Sukuk in the globe covering a percentage of 60.8% (IIFM, 2019). The Malaysian Sukuk market plays a vital role in financing the economy especially in public infrastructural development projects and services. The present infrastructural development of Malaysia is the result of the adoption of Sukuk financing in their infrastructural mega projects. So Bangladesh can take the lessons from Malaysia, how they utilized Sukuk financing in their infrastructural development. The core objective of this research is to ascertain the utmost effective ways to stimulate Sukuk as a basis of funding for infrastructural development in Bangladesh. Whether Sukuk can be applied for the infrastructural development of Bangladesh or not. Another objective of the research is to explore deep understanding and consciousness regarding Sukuk and to identify the competitive advantage of Sukuk in Bangladesh including their prospects and challenges.