| DHAKA/SYDNEY, June 3
DHAKA/SYDNEY, June 3 Bangladesh's central bank
is seeking to amend rules on its existing Islamic bond (sukuk)
programme to broaden its use and allow for a sovereign issuance
by the government, enhancing the prospects of Islamic finance in
Bangladesh, a majority-Muslim country of 160 million, has
developed Islamic finance with marginal regulatory support but a
lack of Islamic capital market tools are limiting the industry's
A request for the amendments was now being considered by the
finance ministry, which would allow sukuk to be used as a money
market as well as a fiscal instrument, the Bangladesh central
bank governor's spokesman A.F.M. Asaduzzaman told Reuters.
"Issuance of sukuk by the government is one of the major
considerations in the proposed amendment," Asaduzzaman said.
The central bank has a small sukuk programme backed by
legislation dating back to 2004, which issues short-term paper
to help Islamic banks manage their liquidity, but a wide range
of tenors is not available and there are no corporate sukuk.
The proposal comes after a report by the Malaysia-based
Islamic Financial Services Board (IFSB) highlighted the need to
develop sharia-compliant funding instruments such as sukuk in
the south Asian country.
The IFSB report said a sharia-compliant lender of last
resort facility and an Islamic deposit insurance should be
developed in Bangladesh to support an Islamic finance industry
which has doubled in size in the past four years.
The central bank is currently developing a lender of last
resort framework for the entire banking sector which is expected
by December of this year, with a sharia-compliant equivalent to
be developed afterwards, Asaduzzaman said.
Islamic deposit insurance, however, was not under
consideration with Islamic banks currently covered under the
existing scheme managed by the central bank, he added.
The IFSB lists Bangladesh as one of a handful of countries
where Islamic banking has systemic importance, an industry which
follows religious principles such as a ban on interest and
The country was gripped by political turmoil leading up to
an election in January, with economic growth expected to slow to
less than 6 percent in the financial year. In the previous year,
the economy grew by 6 percent.
(Editing by Kim Coghill)