A financial instrument once celebrated as a milestone in Bangladesh’s Islamic finance market is now shadowed by uncertainty.
Beximco’s flagship Sukuk, which is Bangladesh’s first privately placed Islamic bond, is approaching maturity amid mounting concern over whether investors will recover the Tk 30 billion committed to the issue, much of it by institutions that say they were effectively pushed into the investment.
The bond is due to mature in December 2026. If the principal is not repaid before then, banks may come under renewed pressure to raise deposits to meet obligations to their own customers.
Against this backdrop, analysts in the banking sector are weighing two possible paths to salvage the investment: extending the bond’s tenure or selling the Teesta solar power project, which was built using the Sukuk funds.
They also point to the possibility of drawing from a sinking fund, though they acknowledge that the amount accumulated there would fall far short of covering the entire investment.
What was launched as a model for Islamic finance has now become a test of how far regulators can stretch markets — and how much risk investors can be compelled to bear.
Beximco’s Managing Director Osman Kaiser Chowdhury insists the asset base is strong enough to support repayment.
“The Teesta solar project has a 20-year contract with the government to supply electricity to the national grid. Only around four years have passed. The project is now worth Tk 50 billion. Even if it is sold, investors can be repaid,” he told bdnews24.com.
Beximco Green Sukuk Al Istisna, privately issued, was Bangladesh’s first Sukuk bond.
Initially, Beximco struggled to attract adequate subscriptions despite multiple extensions.
Intervention by the Bangladesh Securities and Exchange Commission (BSEC) compelled brokerage houses and merchant banks to invest Tk 1.5 billion, securing the bond’s early footing.
Furthermore, Bangladesh Bank allowed banks to invest outside standard “capital market exposure” limits, effectively forcing them to participate.
Now, officials report that 27 banks supplying 75 percent of the Sukuk bond’s capital are among the most disillusioned investors.
Regulators Step In — And Tighten Grip
Launched in 2021 as part of market expansion, Bangladesh’s first private Shariah-compliant Sukuk bond came alongside approvals for several other corporate and perpetual bonds for 11 banks.
The BSEC authorised Beximco Green Sukuk Al Istisna with a capital target of Tk 30 billion.
Beximco Group, led by Salman F Rahman, former advisor to the ousted prime minister Sheikh Hasina, initiated the bond.
The trustee role was assigned to the state-owned Investment Corporation of Bangladesh (ICB), while City Bank Capital Resources acted as issue advisor and manager, supported by Agrani Equity and Investment as co-manager.
Underwriters included Agrani Equity and Investment, AB Investment, and AIBL Capital Management. The bond’s face value was set at Tk 100 per unit, with proceeds earmarked for two solar power projects:
• Teesta Solar Power Plant in Gaibandha, 200MW
• Karatoa Solar, 30MW
The Teesta plant is operational, feeding renewable energy into the national grid. Bond proceeds were also allocated for refurbishing Beximco’s textile factories, purchasing machinery, and acquiring equipment.
At the time, Beximco’s profit figures were suddenly increased to attract investors — a move later criticised.
In 2020-21, profit reportedly surged by 1,400 percent to Tk 6.6 billion, followed by Tk 12.54 billion in 2021-22.
By 2023-24, the company disclosed a loss of Tk 360 million to the Dhaka Stock Exchange (DSE).
Early Sukuk coupon rates were highly competitive at nearly 12 percent, compared with 3.92 percent for treasury bonds.
Despite this, investor interest remained muted. Multiple extensions were granted before brokerage houses and the BSEC collaborated to ensure subscriptions reached Tk 1.5 billion.
Investments Driven by Regulatory Pressure
In June 2022, the BSEC issued letters to brokerage firms, mandating 3 percent of their total capital market investment be channelled into the Sukuk.
Only three bonds were available at the time, leaving limited options.
Bangladesh Bank further eased capital exposure rules in August 2023 to encourage bank participation. Analysts say regulatory pressure was pivotal in raising investment, leaving loss-bearing investors questioning who, if anyone, is accountable.
A BSEC spokesperson told bdnews24.com, “The BSEC only advised diversification of 3 percent of investments into bonds. Investors decide which bonds to select.
“No specific directive for Beximco Sukuk was issued. Responsibility for individual investment choices rests with the investor.”
Yet, the BSEC letters listed Beximco Sukuk alongside eleven other corporate perpetual bonds, at a time when no government bonds were actively traded, effectively leaving investors with few alternatives.
After Political Shift, Financial Strain Deepens
Following the 2024 political upheaval, Beximco Vice-Chairman Salman F Rahman was arrested, pushing the group into acute financial strain.
Several companies have shuttered, operational expenses have surged, and banks along with institutional investors now face substantial losses as bond unit prices plummeted.