Potentials of Sukuk for Public Welfare and Sustainable Development in Bangladesh

Bangladesh needs substantial investment to improve infrastructure, expand essential public services, generate employment, and address climate change.

Meeting these needs requires diversified and sustainable sources of finance. In this context, Shariah-compliant sukuk offers an opportunity to mobilise domestic savings and channel them into productive economic activities and public welfare projects, potentially reducing reliance on foreign borrowing and development assistance.

Since the introduction of the Bangladesh Government Investment Sukuk (BGIS) in December 2020, the government has used this financing instrument for projects involving safe drinking water, government primary school infrastructure, and rural connectivity.

According to published reports, the outstanding amount against six government sukuk stood at Tk 24,000 crore at the end of June 2025. A report published in May 2026 stated that cumulative sukuk issuance had reached Tk 42,400 crore since December 2020, while the outstanding amount reportedly stood at Tk 53,500 crore at the end of June 2026.

However, the success of sukuk cannot be measured by the volume of funds raised alone. Efficient use of proceeds, protection of investors’ rights, and measurable improvements in people’s lives should be the principal indicators of success.

Sukuk: Linking Finance with the Real Economy

Sukuk is often described as a Shariah-compliant alternative to conventional bonds, but the two differ in their underlying structures. Conventional bonds generally represent debt obligations under which investors receive interest.

Sukuk, depending on its structure, represents ownership benefits, beneficial rights, usufruct, or contractual rights associated with assets, projects, or investment activities.

Sukuk can be structured through Shariah-compliant contracts such as Ijarah, Mudarabah, Musharakah, and Istisna. Ijarah generates returns through rentals associated with asset use, while Mudarabah and Musharakah provide profit-sharing and partnership arrangements. Istisna can facilitate financing for construction and manufacturing.

These structures can connect investment with tangible assets and productive economic activities. Nevertheless, Shariah compliance requires more than an Islamic label. Underlying contracts, ownership and usage rights, return mechanisms, and risk allocation must be properly defined.

Legal enforceability and investor protection are equally essential.

Bangladesh’s Experience and Development Opportunities

Bangladesh’s government sukuk programme has supported several public infrastructure initiatives.

Tk 8,000 crore was raised in December 2020 for safe water supply, followed by Tk 5,000 crore in December 2021 for government primary school infrastructure and another Tk 5,000 crore in April 2022 for rural infrastructure development.

Sukuk financing has also supported rural roads, bridges, and improvements to upazila and union roads.

Such investments can generate benefits beyond financial returns. Improved roads reduce transportation costs, facilitate agricultural trade, and connect rural communities with markets, schools, and healthcare facilities.

Safe water projects contribute to better public health, while improved school infrastructure supports education.

Looking ahead, sukuk could finance railways, ports, hospitals, sanitation systems, technical training centres, agricultural storage facilities, and cold-chain infrastructure.

Project selection should prioritise public need, economic viability, and long-term sustainability. Planning must also cover operating costs, maintenance, and service continuity to ensure that infrastructure continues delivering benefits after construction.

Green and Social Sukuk for Sustainable Development

Climate change, floods, river erosion, cyclones, and coastal vulnerability pose serious challenges to Bangladesh. Addressing them requires investment in renewable energy, climate-resilient infrastructure, sustainable transport, and environmental protection.

Green sukuk could help mobilise funding for solar power, energy-efficient buildings, wastewater treatment, and waste management.

Social sukuk could support education, healthcare, safe drinking water, and essential services for disadvantaged communities. Sustainability sukuk may finance projects delivering both environmental and social benefits.

To attract responsible investors, these instruments must meet credible standards. The intended use of proceeds, project selection criteria, fund management, and expected outcomes should be clearly defined.

Independent reviews, regular reporting, and environmental and social impact assessments can strengthen credibility and prevent unsupported sustainability claims.

Mobilising Domestic Savings and Protecting Investors

Sukuk can broaden Bangladesh’s investor base by channelling savings from individuals and institutions into development financing. Banks, financial institutions, insurance companies, pension and provident funds, and eligible retail investors could contribute to a deeper domestic market.

Accessible investment procedures, transparent pricing, and adequate disclosure are essential. Investors should understand an instrument’s maturity, return mechanism, repayment arrangements, and associated risks before investing. A more active secondary market could improve liquidity, subject to Shariah requirements and applicable regulations.

Investor protection also depends on understanding the distinction between asset-based and asset-backed sukuk. Under asset-based structures, repayment may depend substantially on the issuer’s financial capacity and contractual obligations.

Asset-backed structures may provide investors with more direct rights over underlying assets, depending on the legal arrangements.

Issuing sukuk against a bridge or other public infrastructure does not automatically entitle investors to its income. Ownership or usufruct rights, repayment sources, and legal remedies must be clearly established.

Government-related transactions require particular care because public assets may be subject to statutory restrictions and public-service obligations. Strong contractual and legal safeguards are therefore essential for building investor confidence.

Governance, Transparency, and Accountability

The long-term success of sukuk depends on effective governance throughout the financing cycle. Investors and the public should be able to determine whether proceeds have been used as intended, whether projects are progressing as planned, and whether promised benefits are being realised.

Separate accounting, independent audits, and periodic progress reports can strengthen transparency. Cost overruns, implementation delays, and shortfalls against targets should be disclosed alongside corrective measures.

Coordination among the Ministry of Finance, Bangladesh Bank, the Bangladesh Securities and Exchange Commission, and implementing agencies is important. Qualified Shariah scholars, legal experts, financial analysts, and technical specialists can contribute to sound structuring and oversight.

Each project should also have measurable development indicators, such as the number of people gaining access to safe water, schools upgraded, kilometres of roads improved, and environmental benefits achieved. Publishing these results would enable investors and citizens to assess both financial performance and public value.

Public Welfare Should Define Success

Bangladesh has an opportunity to build on its government sukuk experience and expand financing for viable private-sector projects, renewable energy, climate resilience, education, and healthcare.

Realising this potential requires regulatory certainty, credible Shariah governance, transparent disclosures, and effective investor protection.

Sukuk must also be assessed in terms of affordability, repayment arrangements, and the government’s long-term fiscal obligations. It is an alternative financing structure, not a substitute for sound public financial management. Every project should demonstrate that its expected economic and social benefits justify its costs.

Ultimately, sukuk can become an important instrument for Bangladesh’s development. Its true value lies not simply in the capital it mobilises, but in its contribution to better living standards, higher productivity, employment generation, stronger public services, and environmental sustainability. Sukuk should be measured not merely by the money it raises, but by the lasting public value it creates.

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About the author: Md. Khairul Hasan is an AAOIFI Certified Shari’ah Adviser and Auditor, a banking and financial sector analyst, and Assistant Vice President in the Brand Communication Division of Sammilito Islami Bank PLC. Email: [email protected]