KUALA LUMPUR (REUTERS) - DanaInfra Nasional Bhd, a unit owned by Malaysia's Finance Ministry, on Tuesday launched a 10-year Islamic bond worth 300 million ringgit (S$120.8 million) aimed at retail investors to raise funds for the country's largest infrastructure project.

DanaInfra, which was created last year to facilitate funding for large infrastructure projects, will draw the amount from an 8-billion-ringgit bond programme established to cover costs for the planned Mass Rapid Transit (MRT) rail system.

"The bonds launched today represent an opportunity for people to invest in, and profit from, the nation's development,"said Prime Minister Najib Razak at the launch of DanaInfra's bond, the first retail note to be issued on Malaysia's stock exchange.

The first of three lines for the MRT in the capital Kuala Lumpur will span 51 km and be fully operational by July 2017. Project costs for the packages that have been awarded are estimated at 20 billion ringgit.

"The population of the capital city is expected to reach 10 million by 2020 and pressure on its infrastructure will grow. Without the additional capacity, the city will be choked with traffic and this will make it less livable," said Mr Najib.

DanaInfra expects to issue new bonds every quarter. It last year issued 2.4 billion ringgit in Islamic bonds for institutional investors.