Govt Raises Record Rp 22t From Red-Hot Sukuk Sale
Jakarta. Indonesia raised a record Rp 21.97 trillion ($1.68 billion) from selling shariah-compliant bonds, or sukuk, in the past two weeks thanks to strong demand that left small investors wanting.
The Finance Ministry’s sale of the Islamic bonds to individual investors topped the Rp 19.3 trillion that it made in a similar sale last year, said Robert Pakpahan, the ministry’s director general for financing and risk management.
“The issuance of the retail sukuk SR-007 series was our biggest sale to date,” Robert said at a press conference in Jakarta on Monday, referring to the bonds’ serial number. “Due to high interest from the public, selling agents proposed to upsize the quota.”
The sukuk was sold through 22 selling agents comprised of 17 banks and five securities from Feb. 23 to March 6, with an initial target of Rp 20 trillion, in order to finance government projects this year.
The sukuk uses the ijarah scheme, in which the investors buy beneficial rights or ownership of the projects and then lease them back to government, to comply with an Islamic prohibition on interest.
Despite the record sale, the number of individual investors, at 29,706, was down markedly from last year’s 34,600.
“Because of the stronger demand, there was a longer waiting list. So the selling agents put priority customers first,” said Saminto, the Finance Ministry’s director of financing.
Banks typically prioritize services to customers who have deposits or buy insurance and other financial instruments through the lender in amounts exceeding some specified level.
Bank Mandiri, the country’s largest lender by assets, defines its priority customers as those with total assets of at least Rp 1 billion with the lender. State-owned Bank Rakyat Indonesia defines the same kind of customer as having at least Rp 500 million with the bank.
“I was shocked when on the first day of sales I found that the sukuk had sold out at my bank branch,” said Fransisca Ningsih, a civil servant who wanted to buy Rp 10 million of sukuk.
Fransisca said she was told that the entire quota of papers issued to the branch had already been booked by priority customers.
Fransisca said she decided instead to buy mutual funds.
“Maybe I’ll buy them [sukuk] later in the secondary market,” she added.
The sales were mostly concentrated in Jakarta, where 9,787 investors bought sukuk worth Rp 8.54 trillion. The western half of the country accounted for the highest sales at Rp 11.15 trillion, or 50.75 percent of the bonds issued.
The sukuk will be issued on Wednesday, with a maturity of three years. The papers, sold at par, offer an 8.25 percent coupon rate, which will be paid every month starting on April 11.
The sukuk will be registered on the Indonesia Stock Exchange, or IDX, on Thursday.
Finance Minister Bambang Brodjonegoro said at the launch of the sukuk last month that the issuance was as part of efforts to help plug the state budget deficit. With the issuance, all individuals can help contribute to financing the state budget, he said.
Indonesia set a deficit target of Rp 245.9 trillion in this year state budget, or 2.21 percent of gross domestic product. The government must maintain the deficit at less than 3 percent of GDP.
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Source: The Jakarta Globe