Indonesian government to offer retail sukuk bonds next March

Posted by Dr. Jamaldeen Mohamed Faleel

JAKARTA: The Indonesian government will begin offering retail Islamic debt papers (sukuk) to individual investors in March, after previous issuances drew strong interest, despite the shaky global financial market.

The Finance Ministry’s Debt Management Office (DMO) began accepting applications from banks and brokerages to be sales agents for the government’s fourth issue of syariah-compliant bonds, English daily The Jakarta Post quoted DMO chief Rahmat Waluyanto as saying.
Sales agents would be appointed on January 4 and the offering would be in March. Government debt papers were attractive to individual investors because the return rates were higher than bank deposits. It was also viewed as safe because of government guarantees.
In its last retail sukuk issuance in February, the Indonesian government raised 7.34 trillion rupiahs (US$800.06 million) with an annual coupon rate of 8.15 per cent to be paid monthly, compared with a 6.75 per cent bank deposit rate guaranteed by the Indonesia Deposit Insurance Corporation (LPS).
The government’s retail bond offerings had received strong demand from individual domestic investors, with the last sukuk issuance, exceeding its six trillion rupiah target.
Meanwhile the latest regular retail bond offering saw 20.35 trillion rupiah in bids, although the government ended up selling 11 trillion rupiah in debt papers.
The issuance of government debt papers, in the form of regular and sukuk institutional and retail bonds in rupiah and US dollar dominations, was a move to finance development projects and plug an estimated state budget deficit equal to 1.5 per cent of the country’s gross domestic product (GDP).
The global financial market had been hit by high-level volatility in the stocks, bonds and currency markets on international fund sell-offs over fears of a global economic slowdown on the eurozone debt crisis and the stalling US economic recovery.
Rahmat had dismissed concerns on the retail sukuk issuance due to the shaky markets, saying that the retail market was relatively resilient to crisis, as the investors were individuals.

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