Indonesian Government Raises $1.5 Billion From Sukuk Sale

Aloysius Unditu

The Finance Ministry raised Rp 14.9 trillion ($1.5 billion) from the sale of rupiah-denominated Islamic bonds to Indonesian citizens on Monday as part of the country’s effort to raise funds to plug its ballooning budget deficit.
The sale of the Shariah-compliant sukuk notes is also intended to spur growth in the Islamic finance sector in the country that is home to the world’s largest Muslim population.
The sukuk, called Sukuk Retail Indonesia (Sukri), will be the first rupiah-denominated Islamic bonds aimed at retail investors in Indonesia this year.
“Demand by investors during the offering period was high,” Robert Pakpahan, the director general of the debt management office at the Finance Ministry in Jakarta, said on Monday.
Robert was speaking to media at the Finance Ministry office.
Robert said there were 17,783 retail investors that purchased the bonds, with around 55 percent of them located in the more-developed western part of Indonesia.
The offering period of the Islamic bonds ran from Feb. 7 through Feb. 22. The government set the coupon on the rupiah sukuk at 6 percent, lower than the previous sale’s 6.25 percent rate last year.
The government raised Rp 13.6 trillion by selling 42-month notes in November 2012. In October 2011, the government also raised Rp 8 trillion by selling the 7.956-percent bonds to individual investors.
Several Indonesian banks and security companies were named by the government as selling agents to manage the notes’ sale. They included Bank Mandiri, Bank Central Asia, Citibank and Bank CIMB Niaga, as well as brokerage firms Andalan Artha Advisindo Sekuritas, Bahana Securities, Trimegah Securities and Danareksa Sekuritas.
The retail investors, who are Indonesian individuals and the target for the issuance, differ from large investment banks in that they are permitted to buy smaller parcels of bonds. Individual investors are required to bid at least Rp 5 million but cannot bid more than Rp 3 billion, according to Finance Ministry guidelines.
The government, which has been selling dollar- and rupiah-denominated bonds since 2002, wants to raise funds to plug its budget deficit, which is forecast to reach Rp 153 trillion this year, or 1.65 percent of gross domestic product.
The sale of the rupiah bonds is also aimed at diversifying the base of investors in the domestic bond market.
Indonesia also plans to sell dollar-denominated sukuk and conventional bonds this year.
The Indonesian government has been aiming to boost the sale of Shariah-compliant debt notes to woo more retail investors.