The government has released its latest investment instrument and source of funding called sharia saving bonds. The government will have the chance to gain up to IDR 3 trillion of fresh funds using the new instrument.
The Finance Ministry’s Director General for Management, Funding and Risks (DJPPR) Robert Pakpahan said that the target indicative value of the new bonds was IDR 2 trillion. However, based on the results of a survey, Robert claimed that the public’s interest in purchasing the bond could generate IDR 3 trillion.
“We haven’t thought about doing an upsize (increasing the value). We’re waiting for the government to think about it, observe the situation. An upsize is possible, we will consider it eventually,” Robert said during the launching of the ST-001 Sharia Saving Bond at the Finance Ministry’s office on Friday (19/8).
(Read: Brexit Effect, Indonesia’s Sharia Bond Reaps more Foreign Fundsthan Malaysia’s)
The sharia bonds have a 6.9 percent coupon rate with a maturity period of two years.In other words, the bonds will mature on 7 September 2018. Assets used as collateral for the bond are projects or activities listed in the 2016 State Budget and government property in forms of land and buildings.
Somewhat different from other bonds, these sharia bonds cannot be traded on secondary markets. However, the government is offering an early redemption option at the end of the first year. Investors who wish to make use of this facility are only allowed to redeem 50 percent of the total value of their sharia saving bonds.
The first series of the sharia saving bonds will be offered from 22 August to 2 September 2016. Allocation of the bonds starts on 5 September and they will be issued on 7 September. The minimum order is for IDR 2 million-worth of sharia saving bonds, and the maximum is IDR 5 billion.
Robert is optimistic that the bonds’ coupon rate will be able to attract investors, especially as interest rates are currently declining. “We hope that [these bonds] will be attractive at a time of declining interest rates, both on the global and domestic markets,” Robert said. (Read: UK Sharia Finance Growing Faster in UK than Indonesia)
On the same occasion, Finance Minister Sri Mulyani Indrawati said that the sharia saving bond is one of the government’s efforts to raise money to finance infrastructure projects. She added that the government is committed to managing a secure and credible State Budget to increase public confidence in the government’s ability to pay its debts.
“We need to establish a good and healthy State Budget so that the public have confidence that the [investment] instruments we issue are of good quality, secure, and provide certainty,” Sri Mulyani said. (Read: Foreign Interest Rates High, Government Issues Global Sharia Bonds Worth US$ 2.5 Billion)
The ST-001 series sharia saving bond is available for purchase through 20 banks, including Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI), Bank Tabungan Negara (BTN), Bank Central Asia (BCA), Bank Muamalat, Bank Permata, Bank Danamon, and Bank Mega. Other banks also include Bank DBS Indonesia, Bank ANZ Indonesia, Standard Chartered Bank, and HSBC.
The sharia saving bond sales agents are supported by six securities firms: Bahana Securities, Danareksa Securities, Trimegah Securities, Sucorinvest Central Gani, Mega Capital Indonesia, and MNC Securities.