Indonesia’s Shariah capital market has entered a new era as a result of Law No.19 2008 about government Shariah bonds, which was enacted on the 7th May 2008. This law is required as a foundation for the issuance of government Sukuk (SBSN). Between then and the 20th September 2012, the government of Indonesia (GOI) has issued sovereign Sukuk amounting to IDR113.55 trillion (US$ 11.95 billion).
Up until the end of 2011, the GOI’s sovereign Sukuk consisted of five types: Hajj Fund Indonesian Sukuk [Sukuk Dana Haji Indonesia (SDHI)], retail Sukuk [Sukuk Negara Ritel (SR)], Islamic fixed rate (IFR), US dollar-denominated global Sukuk [Sukuk Negara Indonesia (SNI)], and Islamic T-Bills (Surat Perbendaharaan Negara-Syariah [Islamic T-Bills/SPN-S]. Indonesian rupiah-denominated Sukuk accounted for 76% of these Sukuk while the remaining 24% is denominated in US dollars.
This year the GOI has started issuing a new type of Sukuk called project-based Sukuk (PBS). Based on its issuing mechanism, the ministry of finance has differentiated the underlying projects of this project-based Sukuk into two categories.
The first category is the PBS, whose underlying projects are from those belonging to the ministries and government. From the beginning of 2012 until the 20th September 2012, the GOI has issued Sukuk under this category in the amount of IDR14.9 trillion (US$1.56 billion), sold through auction.
The second category of the PBS is with underlying projects from their original plans which are intended to be financed by the Sukuk. The process starts when the projects are submitted to the National Planning Body.
It is reported that in future the GOI will make the PBS a priority in issuing Sukuk, considering that there is a limit to the issuance of Islamic bonds on the basis of existing assets, as has been done so far through Sukuk Ijarah. The structures used for both PBS above are Ijarah assets to be leased.
Looking at the increasing pattern of Sukuk issuance in Indonesia, particularly from the government, and the fact that it is the largest Muslim country with huge infrastructure financing needs, it will not be long before Indonesia will finally be listed among the biggest Sukuk issuers in the world.
Farouk A Alwyni is the CEO of Alwyni International Capital (AIC). He can be reached at
[email protected]
.