By IINA,
Jakarta : Indonesia, the world’s most populous Muslim state, launched on Friday sukuks (Islamic bonds) for retail investors, eyeing a bigger share in the booming Islamic finance industry. “Today we launch Sukuk with serial number of 001,” Tahmat Waluyanto, the ministry’s Director General for Treasury, said. The sukuk will be sold at par, or face value, at Rp 1 million ($88) per unit, with a minimum purchase amount of Rp 5 million. It will be offered for investors from January 30 to February 20 with annual yield 12 percent, higher than premium-grade bank deposit rates of nearly 10 percent for preferred customers.
Sukuks, which conform to Islam’s prohibition of receiving or paying interest, typically work as profit-sharing vehicles. Companies that issue Islamic bonds make payments to investors using profits from the underlying business, instead of paying interest. But money can not be invested in alcohol, gambling, pornography, tobacco, weapons or pork. Indonesia joined the world club of sukuks in April 2008, passing legislation allowing the sale of Islamic bonds at home and abroad. The Sukuk market has reached $111.9 billion in the eight years to 2008 and a further $69 billion is expected to be issued in 2008/2009, according to the International Islamic Financial Market.
Indonesian banks are also eyeing a bigger share in the world’s thriving Islamic banking industry, with plans to sell millions of sukuks in neighboring countries. Indonesia’s fourth-largest lender, PT Bank Negara Indonesia Tbk (BBNI.JK), said it plans to sell $50 million of Islamic bonds in Malaysia this year. “We are now at the pre-marketing stage, the tenor may range between 5 to 10 years,” BBNI.JK president director Gatot Suwondo told Reuters. “We will issue it when the market and the price is good.”
However, Suwondo declined to declare the currency in which the bonds would be issued. Spokesman Zulnasri said the bank had not yet appointed underwriters for the planned issuance. “Financial firms HSBC (HSBA.L) and CIMB (BUCM.KL) have done this sort of thing before. So we are learning from them, but we haven’t given any mandate,” he said. The targeted market in the southeast Asian giant Malaysia is home to the world’s largest Islamic bond market.
Islamic finance is already one of the fastest growing sectors in the global financial industry. The Islamic banking industry, which began almost three decades ago, has made substantial growth and attracted the attention of investors and bankers across the world. Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.