Retail Sukuk (Sukuk Ritel): Indonesia Experience Ministry of Finance The Republic of Indonesia 1 st Annual Islamic Finance Conference: Sukuk for Infrastructure Financing and Financial Inclusion Strategy Jakarta Convention Centre, May 17, 2016 Dr. Robert Pakpahan Director General of Budget Financing and Risk Management Ministry of Finance of the Republic of Indonesia
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Retail Sukuk (Sukuk Ritel):Indonesia Experience
Ministry of FinanceThe Republic of Indonesia
1st Annual Islamic Finance Conference:Sukuk for Infrastructure Financing and Financial Inclusion Strategy
Jakarta Convention Centre, May 17, 2016
Dr. Robert PakpahanDirector General of Budget Financing and Risk Management
Ministry of Finance of the Republic of Indonesia
2
1. Introduction
Sukuk Negara’s role in financing Indonesia’s budget
What is Sukuk Negara?
State Budget Financing Instruments
Government Securities Loans
Government Debt Securities Domestic Loans Foreign Loans
Domestic International
SPN-SIslamic Treasury Bills
For Islamic money market development and cash managementAuctioned since August2011Tenor: 6-monthsProfit Rate: discounted basis Underlying assets: fixed assets
IFRIslamic Fixed Rate
Introduced in August 2008Tenor:medium to longProfit Rate:semi-annual distribution paymentUnderlying assets: fixed assets
PBSProject Based Sukuk
Auctioned since 2012Tenor: medium to longProfit Rate: semi-annual distribution paymentUnderlying assets: state budget projects and fixed assets
SRSukuk Negara Retail
For retail sale to indvidualsTenor: 3 to 3.5-yearsIssued through bookbuildingMaximum purchase of Rp5bn, with a minimum of Rp5mnProfit Rate: monthlyUnderlying assets: state budget projects and fixed assets
SNISukuk Negara IndonesiaIssued in the international US Dollar marketEnables diversification of investor base (Islamic and Middle East)Tenor: 5 to 10-yearsProfit Rate: semi-annual distribution payment
Sukuk Negara
Sukuk Negara is sovereign securities issued based on the principles of Sharia (Islamic Law), as evidence of the participation in Sukuk Negara assets, either in Indonesian Rupiah or in foreign currencies (Law Number 19 of 2008 on Sovereign Sharia Securities).Sukuk Negara plays an integral role in financing Indonesia’s budget, and comprises of 6 core instruments across a wide range of tenors, sizes, coupons, and investor bases This strategy enables maximum investor coverage, as well as the greatest possible diversification. Indonesia has been active in Sukuk markets since it laid the groundwork for Sukuk issuances in 2008 and this year has already issued IDR 110.9 trillion of Sukuk Negara in the domestic and international markets (as of April 29, 2016).As of 29 April 2016, Sukuk Negara forms 15% of the Total Outstanding Government Securities.
SDHIHajj Sukuk
First issued in 2009Tenor: medium to longIssued through privateplacementProfit Rate: semi-annual distribution paymentUnderlying assets: Hajj services
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Sukuk Negara Profile
Composition of Outstanding by Currency
Composition of Outstanding by Tenor
Consistent growth in Sukuk Negara Issuance IDR 250.99tn66.68%
IDR 125.44tn33.32%
0 100 200 300
IDR
USD
(IDR tn)
IDR 227.91tn60.55%IDR
100.57tn26.72%
IDR 47.94tn12.74%
0 50 100 150 200 250
0 – 5 years
6 – 10 years
> 10years
(IDR tn)
4,7
110.9118.5
75.5
53.257.1
33.327.0
16.6
0
20
40
60
80
100
120
140
Apr-1620152014201320122011201020092008
Issu
ance
vol
ume
(IDR
tn)
IFR SR (Retail) SNI (USD) SDHI (non-tradable) SPN-S SPN-S NT PBS
Sukuk Negara first issuance : 2008 (IFR0001 & IFR0002)Total issuance IDR 496.73 trillion (as of 29 April 2016)Total outstanding IDR 376.43 trillion (as of 29 April 2016)Denomination : IDR and USDIssuance method: auction, book building, and private placement
Data as of April 29, 2016
Data as of April 29, 2016
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Global Sukuk
As of April 29, 2016, total sovereign sukuk issuance in International market (USDdenominated) has reached USD43.56 billion.Indonesia contributed 23.3% (USD10.15 billion) of total international sovereignsukuk issuance.Currently, Indonesia has the largest outstanding of international sovereign sukuk(USD denominated) at the amount of USD9.5 billion.
Total Issuance of Int’l (USD) Sovereign Sukuk Total Outstanding of Int’l (USD) Sovereign Sukuk
• Others consist of Companies, Leasing Co, Securities Co., Foundations.
The relatively low share of Sukuk ownership by Sharia banks vs Conventional banks is largely attributed to the relative asset size of both groups. According to the latest Bank Indonesia publication in 2016 to date, Conventional banks’ asset size amounts to IDR 5,909 Tn vs Sharia banks’ IDR 211 Tn. Therefore, although Shariabanks’ holding proportion is lower at 7.8%, this already represents 9% of total assets compared to 34.6% for Conventional banks which represents 1.5% of their total assetsIndividuals have seen positive trajectory in Sukuk ownership on the back of recent retail bond issuances by the Government of the Republic of Indonesia. Recently, the Government issued Retail Sukuk series (SR-008) in 2016 which registered total investor demand of around IDR 43 Tn.Sukuk holdings by Insurance, Pension Funds and Mutual Funds have increased in 2016 and are expected to rise further given the recent implementation of OJK regulation No 1/POJK.05/2016 which requires the aforementioned to have at least 20-30% of their total investments in Government Debt Securities (including Sukuk) by 2017.Offshore holdings on Sukuk continues to increase reflecting relative value of Sukuk, confidence in the strengths of the Indonesia credit story and improved awareness of Sukuk securities issued by the Government of the Republic of Indonesia.
ROI regularly issues Sukuk Ritel for promoting financial inclusion
Since 2009 the RoI offered Sukuk Ritel through Selling Agents for Indonesian citizens in the primary market. The issuance is aimed at investor diversification, domestic market deepening and supporting financial inclusion.Sukuk Ritel Selling Agents consist of Banks and Securities Companies who is appointed by the GoI to sell Sukuk Ritel to individual investors of Indonesian citizen.
Investor Selling Agent
Ministry of Finance
Investor (holder of Indonesian ID card)- Completes forms and attaches ID card copy- Opens a cash and fixed income account with
the Selling Agent- Deposits funds- Awaits allocation
Selling Agent- Compiles and relays their
orderbook to the Ministry of Finance for the allocation process
Selling Agent- Carries out Settlements based on actual
allocated amount- Returns funds to investors based on their
actual allocation- Provides investors with their proof of
ownership of the Sukuk Ritel allocated to them
Ministry of Finance- Allocates orders as deemed
appropriate- Relays results to the Selling Agent
How is Sukuk Ritel
ordered and
allocated?
Fixed returnsDistributed on a monthly basisLower income tax compared to a bank deposit accountTradable at market priceCan be used as collateral (subject to Selling Agents facility)
How to issue Sukuk Ritel?
1. Legal base2. Underlying assets3. Sukuk structures4. Fatwa5. Selling agents appointment6. Legal advisor appointment7. Issuance process and settlement
Why are Investors willing to buy Sukuk Ritel?
Why does ROI issue Sukuk Ritel for individual investors?
1. Broadening alternative source of State Budget Funding
Summary of Terms & ConditionsStructure : Ijarah Asset to be LeasedIssuer : Perusahaan Penerbit
SBSN IndonesiaTenor : 3 YearsSettl. Date : 10 March 2016Maturity Date : 11 March 2019Coupon Rate : 8.30 % p.a. Minimum Order : IDR 5,000,000Maximum Order
: IDR 5,000,000,000
Tradability : Tradable, 1 month Holding Period
Nominal per Unit
: IDR 1,000,000
Sukuk Ritel SR 008: Distribution by Purchase Volume
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IDR1.1 trillion(3.4%) <IDR100 million
IDR100 – 600 million
IDR600 million –2 billion
IDR2-3 billion
IDR3-4 billion
>IDR4 billion
IDR6.8 trillion(21.7%)
IDR12.8 trillion(40.7%)
IDR3.9 trillion(12.4%)
IDR1.5 trillion(4.8%)
IDR5.2 trillion(16.7%)
17,609 investors(36.3%)
18,297 investors(37.7%)
9,824 investors(20.3%)
1,352 investors(2.8%)
383 investors(0.8%)
979 investors(2.02%)
Total Purchase Volume Total Number of Investors
Most Sukuk Ritel SR-008 investors comes from those who purchase below IDR600 million (35,907 investors/ 74.12%) with total purchase volume of IDR7.9 trillion (25.1%)
Sukuk Ritel SR 008: Distribution by Region
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www.frewaremini.com
Sukuk Ritel is reachable to all Indonesia citizen acrossall region.
JakartaBy Volume = 38.53%By Number of Investors = 34.18%
Western Indonesia (excl. Jakarta)By Volume = 50.31%By Number of Investors = 55.42%
Central IndonesiaBy Volume = 9.04%By Number of Investors = 8.76%
Eastern IndonesiaBy Volume = 2.12%By Number of Investors = 1.64%
Sukuk Ritel SR 008: Distribution by Investor Types