JAKARTA – Indonesia on Friday (Oct 9) issued a retail cash waqf-linked sukuk as part of the government’s efforts to finance the recovery of the pandemic-hit economy.
The offering period for the retail sukuk is October 9 to November 12. Investors can put in from 1 million rupiah ($68) through four distribution partners Bank Muamalat, Bank Syariah Mandiri, BNI Syariah, and BRI Syariah.
The wakalah-based retail sukuk is guaranteed by the government and cannot be traded on the secondary market. It has a two-year tenure and offers a fixed rate of return of 5.5% per year. The first coupon payment is scheduled for December 10.
Proceeds will benefit Yayasan Hasanah Titik, Dompet Dhuafa, LazisMu, LazisNu, Baitulmaal Muamalat, Wakaf BSM Umat and Wakaf Salman and LAZ IPB, according to Luky Alfirman, Director General of Budget Financing and Risk Management at the Ministry of Finance.
“They will channel the return on investment or yield for Islamic social and commercial financing such as education (scholarships), health (hospitals) and financing MSMEs,” said Luky.
The government has not set a target for the retail sukuk and will adapt to market appetite during the subscription period, according to the official.
Finance minister Sri Mulyani Indrawati said in an online call to investors on Friday the retail cash waqf-linked sukuk is part of government initiatives to continue the innovation of Islamic financial products and increase awareness of Shariah-compliant investments.
The finance ministry—in collaboration with the Ministry of Religious Affairs, the central bank and the national waqf agency (Badan Wakaf Indonesia)—is exploring new instruments that can maximise the potential of waqf. The ministry believes the potential for cash waqf is 200 trillion rupiah annually and hopes that at least 20%, or around 40 trillion rupiah, can be collected each year.
“We have so much potential for retail waqf. I believe if we compare it to retail government Islamic bonds (SBSN) that have reached 203.6 trillion rupiah, the retail waqf could also be worth hundreds of trillions of rupiah,” said the minister.
“Yet the realization is still very low, only about 255 billion rupiah over the last three years. We have been actively developing waqf-linked sukuk instruments since the IMF-World Bank annual meeting in Bali in 2018.”
The sovereign this year issued a cash waqf-linked sukuk of 50.8 billion rupiah ($3.46 million) in March. The discounting of the five-year tenure sukuk is used for the development of new waqf assets, renovations and procurement of retina and glaucoma center in Serang in Banten. The monthly yield will be used for free cataract surgeries for the poor with a target of 2,500 patients. It is also allocated for the procurement of an ambulance.
“People’s income and awareness of Shariah investment instruments is on the rise,” said Sri Mulyani.
“Up to now, we have 347,145 retail investors with investment value of 203.6 trillion rupiah and 72,036 savings investors with investment value of 16.7 trillion rupiah. Combined, there are 419,184 investors with investment value of 220.3 trillion rupiah,” she added.
In other waqf-related transactions, the central bank on Oct 7 collected 30.32 billion rupiah from an auction of waqf assets. The regulator worked with the national waqf agency and Forum Wakaf Produktif on that transaction.