Indonesia

Sharia-compliant #investments guard against foreign influence

Sharia-compliant investments have flourished in recent years, which could help strengthen the domestic market’s resistance to global influences. Data from the Indonesia Stock Exchange (IDX) shows that the number of sharia-compliant investors in March grew 18%, or by 4,245 investors year-to-date (ytd), with transactions totaling Rp 476 billion.

Republic of #Indonesia’s $3 Billion Sovereign #Green #Sukuk Offering

Indonesia issued a 5-year US$1.25 billion green Wakala Sukuk as the first issuance under its recently established Green Bond and Green Sukuk Framework. Norton Rose Fulbright has advised Abu Dhabi Islamic Bank, Citigroup, CIMB, Dubai Islamic Bank and HSBC, acting as joint lead managers and joint bookrunners. The Republic intends to use the proceeds exclusively to finance green projects, including renewable energy, sustainable transport, waste management, climate-related projects and green buildings. Alongside the 5-year green Sukuk, Norton Rose Fulbright also acted for the joint lead managers and joint bookrunners in the Republic’s 10-year US$1.75 billion Wakala Sukuk issuance.

#Indonesia sells 8.44 trillion rupiah in retail #sukuk

The Indonesian government sold 8.44 trillion rupiah ($613.19 million) of sukuk bonds to local retail investors. The sales were slightly higher than the initially-allotted 8.11 trillion rupiah. The tradeable sukuk carry a fixed annual rate of 5.9%, similar to the average rate offered by Islamic banks for 12-month and longer time deposits. The sukuk was sold to a total of 17,922 Indonesians this year. Since the retail sukuk was first launched in 2009, the government has sold a total of 144.78 trillion rupiah of the debt to nearly 250,000 people.

How interfaith #philanthropy can minimize violence in the name of religion

Religion-based philanthropy entails sharing and assistance activities conducted without discrimination between ethnicity, religion or race. In Indonesia it is increasingly common for philanthropic agencies to collaborate and develop interfaith partnerships to carry out humanitarian missions in conflict and disaster areas. For example, The Tzu Chi Buddhist Foundation assists the community of pesantren and builds housing for Muara Angke residents, who are predominantly Muslim. The catholic Karina Foundation develops emergency response and disaster risk reduction programs. Islamic Philanthropy Institutions such as Dompet Dhuafa, Lazismu, Rumah Zakat, PKPU, Aksi Cepat Tanggap, Wahid Institute, also work together and readily help non-Muslim communities. Interfaith philanthropy is especially important in the current environment in which the unity of Indonesia is under attack by religious separatists. Many institutions collaborate on running programs. Through collaboration, suspicion can be minimized and the programs can be run optimally.

Green, Islamic investors find common ground with Indonesian #sukuk

#Indonesia became the first Asian sovereign to sell green sukuk, raising $1.25 billion via a five-year deal, alongside a $1.75 billion 10-year sukuk. Proceeds will be used on eligible projects, ranging from renewable energy to waste management. Indonesia’s sukuk was based on an agency contract known as wakala and also incorporated a green framework assessed by the Centre for International Climate and Environmental Research (CICERO). Such a convergence of investment principles could widen the appeal of sukuk beyond Asia and the Middle East to include ethical investors in Western countries. More transactions might be needed to fully test the appetite of green investors for sukuk, as Indonesia’s green sukuk saw stronger takeup from regional investors.

#Indonesia’s P2P startup Investree to raise Series B round, eyes collaboration with banks

Indonesian P2P firm Investree expects to close a Series B funding round in two to three months to finance the company’s marketing activities and expansion. Investree chairman Adrian Gunadi said that the investment would not only boost the company’s core business but also its new sharia product and online government securities business. The firm is hoping to capitalize on its large lender base, made up predominantly of the country’s millennials aged 21-35. Since its inception in 2016, Investree facilitated Rp 623 billion in loans. From the Rp 623 billion, around Rp 500 billion has been disbursed and Rp 367 billion has been paid back. So there’s around Rp 120 billion in outstanding loans. Investree plans to offer a new asset class on its platform, that of retail online government securities. The initiative will start either in April or May, they are currently waiting for confirmation from the Finance Ministry.

#Indonesia raises $3bn in Sovereign #Sukuk including $1.25bn Green Sukuk

Indonesia raised $1.25bn as the world’s first sovereign green sukuk. The country's latest sukuk was priced at a yield of 3.75% and has a tenure of 5 years. Non-Sovereign Malaysian organisations have previously issued green sukuk, most recently with two issuances in 2017. Indonesia also raised US$1.75 billion via a 10-year sukuk sold at the same time as the green issuance. The non-green sukuk was sold at a coupon rate of 4.4%. Globally, $155.5 billion of green bonds were sold last year, according to the London-based Climate Bonds Initiative.

#Indonesia issues world's first #green #sukuk bond - Financial Times

Indonesia, the world's largest exporter of coal, has become the first country in the world to sell a sovereign green sukuk bond. The country has borrowed $1.25bn with the issuance of a five-year sukuk. Luky Alfirman, head of the Budget Financing at Indonesia's Finance Ministry said the proceeds would be used to finance projects such as renewable energy, green tourism and waste management. The government also said it would take up more projects to address climate change mitigation and adaptation, which requires alternative financing. CIMB, Citigroup, Dubai Islamic Bank PJSC , HSBC and Abu Dhabi Islamic Bank were bookrunners on the deal.

#Indonesia has great sharia finance potential: President

Indonesian President Joko Widodo (Jokowi) sees great potential in Islamic finance, considering that the country has the largest Muslim population in the world. According to the President, sharia banking assets continued to increase in 2017 and amounted to Rp435 trillion (about US$32.2 billion) or about 5.8% of the total assets of Indonesian banks. In addition, the sharia capital market in Indonesia also continues to improve with sukuk reaching a 19% market share. The government also noted that non-bank Islamic finance industry assets have doubled since 2013. Jokowi explained that the potential of sharia industry and trade can be immediately developed in the Muslim fashion industry, halal food industry, pharmaceutical industry and tourism industry. He urged all people to become the driving force of the sharia economy.

Indonesia hires for dollar #sukuk, could include Green tranche

The Republic of Indonesia has appointed banks for a US dollar sukuk offering that could include the first offshore Green bond from an Asian sovereign. Abu Dhabi Islamic Bank, CIMB, Citigroup, Dubai Islamic Bank and HSBC are joint bookrunners. The sukuk maturities are expected to be of 5 and 10 years, and the issuer may also consider the possibility of a longer dated tranche. Poland was the first sovereign to issue Green bonds, in a euro-denominated transaction in 2016. In Asia, Hong Kong has also expressed interest in issuing Green bonds. Indonesia last issued dollar bonds in December, when it completed a $4 billion transaction split across three tenors.

#Indonesia Hampers #Fintech in Using #Cryptocurrencies

From January 1, Indonesia is introducing a ban on crypto coins as payment options. The Indonesian government wants to ban forms of payment processing and make payment processing available only by owning a banking license. Such moves show how governments could crack down on crypto coins, while being generally accepting of fintech payment systems, even going as far as licensing them. Indonesia recognizes fintech firms as those providing payment systems, market support, investment management or risk management, P2P lending, financing providers and other financial services. All new fintech products in Indonesia would be tested in a sandbox environment before receiving a license.

Reviving 'waqf' institutions in #Indonesia

Waqf have played an important role in the social and economic development of Muslim societies. However, many waqf properties in Indonesia suffer from abuse and neglect. Chairman of the Indonesian Waqf Board (BWI) Mohammad Nuh urged the transformation of the great potential of waqf into a real force to support the national economy. Current development of waqf is hindered by five core issues: misperception, legislation, governance, professionalism and the availability of funding. Important issues such as the provisions of a survey or census on waqf and tax incentives are lacking in the current legislation. A survey on waqf is crucial in mapping the current problems and status of waqf assets. In Indonesia waqf institutions are largely not bankable and hardly have a channel to financial institutions in financing the development of their properties. The newly appointed Indonesian waqf board may revive waqf institutions by identifying priorities, careful implementation and better administration.

The rise of the Islamic capital market

The Financial Services Authority (OJK) recently licensed Indonesia’s first full-fledged Islamic fund management company, Paytren Asset Management (PAM). This newly established Islamic fund manager is another milestone in the development of the country’s Islamic capital market.

Developing #Indonesia as Islamic finance hub

The world’s financial landscape has changed fundamentally over the last few years. Islamic equity funds experienced strong growth during the second half of the 1990s. In 1996, there were 29 Islamic funds, valued at US$800 million. Nowadays, Indonesia plans to become a leading Islamic finance hub. The Jakarta Islamic Index has 30 sharia shares accounting for Rp 2.1 quadrillion with 32.7% of market capitalization.

IFSB #Engagement #Session with the #Indonesian Islamic Finance Stakeholders

The Islamic Financial Services Board (IFSB), Bank Indonesia and the Financial Services Authority of Indonesia (OJK) organised an Industry Engagement Session. The event was entitled "The Global Islamic Finance Industry and the IFSB" and took place on 2 October in Jakarta. Anwar Bashori, Head of Islamic Finance at Bank Indonesia, shared his optimism that there is strong potential for further growth of this sector in Indonesia. He also touched on the importance of Halal tourism and food industry, and the various challenges and opportunities related to Fintech. In the panel discussion Prof. Volker Nienhaus commented on the emerging trend which is expected to enhance financial inclusion through the greater use of fintech. Ahmad Buchori shared the current issues of Islamic finance in Indonesia. Dr. Rifki Ismal’s presentation focused on developing the Islamic social sector to enhance the Indonesian economy. The session ended with discussions between the participants, where the industry players reaffirmed the important role of regulators. There was a request for more platforms to address and discuss key issues and concerns of the Islamic finance players.

Responsible Investing: Shariah-compliant #microfinance investment fund eyeing Asean opportunities

Investing in microfinance institutions (MFIs) has become increasingly popular in the last decade. According to a 2016 report, microfinance investment vehicles (MIVs) have seen capital inflows of US$1.1 billion per year since 2006. The market size at end-2015 was US$11 billion, a fivefold increase from US$2.1 billion in 2006. While MIVs usually target countries in Eastern Europe, Central Asia, Latin America and the Caribbean, the report points out that Asia has witnessed the largest growth in this respect. Matthew Martin, founder of microfinance investment fund Blossom Finance, points out that microfinance can better serve the needs of communities than the top-down, one-size-fits-all model of retail banking. The fund is currently limited to US accredited investors due to legal issues, but Martin hopes to open it up to other investors too. Blossom Finance only invests in shariah-compliant MFIs specifically focused on Indonesia.

#Indonesia, the next big #market for Dubai Islamic Bank?

In this interview Dr. Adnan Chilwan, CEO of Dubai Islamic Bank (DIB), speaks about the Indonesian market and the positioning of Dubai Islamic Bank. In March 2017 Indonesia’s Bank Panin Syariah rebranded to Panin Dubai Syariah Bank (PDSB) and DIB holds a 40% interest. Dr. Chilwan believes Indonesia has great potential and the regulator is quite supportive of Islamic finance. In his view, the success of DIB is the result of its change in positioning. The bank has not compromised Shari’ah, but has a better understanding of customer needs. DIB is competing with the largest players within every region and is aiming at full inclusion to bank everyone.

Advancing financial #inclusion for #Indonesian #women

Commonwealth Bank and Mastercard announced a collaboration to better financial inclusion for Indonesian women. This collaboration will have three key pillars: enhancing formal networks by knowledge exchange among women-owned businesses, innovating through new digital learning tools and investing in research. Early in 2017, Indonesia’s Financial Services Authority (OJK) released a research showing that Indonesia’s financial literacy and inclusion indices stood at 29.66% and 67.82%. OJK called upon the industry to implement inclusion programmes to achieve their target of 75% for the financial inclusion index by 2019. Commonwealth Bank and Mastercard will help drive the growth of women-owned businesses by educating them about customer and market trends. Additionally, both will invest in research to continue the conversation about financial inclusion.

Digitisation of #Indonesian Banks

Consulting firm Solidiance launched its new report entitled Digital Evolution in Indonesia's Banking Industry. In this report millennials are projected to account for around 58% of Indonesia's total population by 2027. Indonesia has a population of more than 260 million people and only 36% of the population are connected to financial institutions, leaving in the region 150 million citizens unbanked. The report also noted that digitalization helps provide greater opportunities for banks to seize the market share. The market will be soon occupied with digital-native millenials who prefer to use the new channels available them. The Solidiance report estimated the number of Internet users in Indonesia is expected to explode in the coming years from as low as 35% of the population in 2015 to an estimated 68% in 2020.

Islamic finance, a big chance to back SDGs

The #Indonesian National Alms Agency (BAZNAS) agreed to support the widening of electricity access to the poor in Jambi province in July. This marked the first official disbursement of the Islamic zakat fund to support the sustainable development goals (SDGs) in Indonesia.

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