IslamicFinance.de

Due to a shortage of Islamic sovereign debt, the new dollar-denominated sukuk of Indonesia rallied at the double pace of than non-Islamic securities this week. The sales gathered $5 billion in orders for $1 billion on offer. The bonds, which will reach maturity in 2022, are sold at a coupon of 3.3%. Since November 19th, the yield fell 17 basis points reaching 3.13%. Compared to that, not Shariah-compliant bonds declined only 8 basic points to 2.91%. The current 2.82% are a record low for Shariah-compliant borrowing costs in the international markets. It is possible that next year the shortage will become even more acute because of the government's plans to cut overseas sales in order to reduce its foreign-currency risk.

Regulators changed the rules on non Islamic loans for the purchase of motor vehicles like cars and motorcycles in favour of Islamic loans. As a result, consumer-finance companies in Indonesia increasingly consider Shariah-compliant lending. PT Adira Dinamika Multi Finance, which recently started Shariah-compliant business, expects for it to make up 20% of its overall operations. Other Shariah lenders clain that Islamic loans will grow as fast as 30% a year in the near future.

Indonesian central bank plans to strengthen payments on housing and automotive loans at Shariah banks. New requirements will be similar to those of conventional lenders for housing and vehicle loans issued on March 15. Due to new regulation, which took effect on June 15, it will be necessary to pay 25 percent for two-wheeled vehicles and 30 percent for four-wheeled vehicles as down payment.

Indonesia plans to let Shariah-compliant banks hedge against exchange-rate movements. This way, the growth in Islamic financial assets will be stimulated and the gap with Malaysia’s industry will be narrowed. The instruments, available in Malaysia since 2006, have been approved by the Bank Indonesia, the National Shariah Board and the Indonesia Institute of Accountants. As a result of hedging, Bank Muamalat Indonesia will be able to hold more global bonds and issue more dollar loans.

The government plans to sell up to Rp 5 trillion (USD 485 mn) of Sukuk, to institutional investors in the domestic market by the end of the second quarter.

Muhamad Al Azhari & Dion Bisara reported on 24 February in The Jakarta Globe that Indonesia raised Rp 5.56 trillion ($467 million) from the sale of the country’s first retail Islamic bonds, or retail sukuk , beating the sales target due to strong demand from investors, according to the finance minister.

The government initially aimed to raise Rp 1.77 trillion through the debt paper sale, but later raised that target to Rp 3.7 trillion as demand appeared to be strengthening. A 12 % of return was offered for the bonds, higher than premium-grade bank deposit rates of about 10 percent for preferred customers.

The debt papers were sold at a par, or face value, of Rp 1 million per unit, with a minimum purchase of Rp 5 million. The sukuk has a fixed payout on the 25th of each month and matures on Feb. 25, 2012.