IslamicFinance.de

Indonesia is seeking to further develop its Islamic banking sector, looking to tap into the growing market for sharia-compliant financial instruments, though it still has some way to go before being able to match the major players in the segment.

Indonesia's finance ministry raised 620 billion rupiah ($68.24 million) in a sukuk auction on Tuesday, well below target, as investors demanded high yields to compensate for a lack of trading liquidity in the paper.

Indonesia has set the yield on the retail sukuk due to be issued next month at 8.70 percent. Indonesia, which has the world's largest Muslim population and wants to develop the domestic Islamic finance market, plans to sell 3 trillion rupiah ($321.2 million) worth of retail sukuk next month.

State insurance company PT Jamsostek plans to acquire stakes in two local sharia banks this year through a joint agreement with the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD).

The new investment arm of the company, the Jamsostek Investment Company (JIC), expected to be established in the first semester of this year, will purchase the stake of the country's biggest sharia lender BNI Syariah and Bank Syariah Bukopin by the end of this year, Jamsostek president director Hotbonar Siaga said on Friday.

The people of West Java also showed their support by injecting Rp 106 billion into the bank. Although its business was not too bright in its early days, the bank recorded a profit of Rp 372.5 billion in the second quarter of 2009. The achievement of Bank Muamalat is proof of the great potential of sharia banking in Indonesia. Sharia banking is based on Islamic law.

Bank Indonesia data reveals there are currently five sharia banks operating in the country, namely Bank Syariah Mandiri, Bank Muamalat Indonesia, Bank Syariah Mega, Bank Syariah Bukopin and Bank Syariah BRI. Twenty-six other banks have sharia banking units, such as Bank Permata, Bank BNI, Bank CIMB-Niaga, Bank Danamon and BPD DKI.

The Acting Governor of Bank Indonesia said that banks based on Islamic law are predicted to enjoy further growth in 2010. Darmin added that sharia banks would continue to flourish due to the organic growth within existing banks and the establishment of new sharia banks and unit.

Indonesian Islamic financer PT Bank Rakyat Indonesia Syariah (BRI Syariah) expects its assets to double to 3 trillion rupiah by the end of the year.

Three national banks are in the process of opening Islamic units to respond to growing demand for sharia banking services, an official was cited in Antara: Bank Central Asia (BCA), Bank Panin and Bank Victoria.

Reuters reported on 18 March that Indonesia's third-largest lender, PT Bank Central Asia Tbk, is planning to launch an Islamic bank in September following its acquisition of a small bank last year, its vice president director said.

Indonesian property firm PT Bakrieland Development Tbk wants to raise up to 300 billion rupiah from an Sukuk issue, or twice the amount previously indicated. Bakrieland has appointed PT Bahana Securities and PT Madani Securities as underwriters for the sukuk. The firm plans to issue a 2-year tranche with an indicative yield of 14-15 %, and a 3-year tranche with an indicative yield of 15-16 %.

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.

Indonesian shipping firm, PT Berlian Laju Tanker Tbk , in a prospectus published in Bisnis Indonesia newspaper, the firm said it plans to sell 400 billion rupiah of conventional bonds and 100 billion rupiah of ijarah sale-and-leaseback sukuk, which will be offered May 20-25.

It has appointed PT Danatama Makmur and PT Andalan Artha Advisindo Sekuritas as underwriters.

Islamic Corporation for the Development of the Private Sector, a unit of Islamic Development Bank plans to invest as much as USD 500 mn in PT Bank Negara Indonesia’s Shariah- compliant banking unit to help it expand in Asia, specifically Indonesia, Southern Thailand and Malaysia.

The nation’s Shariah-compliant banking assets rose 47 % to 48.4 trillion rupiah (USD 4.6 bn) at the end of 2008, according to Bank Indonesia data.

New sales of Islamic bonds or sukuk, by Asian governments such as Indonesia are revitalising the market, ratings agency Moody’s said in a report, wrote Uta Harnischfeger in The National. Last week, the government of Indonesia issued its first international dollar sukuk, raising US$650 million (Dh2.3bn). The Sukuk was seven times oversubscribed.

Indonesia's forthcoming Global Sukuk has been assigned a foreign currency rating of Ba3 with a stable outlook by Moody's Investors Service.

Indonesia began gauging interest this week for its maiden global sukuk that is expected to raise up to USD 650 mn. Sri Mulyani Indrawati, finance minister, confirmed that the offering circular for the Sukuk Al Ijara reported John Aglionby in the Financial Times. Barclays Capital, HSBC and Standard Chartered Bank are marketing the Sukuk. t has been rated Ba3 from Moody’s Investors Service, BB- from Standard & Poor’s Ratings Services and BB from Fitch Ratings.

Yields on traditional government bonds are coming down: The government’s 10-year paper is now offering 11.99%, down from above 14 % in February. Indonesia’s credit default swap spreads over US Treasuries have tightened to 491 bps, down from well over 1,000 bps late last year.

Indonesian retailer PT Matahari Putra Prima Tbk raised a bigger-than-targeted 528 billion rupiah ($46.68 million) from a bonds issuance to help finance business expansion.

Matahari appointed PT HSBC Securities Indonesia, PT Indo Premier Securities and PT Ciptadana Securities as underwriters. It planned to raise 500 billion rupiahand achieved to raise 226 billion rupiah from Sukuk and 302 billion rupiah from conventional bonds. Pricing is about 16 % for 3 years and 17 % for 5 years.

Allianz Indonesia grew by 8.5 % and is the fourth biggest life insurer in the country. In 2008 the MENA region has proven to be one of Allianz's growth powerhouses. Revenues from the region grew to 2.4 billion euros, an increase of 40 percent from last year. In Asia Pacific Property and casualty business (P&C) remains growth driver, unique opportunities to strengthen distribution.

Allianz offers conventional and Islamic coverage.

Indonesia's finance ministry plans to sell its first global sharia-compliant bond issue, or sukuk, before June, backed by 7.5 trillion rupiah (USD 650 mn) worth of assets. The sukuk will be issued according to the ijara, or lease-based, principle.