IslamicFinance.de

Aberdeen Asset Management plans to launch a new Islamic compliant fund to invest in overseas assets in the first quarter of next year, president director Sigit Pratama Wiryadi said on Thursday.
Aberdeen, a local unit of the Scottish fund manager of the same name, will be among the first funds in Indonesia to take advantage of recently loosened Financial Services Authority (OJK) rules allowing local fund managers to include foreign assets in portfolios. An OJK regulation issued last week announced managers are now permitted to invest between 51 and 100 % of shariah mutual fund products in overseas securities — from bonds, to stocks and currency.
Bharat Joshi, investment director at Aberdeen, said the fund manager would look for assets in Asia Pacific, the United States and Europe to include in the new fund. Aberdeen currently manages around Rp 2 trillion ($147 million) of the country's equities and bonds. The fund has previously said it is looking to increase assets fivefold over the next five years.

Indonesia’s branchless banking initiative faces an uphill battle against misconceptions of financial services in the country, a survey report from consultancy firm InterMedia Indonesia revealed. Nearly half of Indonesians do not use any form of financial services, according to the firm’s Financial Inclusion Insights report. It also found that one-third of people who use informal financial services cited “an inability to afford an account” as the main reason behind their reluctance to use formal banking services. The report surveyed 6,000 people across 24 provinces in Indonesia between August and November last year.

Asia is set for the busiest year for dollar sukuk sales in at least five years as Malaysia’s state oil company plans a record offering and Indonesia’s government seeks to beat rising US borrowing costs. Malaysia’s Petroliam Nasional may sell as much as $7 billion of Islamic notes while Cagamas and Export Import Bank of Malaysia have also planned offerings for this year. Meanwhile, Indonesia is seeking to return to the fold in the first half of this year. The average yield on US currency sukuk has dropped 13 basis points to 2.92 percent this year. The planned sales by Petronas, Malaysia and Indonesia will be positive as they will help ease the shortage of sukuk.

Indonesian authorities are pushing ahead with a plan to create an $8 billion Islamic megabank, even after a similar proposal fell through in Malaysia. A potential merger of the shariah-compliant units of government-controlled Bank Mandiri, Bank Rakyat Indonesia and Bank Negara Indonesia could happen as soon as this year, Financial Services Authority (OJK) chairman Muliaman Hadad said. Talks are ongoing with the State-Owned Enterprises Ministry, which first proposed the merger in May 2013. The megabank could help drive a quadrupling in Islamic banks’ market share to 20 percent by 2018, compared with 10 percent without it.

Indonesia raised $1.5 billion from the sale of dollar-denominated sukuk on Tuesday, which is to help finance the country’s budget deficit. Foreign investors submitted $10 billion worth of bids on Tuesday, or six times the amount offered. The government awarded 35 percent of the sukuk to Middle East and Islamic funds, 30 percent to investors based in Asia, including Indonesia, 20 percent to US funds and 15 percent to European investors. The 10-year Islamic bonds were sold at 4.35 percent yields, as compared with 6.125 percent paid on notes maturing in 5.5 years in September 2013 and the record-low 3.3 percent on 10-year sukuk sold in 2012. Foreign holdings of the country’s bonds increased to Rp 437.4 trillion as of Sept 2, accounting for some 37 percent of the total debt.

Indonesia is about to get an annual scorecard from Islamic bond investors and the signs are good. The nation’s first dollar sukuk in a year may yield 3.8 percent to 4.5 percent if the tenor is 10 years. That’s less than the 6.125 percent on 2019 global Islamic notes sold last September. Bank Indonesia has added $18 billion to currency reserves over the past year, inflation has almost halved from January and bond risk fell as Joko Widodo fended off legal challenges to his victory in July’s presidential election. Demand for Indonesia’s sukuk will be buoyed by a shortage of global Shariah-compliant securities. The nation’s dollar sukuk due November 2022 returned 17 percent this year, outpacing gains of 9.2 percent and 12 percent for similar notes from Malaysia and Dubai.

Indonesia's finance ministry sold Rp 19.3 trillion ($1.7 billion) of the three-year Islamic bonds to households, exceeding its Rp 18.5 trillion goal. That came after two of its three Shariah-compliant debt auctions this year failed to meet their targets. The yield on the non-retail 10.25 percent sukuk due 2025 slid 29 basis points this week to 8.61 percent, the lowest since November. Indonesia is targeting Rp 57 trillion of Islamic bond sales this year and wants to sell most of that this half before a presidential vote in July. The next offer is scheduled for March 11.

Indonesia is facing tough economic challenges and a period of political uncertainty. In this climate, Indonesia needs to restore foreign investors’ trust and redirect their attention to its strong fundamentals: a politically stable country with the world’s fourth largest population and a young and growing consumer base. One fundamental step to restoring this trust and raising Indonesia’s standing as an attractive investment destination is to shore up the private sector’s corporate governance practices. Indonesian companies can build trust by protecting the rights of shareholders and honoring their obligations to staff, investors, suppliers and local communities. They should also institute a competent and independent board that can review management decisions.

Police have named two more suspects in an alleged Bank Syariah Mandiri scam implicating three bank officials, bringing the total number of suspects to six. The two latest suspects are Hen Hen Gunawan and doctor Rizky Adiansyah. Gunawan allegedly used the identity cards of his 26 employees to embezzle up to Rp 12.4 billion ($1.1 million) from the bank through its loan scheme. Rizky, meanwhile, allegedly borrowed ID cards of some of his neighbors to siphon Rp 12.2 billion from the bank. These two new suspects were ‘instructed’ by an accounting officer of the Bogor branch of BSM, John Lopulisa. John was earlier arrested, along with the head of BSM‘s primary branch in Bogor, M. Agustinus Masrie, the head of a smaller Bogor branch, Haerulli Hermawan, and Iyan Permana. The fraud is believed to have cost the bank Rp 59 billion.

Indonesia’s finance ministry sold Rp 1.055 trillion ($96.22 million) of shariah bonds at an auction on Tuesday, with yields mixed. The country sold 700 billion rupiah of 6-month shariah T-bills, at a yield of 6.71615 percent, down from 6.75000 percent on Aug. 20. It also sold 355 billion rupiah of 30-year project-based sukuk, while its yield rose to 9.43750 percent from 9.24943 percent. Total bids were 9.308 trillion rupiah and the highest bid-to-cover ratio was 12.53 from 6-month shariah T-bills.

Indonesia’s need for dollars to defend the plunging rupiah will see the country pay the highest yield since 2009 when it sells global sukuk. The nation will offer around $1 billion of Shariah- compliant bonds after investor meetings. A yield of between 6.5 percent and 7 percent for 10-year securities is expected. Bank Indonesia announced measures aimed at increasing the supply of foreign-exchange on Aug. 23 to stem an 8.5 percent plunge in the rupiah this quarter. Moreover, the country raised its overall sales target to 231.8 trillion rupiah ($21 billion), from 180.4 trillion rupiah, as it set its budget deficit goal at 2.38 percent of gross domestic product. Besides, more shipments of unprocessed minerals will be allowed in order to narrow the current-account deficit.

Asuransi Allianz Life Indonesia plans to double its takaful, market share in five years as it joins insurer Sun Life Financial Indonesia in forming partnerships with banks to tap rising Muslim wealth. Asuransi Allianz made an agreement with HSBC Holdings this year to offer its services. Sun Life will seek to boost business in rural areas via telemarketing campaigns and bank alliances. The takaful market share may climb to 7.9 percent in five years, from 3.9 percent currently. Islamic insurance assets in Indonesia, which has the world’s biggest Muslim population at 216 million, increased an average 53 percent in the last five years to Rp 11.4 trillion ($1.1 billion).

Bank Muamalat Indonesia delayed an up to $177 million initial public offering because of recent stock market declines. The sharia lender hasn’t decided on a new timetable for the IPO. Muamalat had already lowered the indicative price range on the deal to Rp 575-675 from the original Rp 625-975, to try and drum up demand. CIMB and Bahana Securities were hired to underwrite the IPO.

Bank Syariah Mandiri is targeting its profit to increase 50 percent this year as it seeks to boost its branches across Indonesia. Yuslam Fauzi, president director of BSM, said that the lender aims to reach profit of Rp 1.2 trillion ($123.7 million) this year from Rp 800 billion last year. He added that the bank's assets also increased to Rp 55 trillion. However, shares of Bank Mandiri fell 0.5 percent to Rp 9,550 on the Indonesia Stock Exchange on Friday.

Indonesia’s finance ministry raised Rp 760 billion ($78.30 million) at its March 5 sukuk auction, well below the target of Rp 1.5 trillion. The Finance Ministry sold 6-month, 9- and 14-year sukuk to help finance its budget deficit. Incoming bids were Rp 3.4 trillion. The G20 economy plans to raise Rp 57.5 trillion in the first quarter of the year.

Indonesia, the country with the world’s largest Muslim population, is developing its Islamic finance industry. It’s speeding up government approvals and fixing a fragmented regulatory system as part of an effort to reach more unbanked Muslims and increase the portion of Islamic assets in the banking system to 15 percent by 2017, from 4.3 percent. Currently, Indonesia ranks fifth in the amount of outstanding Islamic bonds, the number of Indonesians using Islamic financial products increased 36 percent over the past year. However, that’s still only 13.4 million people in a country of 208 million Muslims, which shows Indonesia's growth potential regarding Islamic finance.

Indonesia's Finance Ministry is targeting Rp 15 trillion ($1.55 billion) from issuing rupiah-denominated sukuk to its citizens as part of the country’s effort to plug the budget deficit. Dahlan Siamat, director of Islamic financing at the Finance Ministry’s debt management office, said that the sukuk would use government infrastructure projects such as toll roads and bridges as the underlying assets. The government set the annual coupon rate of the rupiah sukuk at 6.0 percent with a tenor of three years.

Bank Syariah Mandiri is set to sell shares in an initial public offering next year, aiming to raise more than Rp 1 trillion ($103 million) as the first Islamic lender at the Stock Exchange. Having the largest Muslim population in the world, Indonesia lags behind its neighbor Malaysia in terms of the development of Islamic finance. The total assets of Islamic compliant lenders in Indonesia accounts for around 4.7 percent of the total banking assets in the country. Moreover, it is home to 120 commercial lenders with combined total assets of Rp 4,000 trillion.
Bank Syariah Mandiri is one of a few units of Bank Mandiri, the country’s largest lender by assets. Other units include Bank Sinar Harapan Bali and Mandiri Sekuritas.

Islamic banking and loans without interest are the key to Indonesia's growth in the field of Islamic finance. A good example of such loans is the story of 50-year-old widow Nur Hanifah, who took out a Shariah-compliant loan from Bank Muamalat Indonesia in order to help finance a store on the ground floor of a shophouse. She does not pay interest but instead she must give the bank a certain percentage of her profit plus part of the principal each month. The percentage usually is about 40%. Hanifah explains that even when times are bad, she does not have any financial worries because then she does not have to pay anything compared to times when she has good profit.

The Finance Ministry has set stricter down payment requirements on Islamic financing concerning automotive purchases in order to to help curb consumer financing growth. According to the new regulation, a down payment of 20% for two-wheeled vehicle purchases and a 25% down payment for four-wheeled vehicles is required. The regulation will apply to all non-bank Islamic financing institutions. The requirements for the purchase of commercial four-wheeled vehicles, e.g. trucks or buses, are a 20% down payment.