Retail Sukuk (Sukuk Ritel):Indonesia Experience
Ministry of FinanceThe Republic of Indonesia
1st Annual Islamic Finance Conference:Sukuk for Infrastructure Financing and Financial Inclusion Strategy
Jakarta Convention Centre, May 17, 2016
Dr. Robert PakpahanDirector General of Budget Financing and Risk Management
Ministry of Finance of the Republic of Indonesia
Sukuk Negara’s role in financing Indonesia’s budget
What is Sukuk Negara?
State Budget Financing Instruments
Government Securities Loans
Government Debt Securities Domestic Loans Foreign Loans
Domestic International
SPN-SIslamic Treasury Bills
For Islamic money market development and cash managementAuctioned since August2011Tenor: 6-monthsProfit Rate: discounted basis Underlying assets: fixed assets
IFRIslamic Fixed Rate
Introduced in August 2008Tenor:medium to longProfit Rate:semi-annual distribution paymentUnderlying assets: fixed assets
PBSProject Based Sukuk
Auctioned since 2012Tenor: medium to longProfit Rate: semi-annual distribution paymentUnderlying assets: state budget projects and fixed assets
SRSukuk Negara Retail
For retail sale to indvidualsTenor: 3 to 3.5-yearsIssued through bookbuildingMaximum purchase of Rp5bn, with a minimum of Rp5mnProfit Rate: monthlyUnderlying assets: state budget projects and fixed assets
SNISukuk Negara IndonesiaIssued in the international US Dollar marketEnables diversification of investor base (Islamic and Middle East)Tenor: 5 to 10-yearsProfit Rate: semi-annual distribution payment
Sukuk Negara
Sukuk Negara is sovereign securities issued based on the principles of Sharia (Islamic Law), as evidence of the participation in Sukuk Negara assets, either in Indonesian Rupiah or in foreign currencies (Law Number 19 of 2008 on Sovereign Sharia Securities).Sukuk Negara plays an integral role in financing Indonesia’s budget, and comprises of 6 core instruments across a wide range of tenors, sizes, coupons, and investor bases This strategy enables maximum investor coverage, as well as the greatest possible diversification. Indonesia has been active in Sukuk markets since it laid the groundwork for Sukuk issuances in 2008 and this year has already issued IDR 110.9 trillion of Sukuk Negara in the domestic and international markets (as of April 29, 2016).As of 29 April 2016, Sukuk Negara forms 15% of the Total Outstanding Government Securities.
SDHIHajj Sukuk
First issued in 2009Tenor: medium to longIssued through privateplacementProfit Rate: semi-annual distribution paymentUnderlying assets: Hajj services
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Sukuk Negara Profile
Composition of Outstanding by Currency
Composition of Outstanding by Tenor
Consistent growth in Sukuk Negara Issuance IDR 250.99tn66.68%
IDR 125.44tn33.32%
0 100 200 300
IDR
USD
(IDR tn)
IDR 227.91tn60.55%IDR
100.57tn26.72%
IDR 47.94tn12.74%
0 50 100 150 200 250
0 – 5 years
6 – 10 years
> 10years
(IDR tn)
4,7
110.9118.5
75.5
53.257.1
33.327.0
16.6
0
20
40
60
80
100
120
140
Apr-1620152014201320122011201020092008
Issu
ance
vol
ume
(IDR
tn)
IFR SR (Retail) SNI (USD) SDHI (non-tradable) SPN-S SPN-S NT PBS
Sukuk Negara first issuance : 2008 (IFR0001 & IFR0002)Total issuance IDR 496.73 trillion (as of 29 April 2016)Total outstanding IDR 376.43 trillion (as of 29 April 2016)Denomination : IDR and USDIssuance method: auction, book building, and private placement
Data as of April 29, 2016
Data as of April 29, 2016
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Global Sukuk
As of April 29, 2016, total sovereign sukuk issuance in International market (USDdenominated) has reached USD43.56 billion.Indonesia contributed 23.3% (USD10.15 billion) of total international sovereignsukuk issuance.Currently, Indonesia has the largest outstanding of international sovereign sukuk(USD denominated) at the amount of USD9.5 billion.
Total Issuance of Int’l (USD) Sovereign Sukuk Total Outstanding of Int’l (USD) Sovereign Sukuk
500
1.600
2.000
3.388
3.750
4.700
6.850
10.150
10.619
- 2.000 4.000 6.000 8.000 10.000 12.000
South Africa
Pakistan
Hong Kong
Bahrain
Turkey
Qatar
Malaysia
Indonesia
UAE
Million USD 500
750
1.000
2.000
3.750
4.000
5.000
7.569
9.500
- 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000 10.000
South Africa
Bahrain
Pakistan
Hong Kong
Turkey
Qatar
Malaysia
UAE
Indonesia
Million USD
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Sukuk Negara Investor Type
IDR Sukuk Negara Ownership Profile
Notes:• Data as of 29 April
2016• Excludes ownership
of Conventional Government Debt Securities
• Others consist of Companies, Leasing Co, Securities Co., Foundations.
The relatively low share of Sukuk ownership by Sharia banks vs Conventional banks is largely attributed to the relative asset size of both groups. According to the latest Bank Indonesia publication in 2016 to date, Conventional banks’ asset size amounts to IDR 5,909 Tn vs Sharia banks’ IDR 211 Tn. Therefore, although Shariabanks’ holding proportion is lower at 7.8%, this already represents 9% of total assets compared to 34.6% for Conventional banks which represents 1.5% of their total assetsIndividuals have seen positive trajectory in Sukuk ownership on the back of recent retail bond issuances by the Government of the Republic of Indonesia. Recently, the Government issued Retail Sukuk series (SR-008) in 2016 which registered total investor demand of around IDR 43 Tn.Sukuk holdings by Insurance, Pension Funds and Mutual Funds have increased in 2016 and are expected to rise further given the recent implementation of OJK regulation No 1/POJK.05/2016 which requires the aforementioned to have at least 20-30% of their total investments in Government Debt Securities (including Sukuk) by 2017.Offshore holdings on Sukuk continues to increase reflecting relative value of Sukuk, confidence in the strengths of the Indonesia credit story and improved awareness of Sukuk securities issued by the Government of the Republic of Indonesia.
Dec-09 Dec-12 Dec-15 Apr-16Institutions IDR billion % IDR billion % IDR billion % IDR billion %
Tradable Sukuks 11,533 81.1 63,035 63.8 159,236 79.2 214,292 85.4Banks Total 2,196 15.4 25,254 25.6 85,424 42.5 106,498 42.4Conventional Banks 422 3.0 20,419 20.7 70,262 35.0 86,790 34.6Sharia Banks 1,774 12.5 4,835 4.9 15,162 7.5 19,708 7.8
Bank Indonesia – – 1,960 1.0 712 0.3Insurance 3,182 22.4 12,281 12.4 29,694 14.8 37,996 15.1Pension Fund 788 5.5 4,845 4.9 5,270 2.6 7,016 2.8Individuals 2,212 15.6 9,055 9.2 11,534 5.7 23,436 9.3Mutual Funds 1,896 13.3 3,189 3.2 5,042 2.5 6,622 2.6Offshore Investors 81 0.6 5,213 5.3 8,138 4.0 15,593 6.2Others 1,178 8.3 3,199 3.2 12,175 6.1 16,420 6.5
Non Tradable 2,686 18.9 35,783 36.2 41,781 20.8 36,697 14.6Govt. Institution 2,686 18.9 35,783 36.2 41,781 20.8 36,697 14.6Total 14,219 100.0 98,818 100.0 201,017 100.0 250,989 100.0
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ROI regularly issues Sukuk Ritel for promoting financial inclusion
Since 2009 the RoI offered Sukuk Ritel through Selling Agents for Indonesian citizens in the primary market. The issuance is aimed at investor diversification, domestic market deepening and supporting financial inclusion.Sukuk Ritel Selling Agents consist of Banks and Securities Companies who is appointed by the GoI to sell Sukuk Ritel to individual investors of Indonesian citizen.
Investor Selling Agent
Ministry of Finance
Investor (holder of Indonesian ID card)- Completes forms and attaches ID card copy- Opens a cash and fixed income account with
the Selling Agent- Deposits funds- Awaits allocation
Selling Agent- Compiles and relays their
orderbook to the Ministry of Finance for the allocation process
Selling Agent- Carries out Settlements based on actual
allocated amount- Returns funds to investors based on their
actual allocation- Provides investors with their proof of
ownership of the Sukuk Ritel allocated to them
Ministry of Finance- Allocates orders as deemed
appropriate- Relays results to the Selling Agent
How is Sukuk Ritel
ordered and
allocated?
Fixed returnsDistributed on a monthly basisLower income tax compared to a bank deposit accountTradable at market priceCan be used as collateral (subject to Selling Agents facility)
How to issue Sukuk Ritel?
1. Legal base2. Underlying assets3. Sukuk structures4. Fatwa5. Selling agents appointment6. Legal advisor appointment7. Issuance process and settlement
Why are Investors willing to buy Sukuk Ritel?
Why does ROI issue Sukuk Ritel for individual investors?
1. Broadening alternative source of State Budget Funding
2. Providing Islamic instrument for retail investor3. Enhancing Islamic market development4. Promoting financial inclusion5. Transforming investors perspective: savings-
oriented to investment-oriented society
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389466 463
773842
557
739650
SR01 SR02 SR03 SR04 SR05 SR06 SR07 SR08
14,295
17,231
15,847
17,606
17,783
34,69229,706
48,444
SR01 SR02 SR03 SR04 SR05 SR06 SR07 SR08
5,5568,0337,341
13,61314,969
19,32321,965
31,500
SR01 SR02 SR03 SR04 SR05 SR06 SR07 SR08
SR-001 SR-002 SR-003 SR-004 SR-005 SR-006 SR-007 SR-008
Offering Date 30 Jan - 20 Feb 2009
25 Jan - 5 Feb 2010
7 - 18 Feb 2011
5 - 16 Maret 2012
8 - 22 Feb 2013
14 - 28 Feb 2014
23 Feb – 6 Mar 2015
19 Feb - 4 Mar 2016
Issuance date 25 Feb 2009 10 Feb 2010 23 Feb 2011 21 Mar 2012 27 Feb 2013 5 Mar 2014 11 Mar 2015 10 Mar 2016
Structure / underlying Ijarah Sale and Lease Back / Land & building Ijarah Asset to be Leased / Government Projects
Tenor 3 years 3 years 3 years 3,5 years 3 years 3 years 3 years 3 years
Coupon 12.00% 8.70% 8.15% 6.25% 6.00% 8.75% 8.25% 8.30%
Max. order n.a n.a n.a IDR5 billion IDR5 billion IDR5 billion IDR5 billion IDR5 billion
Selling Agents
13(5 Banks;
8 Securities Companies)
18(10 Banks; 8 Securities Companies)
20(11 Banks; 9 Securities Companies)
24 (13 Banks;
11 Securities Companies)
25 (16 Banks; 9 Securities Companies)
28(19 Banks; 9 Securities Companies)
22(17 Banks; 5 Securities Companies)
26(20 banks; 6 Securities Companies)
Sukuk Ritel Success Story
Total Sukuk Ritel Issuance(IDR Billion)
Total Investor(individual)
Average order per investor(IDR Million)
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Sukuk Ritel SR 008: Summary of Issuance
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Total Issuance
IDR 31.5 trillion
SR-007
SR-008
31,500
21,965
Number of Investors
48,444investors
48,444
29,706
Average purchase volume per investor
IDR 650.2million 650.2
739.4
Summary of Terms & ConditionsStructure : Ijarah Asset to be LeasedIssuer : Perusahaan Penerbit
SBSN IndonesiaTenor : 3 YearsSettl. Date : 10 March 2016Maturity Date : 11 March 2019Coupon Rate : 8.30 % p.a. Minimum Order : IDR 5,000,000Maximum Order
: IDR 5,000,000,000
Tradability : Tradable, 1 month Holding Period
Nominal per Unit
: IDR 1,000,000
Sukuk Ritel SR 008: Distribution by Purchase Volume
12
IDR1.1 trillion(3.4%) <IDR100 million
IDR100 – 600 million
IDR600 million –2 billion
IDR2-3 billion
IDR3-4 billion
>IDR4 billion
IDR6.8 trillion(21.7%)
IDR12.8 trillion(40.7%)
IDR3.9 trillion(12.4%)
IDR1.5 trillion(4.8%)
IDR5.2 trillion(16.7%)
17,609 investors(36.3%)
18,297 investors(37.7%)
9,824 investors(20.3%)
1,352 investors(2.8%)
383 investors(0.8%)
979 investors(2.02%)
Total Purchase Volume Total Number of Investors
Most Sukuk Ritel SR-008 investors comes from those who purchase below IDR600 million (35,907 investors/ 74.12%) with total purchase volume of IDR7.9 trillion (25.1%)
Sukuk Ritel SR 008: Distribution by Region
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www.frewaremini.com
Sukuk Ritel is reachable to all Indonesia citizen acrossall region.
JakartaBy Volume = 38.53%By Number of Investors = 34.18%
Western Indonesia (excl. Jakarta)By Volume = 50.31%By Number of Investors = 55.42%
Central IndonesiaBy Volume = 9.04%By Number of Investors = 8.76%
Eastern IndonesiaBy Volume = 2.12%By Number of Investors = 1.64%
Sukuk Ritel SR 008: Distribution by Investor Types
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1. Employees (39.35%)2. Entrepreneurs (34.37%)3. Housewifes (12.26%)4. Others (14.02%)
Others 14.02%Civil Servant 3.24%Retiree 1.60%Students 1.35%Army/Police 1.16%Artists 0.02%Other 6.65%
EntrepreneursIDR10.82 Trillion12,465 investors
EmployeesIDR12.39 Trillion19,843 investors
HousewifesIDR3.86 trillion5,440 investors
100.00%
Sukuk Ritel SR 008: Distribution by Investor’s Age
15
<25 yearsIDR0.7 trillion
1,022 investors2.43%
>55 yearsIDR13.2 trillion
17,454 investors41.99%
Between 41-55%IDR11.2 trillion
17,338 investors35.51%
Between 25-40 yearsIDR6.3 trillion
12,629 investors20.07%
The largest purchase volume of Sukuk Ritel SR-008 come from investors at the age of >55 Years (IDR13.2 trillion/41.99%)
They consist of 17,454 investors (36.03%) from total 48,444 investors.
Thank You
Wassalamu’alaikum Wr Wb
Inquiries, Information and Suggestions:
Directorate General of Budget Financing and Risk ManagementMinistry of Finance of the Republic of Indonesia
Website: www.djppr.kemenkeu.go.idTelephone. 351-6296, Fax. 351-0728
E-mail: [email protected]