KUALA LUMPUR: The Indonesian Finance Ministry is targetting a $500 million 5-year global sukuk issuance this year, an official told reporters at an Islamic finance forum here on Monday.
“We are looking for the benchmark tenor, but we hope to have longer (tenures),” Dwi Irianti Hadiningdyah, deputy director of Islamic Financing for the ministry’s debt management office, said.
“For the size, we will use the benchmark size but maybe we can do more, depending on the situation.”
The planned offering will be Indonesia’s second global sukuk following its first $650 million global sukuk issued in 2009. The 5-year papers were then priced at 8.80 percent.
Sukuk commonly refers to the Islamic equivalent of bonds. However, as opposed to conventional bonds, which merely confer ownership of a debt, Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. As such, Sukuk securities adhere to Islamic laws which prohibit the charging or payment of interest.
I hope you are right … How can they sell it at 8.8%? it being without interest?
Assalamualaikum wr.wb. Brother Farhat and Brother Rafiq,
nice to read your comments, here I can explain little bit about our sukuk.
How does the sukuk works without interest. We use Ijarah Sale and lease back structure. 8.8% p.a. represent the rental price p.a. of the total assets. First, GOI sell the assets to SPV (as sukuk issuer) and SPV pays to the GOI by issuing sukuk. In order to create such return, SPV on behalf of the investor leases the assets back to the GOI and the GOI pays the rental periodically 8.8%pa. Why the GOI needs to rent the asset, because the GOI still needs the assets for the opperational works e.g. for offices. In the maturity date, the SPV will sell back to the GOI, and redeem Sukuk.
Thanks Irianti for the explanation. mmmm ….. it still sounds like interest, as the % is fixed…. There seems to be no ‘loss-or-profit-sharing’ in this deal. Anyway, Allah knows better. We have to try our best.
Thanks for these useful additions to this link
As long as I know, there are many structures of sukuk. e.g Ijara and mudharaba. Profit and loss sharing will apply for the structure of mudharaba but for the structure of Ijara doesn’t recognize profit and loss sharing.