The government has collected Rp 13.6 trillion (US$1.49 billion) in an Islamic debt-paper (sukuk) issuance, the highest amount since it was introduced in 2008, after seeing strong demand from local individual investors.
“During the offer period, investors ordered Rp 19 trillion, but we could only provide Rp 13.6 trillion, which is the upper limit of all previous Islamic retail bonds,” Rahmat Waluyanto, the Finance Ministry’s director general for debt management, told a press briefing on Monday.
The number of investors reached 17,606, also the highest figure in the history of retail sukuk issuance. The majority of investors were aged between 41 and 45 years old, he added.
Most investors are civil servants (28 percent), followed by private employees (20.69 percent), entrepreneurs (19.91 percent), housewives (16.18 percent), with the remaining 15.22 percent being employees working in other fields.
They are located mostly in the western part of Indonesia (90 percent), particularly in Jakarta (40 percent), the ministry’s data shows.
“Liquidity in the market was quite high, so the result was above target,” Rahmat said. “This shows that Indonesians are growing wealthier.”
Indonesia’s rapidly growing economy has raised per capita income and resulted in a booming middle class. Low interest rates, managed by Bank Indonesia (BI), have also spurred liquidity in the market.
The government’s retail debt papers, both conventional and sukuk, are perceived as an attractive alternative for individual investors given the comparable, or higher, returns compared with the average 5 percent rate gained on bank accounts.
The fourth retail sukuk to mature on Sept. 21, 2015, offers a 6.25 percent fixed coupon rate per year, with returns paid monthly.
The government has been issuing debt papers to plug state budget deficits and finance infrastructure projects, including roads and bridges. It aims to issue around Rp 135 trillion in bonds this year, consisting of retail and institutional sukuk , as well as short- to long-term regular papers.
Dahlan Siamat, director of Islamic financing at the Finance Ministry’s Directorate General for Debt Management, was upbeat that the issuance of the government’s debt papers would receive a warm response from the market.
“In our auctions so far, we’ve always recorded a high demand; higher than the figure we want to take up. This year will be more prospective than last year,” he said.
Within the first six days of the retail sukuk offering, around 14,000 investors ordered Rp 11.1 trillion worth of the Islamic bonds, already nearing selling agents’ targets.
The Finance Ministry aborted its plan to up size the retail sukuk offering after considering the maturity period, underlying projects, and plans to issue other Islamic bonds throughout this year, according to Rahmat.
“We have plans to issue global sukuk and regular auctions, and this is part of the reason [for not up sizing the sales],” he added.
The Finance Ministry previously wanted to up size the fourth retail sukuk issuance after 18 of the total 24 appointed selling agents requested a 39.7 percent rise in sales to Rp 5.4 trillion, Rahmat said.
The selling agents comprise 13 commercial banks and 11 securities firms, including Bank Mandiri, Bank Central Asia (BCA), Citibank, Danareksa Sekuritas and Trimegah Securities.