T

he government has launched its first non-tradable sharia-compliant debt papers for retail investors’ savings, locally called “savings sukuk”, reaching out to the general public with higher returns than the popular bank savings or deposits.

The minimum purchase for the savings sukuk is Rp 2 million, much lower than the usual retail government bonds’ minimum order of
Rp 5 million, according to the Finance Ministry. The maximum purchase is Rp 5 billion per identity card.

The savings sukuk, code-named ST-001, comes with a 6.9 percent yield per year, higher than banks’ average time deposit rates of 6.5 percent for one year. Returns will be paid on a monthly basis until the non-tradable debt papers expire in the second year.

They can also be redeemed after one year with a minimum holding of Rp 4 million.

The government seeks to reap Rp 2 trillion (US$152 million) from the notes, with a possibility of upsizing the figure. The offering period lasts from Aug. 22 to Sept. 2.

“This is a chance for small investors to get good returns amid the trend of lower deposit rates,” said Elina Wirjakusuma, wealth management group senior vice president of Indonesia’s largest lender Bank Mandiri, which is among the 20 banks and six securities firms appointed as sales agents of the savings sukuk.

Bank Mandiri will market the product to cities nationwide, especially to those in eastern Indonesia to spread out its investor base.

Meanwhile, BCA aims to sell Rp 300 billion of the savings sukuk, targeting its customers living in small towns given the relatively cheap minimum purchase amount.

“We hope this effort can widen our investor base,” said BCA director Rudy Santoso.

The sales agents’ targets are in line with the government’s expectation of more people participating in aiding the country’s development. Debt papers sold by the government are used to plug the nation’s state budget deficit.

“I want the public to have the chance to play a role in funding the fiscal deficit. This will boost our ability to widen government bond holders,” said Finance Minister Sri Mulyani Indrawati in her remarks during the savings sukuk launch at the ministry in Jakarta on Friday.

The state budget deficit is expected to swell to 2.5 percent of the country’s gross domestic product (GDP), from 2.35 percent targeted in this year’s revised state budget. It has stood at 2.08 percent level as of Aug. 5.

The government, Sri Mulyani went on, would continue to diversify its financing sources and investment instrument options to further reach out to the public.

There were Rp 56.26 trillion outstanding retail sukuk as of Jan. 7 this year. In March, the government issued its latest retail sukuk notes, dubbed SR 008, worth Rp 56.26 trillion.

Meanwhile, the overall amount of sukuk issuance reached Rp 153.1 trillion so far this year. Accumulatively, the government has issued Rp 538.9 trillion worth of sukuk since the instrument’s first issuance in 2008.

Of the figure, the outstanding amount currently stands at Rp 391.1 trillion, relatively low compared to the total value of government debt papers at Rp 1,228 trillion, said Finance Ministry financing and risk management director general Robert Pakpahan.

Preliminary surveys conducted by sukuk agents showed investors’ appetite for the bonds might reach Rp 3 trillion, higher than the Rp 2 trillion target, Robert said.

“We will observe the situation and will consider upsizing the issuance if the situation enables us to do so,” he told a press briefing following the launch event.