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span class="caption" style="width: 398px;">Selling like hot cakes: A Bahana Securities official meets with a client interested in Islamic retail bonds (sukuk) at the company’s office in Jakarta on Monday. The Finance Ministry said that orders for sukuk, which are now being offered until March 16, have reached Rp 11.1 trillion (US$1.2 billion).JP/NurhayatiThe government is considering up sizing the issuance of the nation’s fourth ever retail Islamic debt papers (sukuk) after seeing strong demand from local individual investors.

“There may be an up-size,” Rahmat Waluyanto, director general of the Finance Ministry’s debt management office, told The Jakarta Post on Monday without disclosing details.

About 14,000 investors have ordered Rp 11.1 trillion (US$1.2 billion) worth of the Islamic bonds within the first six days of the offering up to Monday, already nearing selling agents’ more than Rp 13 trillion commitment.

“Several agents have revised their targets. The target could still change,” Rahmat said. The agents comprise 13 banks and 11 securities firms, including Bank Central Asia, Bank Mandiri, Citibank, OCBC NISP, Danareksa Sekuritas and Trimegah Securities.

The offering period for the so-called SR004 began March 5 until the end of this week on March 16. Coupon rates for the three-year Islamic bonds had been fixed at 6.25 percent per year and is paid per month, lower than the 8.15 percent offered last year.

Retail sukuk has been one of several investment instruments that individual investors find attractive given comparable, or sometimes higher, returns compared with bank deposits’ average rates of between 4 and 7 percent per year.

“This shows that individual investors have become risk takers because the yield is trending down. But this clearly shows that our middle class segment has the appetite to invest their money,” Standard Chartered Bank economist Eric Sugandi told the Post.

Almost 24 percent of total retail sukuk investors are private employees, 22.94 percent are public servants, 19.09 percent entrepreneurs, 18.38 percent housewives, 0.41 percent military and police officers and the remaining 15.44 percent work in other fields.

Government bond yields are trending downward as the newly secured investment grade credit rating pushes down borrowing costs on lower investment risks perceived by investors, and as Bank Indonesia (BI) continues buying government debt papers for its monetary operation.

The government’s plan to up-size issuance of the retail sukuk might be part of its plan to increase net bond issuance this year by about Rp 25 trillion to Rp 159.6 trillion to plug the growing budget, Eric said.

Eri Haryanto, head of public service and investor relations at the Finance Ministry’s debt management office, said that public enthusiasm on SR004 might be because the SR001, the first government Islamic bonds for individual investors, matured on Feb. 25.

“So SR001 investors are looking for another investment instrument,” Eri added.

The government collected Rp 5.6 trillion from the first retail sukuk issuance in 2009, while in 2010 and 2011, it respectively raised Rp 8 trillion and Rp 7.34 trillion.

Funds raised from the sukuk sales would be used to finance infrastructure projects stipulated in the 2012 state budget, including roads, buildings bridges and small-scale expenditures of around Rp 1 to Rp 2 billion each, according to Eri.

“Underlying assets of previous Islamic bonds were the state’s property, including land and buildings,” he added.