Indonesia

Indonesia sukuk catches market momentum

The Republic of Indonesia swept through its funding target for the first half of 2016 on Monday with an upsized $2.5 billion sukuk issue. As a result of the split- and 10-year deal, the sovereign has now raised 64% of the $9.35 billion it is targeting from international markets in 2016, or 2% more than the 62% it was hoping to raise by the end of June. The Baa3/BBB-/BB+ rated credit has been one of the chief beneficiaries of the market’s strong momentum following the Fed's decision to slow the pace of interest rate rises last week. As a result, the order book for the sovereign’s 144a offering closed around the $8.5 billion mark, encouraging it to upsize the transaction by $500 million and press down on the new issue premium.

Trust issues may hamper RI financial inclusion campaign

The government’s joint effort with banking institutions to promote financial inclusion across the archipelago is facing a major hurdle as most people from low-income households are reluctant to let individual agents take care of their savings under the government-endorsed branchless banking program, a recent study has revealed. The Financial Services Authority’s (OJK) branchless banking program, locally known as Laku Pandai, offers banking and financial services to all Indonesian citizens through the help of other parties, including individual and institutional agents, whose work is supported by cellphones and other IT facilities.

Indonesia Islamic finance miniscule, but growing rapidly: study

A report launched by Thomson Reuters on Friday -- called "Indonesia Islamic Finance: Prospects for Exponential Growth" -- says the country's shariah finance industry recorded 559 trillion rupiah ($42.3 billion) in assets as of 2014, merely 3% of the country's financial industry assets overall. However, while the total financial sector's assets grew by 42% during the 2010-2014 period, assets for shariah finance surged by 139%. Boosted by government infrastructure spending and road maps for development of shariah finance, Indonesia's Islamic finance sector is expected to record double growth over the next five years.

Indonesian Financial Service Authority (OJK) Launch Islamic Finance Product Standard

Financial Services Authority held an exhibition of Islamic financial products and services of Islamic Financial Fair (KSF) 2016 in Jakarta Gandaria City Mall in an effort to continuously introduce and bring people to the products and service of Islamic finance. KSF is also done in launch Working Group named SiKOMPAK Syariah (Synergy Communications and Marketing Joint of Islamic Finance) which is a joint program of the OJK and the Islamic Financial Industry in marketing Islamic financial products and services. In addition, OJK also launched Standard Book for Islamic Banking products such as Murabaha, Musharaka products and Musharaka Mutanaqisah.

Indonesia likely to defeat Turkey to host IDB's HQ

Indonesia is likely to defeat Turkey to host the Islamic Development Bank’s (IDB) headquarters, a spokesman of the bank has said. Indonesia's strategic position and role during the Organization of Islamic Cooperation (OIC) summit were two driving factors behind the decision. IDB Indonesia country director Ibrahim Shoukry said the bank had committed to investing US$1.2 billion on projects in Indonesia over five years. Indonesia, he further said, had some advantages over Turkey due to its prospective market in Asia, which is healthier than Turkey's main market, Europe. Indonesia’s market will be broader due to the ASEAN Economic Community.

Q&A: Indonesia's funding head on sukuks and pandas

The Republic of Indonesia begins global roadshows on Thursday for a new global sukuk deal, its first benchmark borrowing of the year in the offshore markets. The prospective Reg S/144a transaction is being led by CIMB, Citi, Deutsche Bank, Dubai Islamic Bank and Standard Chartered. A few weeks ahead of the roadshow, Robert Pakpahan, Indonesia's director general of budget financing and risk management, spoke about the sovereign's funding plans for the year. Pakpahan says he hopes declining oil prices and shrinking investment funds from the Middle East will not affect the pricing prospects for the new deal.

Fitch Rates Indonesia's Sukuk 'BBB-(EXP)'

Fitch Ratings has assigned Indonesia's proposed US dollar-denominated sovereign global certificates (sukuk) issued through Perusahaan Penerbit SBSN Indonesia III (PPSI-III) an expected 'BBB-(EXP)' rating. The expected rating is in line with Indonesia's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BBB-', which has a Stable Outlook. The rating reflects Fitch's view that cash flows supporting payment on the sukuk will constitute direct, unconditional, unsecured and general obligations of Indonesia, ranking equally with Indonesia's unsecured and unsubordinated marketable external debt. Fitch has given no consideration to the sukuk's underlying assets.

Indonesia hopes new hedging rules will attract sharia-compliant investors

Indonesia's central bank has issued a regulation that allows the use of Islamic foreign exchange hedging tools by banks. The regulation, backed by rulings by Indonesia's National Sharia Board, specified that both Islamic and conventional banks can now offer deferred sale of foreign exchange under a muwa'adah scheme, or under a promise from both sides of a transaction. Such a transaction has to have an underlying real need, which could be export and import payments, Islamic bonds transaction in foreign currencies or hajj payments, among others. It will not be tradable and will have to be fully settled upon maturity or cancellation. The new rules will help Islamic banking and sharia-compliant customers to mitigate market risks.

Strong Demand for Indonesia's Sharia-Compliant Retail Bonds (Sukri)

There is strong demand for Indonesia's sharia-compliant government retail bonds (in Indonesian: Sukuk Negara Ritel, abbreviated Sukri). Since the launch of series SR-008 on Friday (19/02), a number of sales agents have run out of quota. These financial institutions now request additional quota from the government. The three year SR-008 series carries a fixed coupon of 8.3 percent per year and is tradable on the secondary market. The government of Indonesia targets to collect up to IDR 30 trillion (approx. USD $2.2 billion) in funds from the issuance. Sukri bonds are only available to Indonesian citizens.

Sharia lenders must strive for service excellence: OJK

The Financial Services Authority (OJK) is encouraging sharia-compliant lenders to improve their standard of service to increase their competitiveness alongside conventional banks that have greater experience. Citing a 2008 Bank Indonesia (BI) survey, OJK sharia banking head Ahmad Buchori said customers were mostly concerned about the benefits offered by the lenders when choosing who to bank with. The 2008 survey also shows that sharia lenders’ use of verses from the Koran to market their products is not effective despite the fact that more than 80 percent of Indonesians are Muslim, he added.

Govt Turns to Retail Investors to Raise Rp 30t From Sukuk Sale

The government will sell sharia-compliant bonds for retail investors over the next two weeks to help plug the state budget deficit and deepen the local bond market, senior finance ministry officials said. The thee-year Islamic bond would be sold at its face value, starting Friday until March 4, 2016, bearing a coupon of 8.3 percent. At that rate, the sukuk would yield 80 basis points higher than time-deposit interest guaranteed by the Deposit Insurance Agency (LPS) and 130 bps higher than the benchmark rate set by the central bank. The government seeks to raise between Rp 25 trillion and Rp 30 trillion ($1.85 billion-$2.22 billion) from the sukuk sale.

Fitch: Indonesia Offers Vast Potential for Takaful Products

Sharia insurance products have gained in prominence and are steadily securing a foothold in Indonesia, the world's largest Muslim country of more than 200 million. The large Muslim population offers vast, untapped potential for takaful products. However, total takaful insurance and reinsurance gross premiums have stayed low, compared with the entire Indonesian insurance market. Takaful has expanded to account for 6.2% of Indonesia's insurance market by gross written premiums (GWPs) as of end- 2015, from 2.6% as of end-2010. The sector's GWP expanded by around 4.1% to around IDR10.5trn in 2015, slower than the previous year amid a slowdown in the country's real GDP growth but outperforming the conventional insurance product segment that had more modest growth of 1.6%.

Indonesia sees rush of Islamic mutual fund products that can invest in offshore instruments

Indonesia fund management companies are readying to market Islamic/shariah-based mutual funds that will invest in offshore instruments. This follows Indonesia’s regulation, announced late last year, that allows shariah mutual funds to use at least 51 per cent of their investment components in offshore instruments such as bonds and stocks. The move is seen to allow investors an option to diversify their investments and deepen the country’s shariah mutual funds market. In addition to this, the government also allowed these funds to invest up to 100 per cent of their shariah mutual funds units in overseas bonds. With the change in regulations, a host of fund management firms have announced their plans to launch products that will invest in offshore instruments.

IFC to invest $75m in Bank Danamon Indonesia to develop Islamic trade financing

International Finance Corporation (IFC) has agreed to invest $75 million in PT Bank Danamon Indonesia Tbk (BDMN), to develop the bank’s Islamic trade financing operations. Bank Danamon is majority owned by Temasek Holdings (Private) Limited through its affiliate Fullerton Financial Holdings Ltd (67.37%) with JPMB Franklin Templeton Investment Funds holding 6.81 per cent and 25.82 per cent with the public. IFC proposes to invest up to $75 million structured as an Islamic trade financing instrument. The total facility size would be approximately $150 million including co-investment by the Bank. With this investment, IFC is targeting deepening of Islamic financing in Indonesia through new financial products and services designed to expand outreach.

Bahrain's Al Baraka Islamic Bank eyes France, Indonesia for expansion

Bahrain's Al Baraka Islamic Bank plans to open a sharia-compliant bank in France next year as the lender seeks to expand into Europe, Chief Executive Adnan Ahmed Yousif said on Sunday. France has one of the largest Muslim populations in Europe but cultural and legal obstacles have impeded the development of its Islamic finance industry. Some Gulf-based Islamic banks that have expanded in Europe have gone elsewhere. Qatar's Masraf Al Rayan owns Al Rayan Bank in the United Kingdom, while Kuwait Finance House's Turkish arm opened its first branch in Germany last year. Al Baraka also plans to acquire a bank in Indonesia either this year or in 2017 and was in talks with the Indonesian central bank governor, Yousif said.

Indonesia to Sell Islamic Bonds (Sukuk) on Tuesday

Indonesia's Finance Ministry sold rupiah-denominated Islamic bonds on Tuesday, 26/01. The ministry set an indicative target of IDR 4 trillion (approx. USD $288 million). Proceeds from the bond sale will be used to finance the government's budget deficit. This deficit is estimated to reach 2.15 percent of gross domestic product (GDP) in the 2016 State Budget. Despite having the world’s largest Muslim population and forming a dynamic emerging economy, Indonesia plays a minor role in the global Islamic banking industry. Not only does Indonesia's Islamic finance industry lag far behind Islamic finance industries in other countries that contain a big Islamic community, but it also lags far behind the country's domestic conventional banking industry.

Making the Poor Prosperous through Islamic Microfinance

PBMT is the coordinating body of BMT (Baitul Maat wat Tamwil / House of Social and Business) organizations in Indonesia. BMT itself is a microfinance institution which also acts as a social enterprise, using the principles of Sharia economy to lift people out of poverty. In Indonesia, the BMT helps the poor through a systematic step-by-step mechanism. First, the very poor people are given a grant from the donors’ donations, and guidance to start their micro-enterprises. Once they are on the right track, they will be granted a non-commercial loan with no interest. In the last stage, these people would ideally have established their own micro-enterprises.

Indonesian Islamic Megabank Merger Plan Shifts From 2015 to 2017

The difficulties in forming a megabank in the $2 trillion Islamic finance industry are becoming clear as Indonesia pushes back deadlines for its plan after failures in Malaysia and the Middle East. Financial Services Authority Director Dhani Gunawan Idat is the latest official to repeat Indonesia’s goal for such an entity after two years of trying, with a plan to merge the Shariah-compliant units of PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and PT Bank Tabungan Negara. He put the time frame as 2017 in an interview Friday, while his Chairman Muliaman Hadad said in January it may happen this year. Gatot Trihargo, deputy minister for government-run enterprises, said in June that 2016 was the target.

Roadmap to boost Islamic financing

Recognizing the huge economic opportunities of Islamic financing, the Peace and Equity Foundation (PEF) in partnership with Al Qalam Institute, Cordaid and World Bank (WB) Philippines, is gearing up for drafting of the 21-year roadmap to attain compliance to Sharia'h-based financing industry.
Islamic Financing is touted as a growing "$2 trillion" global industry,
The roadmap will be patterned from the Southeast Asian countries like Indonesia, one of the leading countries in adopting Islamic Finance in the global scale. It will be divided into three stages with seven years each of realization.
Ricardo Torres, PEF's Partnerships and Program manager, in a press conference Wednesday, told reporters this 21-year journey will commence next year.
Torres was in Davao City for the three-day Sharia'h conference dubbed as “Islamic Financing in the Philippines: A Step towards the First Seven years,” at the Ritz Hotel and Garden Oases, "The first seven years will be the first step and we intend to implement it starting 2016. After this Sahria’ah conference which will be attended by some 200 stakeholders we intend to craft fully the whole roadmap,” Torres said.

Banks pledge to support green finance

The nation’s eight largest banks, representing 46 % of national banking assets, have committed to implementing sustainable financing as part of global environment goals.

Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Bank Muamalat, BRI Syariah, Bank Jabar Banten (BJB) and Bank Artha Graha Internasional signed the commitment with the Financial Services Authority (OJK) and the World Wildlife Fund (WWF) Indonesia on Monday. The commitment was manifested in a pilot project called “first step to becoming a sustainable bank”, marking a big move taken by the banks less than a year after the OJK launched the 2014-2019 Sustainable Financial Roadmap, according to OJK head Muliaman D. Hadad.

“I hope these eight banks, which are the prime movers in this project, can encourage other banks and financial institutions to join the country’s implementation of sustainable finance,” Muliaman said in his speech. Through the green banking pilot project, Muliaman said participating banks were expected to balance their pursuit of profits with willingness to conserve the environment, serving as examples to their peers.

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