Saya sama Erisa, rekan kantor, telah menulis sebuah tulisan yang masih bertema sukuk dalam hal ini Surat Berharga Syariah Negara (SBSN) di The Jakarta Post edisi 28 Agustus 2008. Temen saya ini hebat banget pokoknya (Hi Er!). Malah sebenernya yang nulis artikel semua ini Erisa, tapi karena diambil dari materi di report SBSN yang kita tulis berdua, jadinya nama saya ikut nangkring. Soalnya, kameran saya juga disibukan dengan kerjaan lain yang menyita waktu, sudah mepet dan tak bisa digantikan.

Realizing the Potential of Sukuk through SBSN in Indonesia
(The Jakarta Post, 28 Agustus 2008)

In April this year, Law No.19/2008 regarding State Shariah Securities or Surat Berharga Syariah Negara (SBSN) was passed by the House of Representatives. And this week the Government of Indonesia (GoI) issued SBSN for the first time. The response from investors has been good and demand from domestic investors reached Rp 8 trillion in last week’s book building process. Yet despite the strong interest from investors, the GoI only accepted Rp 4.69 trillion of orders, or close to the indicative target of 5 trillion after rejecting higher yield bids. The GoI stated that the SBSN will yield 11.8% for the 7-year tranche and 11.95% for the 10-year tranche.

This first issuance of SBSN uses the sukuk ijarah sale and leaseback scheme in which one party solely acts, or through its representative, sells or leases its benefit right of an asset to the other party based on an agreed price and period, without the transfer of asset ownership. In this case, the GoI shall sell the beneficial title of the assets to a special purpose vehicle (SPV). The establishment and administration of the SPV for this SBSN is regulated by Government Regulation No. 56 and 57 (2008). Subsequently, the SPV will sell sukuk to the investors. The GoI shall obtain funds from the sale of assets to investors through the SPV. Assets bought by investors are then leased to the GoI. During the SBSN period, the GoI pays a rental lease periodically to investors. Sukuk that are owned by investors can be traded in the secondary market at the market price. At maturity, the GoI will buy back the assets sold to the SPV through a payment agent. Sukuk certificates held by investors are returned to the SPV.

Under this scheme (the ijarah sale and leaseback), investor cash flow is no different than that for conventional bonds that offer fixed or variable rate coupons. Investors receive income periodically in the form of lease rental stemming from the beneficial right of the assets. For conventional bonds, the lease rental is equivalent to the bond interest that is paid periodically. In the secondary market, just as for conventional bonds, investors may attain capital gains from sukuk. At maturity, investors will receive payment for the nominal SBSN amount in the form of payment from the government that is equivalent to the debt principal in conventional bonds.

However, sukuk under the ijarah sale and leaseback scheme must comply with shariah principles in which there is no interest (riba), no uncertainty (gharar) and no speculation (maysir).

With the issuance of this first SBSN in addition to the issuance of GoI conventional bonds (including the ORI005 planned to be issued in early September), the government will still have to raise another Rp 29 trillion this year to meet its state budget target. Thus, to help raise some of these funds the government plans its first US Dollar denominated sukuk issuance in November. This is expected to raise around US$ 1 billion.

Issuances of Sukuk – both in domestic and foreign currencies – have been quite common in other countries. The most active issuers of Sukuk in the past year include Malaysia, the UAE, Saudi Arabia, Pakistan, Kuwait and Bahrain. Malaysia accounted for 59.1% of the total sukuk issued globally.

Government sukuk in Malaysia include Malaysian Islamic Treasury Bills (MITB) that mature in one year or less. Besides that, the Malaysian government has also issued Government Investment Issue (GII) and Sukuk Bank Negara Malaysia Ijarah (SBNMI) with respective tenors of 3 to 10 years and 1 to 2 years. Additionally, in 2002, the government of Malaysia issued US$ 600 million worth of global sovereign sukuk ijarah (sale and leaseback).

Meanwhile, Bahrain is widely acknowledged as the hub for Islamic finance in the Middle East. In fact, Bahrain accounted for a large amount of the sovereign sukuk issuance reaching 36% of the total sovereign sukuk issued in the world. Its sovereign sukuk comprises short term sukuk ijarah (6 months), long term sukuk ijarah (3-10 years) and al salam sukuk (3 months). Moreover, in 2004, Bahrain also issued US$ 250 million worth of global sovereign sukuk in the sukuk ijarah structure (headlease and sublease).

In Indonesia, the outlook for the sukuk market appears bright since the potential investors for SBSN are not limited to Islamic institutions or Muslims. Indeed, anyone can become an SBSN investor – provided they are happy with the return and risk of course. The SBSN institutional investor base is expected to come from shariah banks, shariah and conventional mutual funds, insurance companies, pension funds and other financial institutions.

Shariah banking has grown briskly in Indonesia. There are some 3 shariah banks, 28 shariah business units and 124 shariah rural banks. As of June 2008, the total assets of shariah banks reached Rp 43 trillion or up 17.6% since the beginning of the year. Meanwhile, the funds that are invested in shariah securities amounted to Rp 5.6 trillion.

Along with the development of the mutual funds industry, shariah mutual funds have also shown strong growth. The NAV of shariah mutual funds increased by 5.7 times from Rp 559.1 billion at the end of 2005 to Rp 3.2 trillion at the end of April 2008.

Meanwhile, it should be noted that the insurance industry has also experienced strong growth. Looking at the amount of the invested funds, some Rp 140.9 trillion of the industry’s funds are placed in current assets (this is around 92.1% of the investments made by the insurance industry). Furthermore, pension funds are potential investors in SBSN given their huge assets (Rp 99 trillion at the end of last year).

Other prospective investors in SBSN include investors from Middle Eastern countries. Investors in these countries have received windfall profits as a result of the soaring global oil prices and have money to invest. Overall, SBSN appears to have a promising future in Indonesia – especially since the GoI has addressed some issues related to the issuance of SBSN. In regard to tax, the Ministry of Finance has stated that SBSN will be treated the same as conventional government bonds and there will not be double taxation. This means that coupon payments and capital gains are subject to 20% tax for SBSN transactions reported to the bourse and 15% tax for unreported transactions filed with the tax office by the end of the fiscal year.

Meanwhile, Bank Indonesia (BI) has addressed the issue regarding sukuk trading by banks in the secondary market. The current regulation (PBI No.8/21/2006) states that banks must hold shariah bonds until maturity unless they need more liquidity. However, BI is willing to amend the rule and allow commercial and Islamic banks to trade sukuk before maturity. As such, there should be better liquidity in the sukuk market, and therefore lower liquidity risk for SBSN.

In conclusion, although the development of SBSN is still at an early stage, sukuk appears to have a bright future in Indonesia. On the demand side there are plenty of potential investors while in regard to regulatory matters the government and the central bank have given firm commitments.