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Saturday, April 20, 2024

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Case study: Indonesia’s farmer empowerment retail Sukuk Waqf

The Indonesian government closed its cash Waqf-linked Sukuk (CWLS) series SWR004 on the 4th September 2023, recording its largest book order for its retail series at IDR112.56 billion (US$7.32 million).

The proceeds from the facility, which saw participation from 709 contributors, will primarily be channeled toward empowering farmers and breeders as well as higher education programs.

In line with Indonesia’s three previous retail CWLS, the government collaborated with seven local Islamic banks as distribution partners for the issuance. A total of seven institutions were appointed as Waqf managers for the Islamic banks.

According to the Directorate General of Budget Financing and Risk Management, which issues budget-financing Sukuk under the Indonesian Ministry of Finance, the Waqf managers are required to report on the implementation of regular activities every six months to Bank Wakaf Indonesia, the Ministry of Religion and the Ministry of Finance.

The governance structure is in place to ensure that Waqf contributors can monitor the distribution of funds from their investment, thereby increasing the number of contributors and Waqf managers.

Institutional contributors accounted for the majority of the book order at IDR88.24 billion (US$5.74 million) while contributions from individuals stood at IDR25.32 billion (US$1.65 million).

Notably, 78.16% of the contributors were attributed to new investors, which constituted a dip from its previous retail CWLS, the SWR003 issued in July last year, which saw 89.97% of contributions coming from new investors.

Conversely, the facility saw an increase in the number of provinces participating in the offering. The SW003 recorded participation from 26 provinces while the SW004 saw participation from 27 out of the country’s 38 provinces.

Jakarta province, the largest metropolis of Indonesia, recorded the largest nominal order for the issuance at IDR98.79 billion (US$6.42 million) from 159 contributors.

Indonesian Government SWR004 cash Waqf-linked Sukuk

IDR112.56 billion (US$7.32 million)


4th September 2023
Summary of terms and conditions
Issuer
Indonesian government
Size of issue
IDR112.56 billion (US$7.32 million)
Mode of issue
Retail
Purpose
To develop productive Waqf in Indonesia and social investment.
Tenor
Two years
Profit rate
5.85%
Payment
Annual
Currency
Indonesian rupiah
Maturity date
4th September 2025
Governing law
Indonesian law
Islamic structure
Wakalah
Underlying asset
2023 national budget projects

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