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Tuesday, January 31, 2023

Launch Partners

Case study: Indonesia’s second retail green savings Sukuk

The Indonesian government issued its ST007 retail green savings Sukuk on the 25th November 2020, receiving an order of IDR5.42 trillion (US$347.17 million). The offering is the second green issuance under the Sukuk Tabungan (ST) national savings Sukuk series. The facility attracted a total of 16,992 investors.

The two-year Wakalah-based facility, which matured on the 10th November 2022, featured a floating rate of Bank of Indonesia (BI) seven-day reverse repo rate plus a spread of 150bps. The proceeds from the facility financed green projects under the Ministry of Transportation and the Ministry of Public Works and Public Housing.

As part of the government’s efforts to address the impact of climate change, projects funded by the facility under the Ministry of Transportation included airport, navigation and port service projects while projects under the Ministry of Public Works and Public Housing included reservoir, irrigation network and standard water unit projects.

The facility was offered in collaboration with 31 distribution partners including four Islamic commercial banks, 16 conventional commercial banks, three securities companies, three special securities companies and three fintech companies. Bank Syariah Mandiri received the largest number of orders among Islamic banks, generating IDR133.62 billion (US$8.56 million) in orders.

At the time of issuance, the offering generated the largest nominal sales and number of investors for a Sukuk facility under the ST series. Millennial investors represented over half of the total investors for the facility at 56.71%, which is an indication of the government’s success in encouraging millennials to become environmentally-conscious investors.

Also notable is the proportion of entrepreneurs who invested in the facility, representing 34.91% of total investors while private employees contributed to 36.61% of total investors.

The retail green Sukuk offering is the second green offering under the ST program. The first retail green savings Sukuk facility, ST006, was issued on the 26th November 2021. The Indonesian government has since issued its fourth green savings Sukuk facilityon the 30th November 2022, which is set to mature in 2024.

The subscription for green facilities under the ST series has been increasing exponentially, with the latest issuance receiving an order of over IDR10 trillion (US$640.53 million) in contrast to the first green facility, which received an order of IDR1.46 trillion (US$93.52 million).

Also as part of the government’s green and sustainable retail financing efforts, it has issued three retail cash Waqf-linked Sukuk under the Sukuk Wakaf Retail series. The first facility under the series also matured on the 10th November 2022.

Indonesian Government ST007 green savings Sukuk

IDR5.42 trillion (US$347.17 million)


25th November 2020
Summary of terms and conditions
Issuer
Indonesian government
Size of issue
IDR5.42 trillion (US$347.17 million)
Mode of issue
Retail
Purpose
Finance and refinance environmentally friendly projects
Tenor
Two years
Issuance price
100%
Profit rate
BI seven-day reverse repo rate plus 150bps spread
Payment
Monthly
Currency
Indonesian rupiah
Maturity date
10th November 2022
Governing law
Indonesian law
Islamic structure
Wakalah
Underlying asset
Sovereign assets and green projects under the 2020 national budget
Tradability
Non-tradable, non-transferable
Face value/minimum investment
IDR1 million (US$64.05)

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