Launch Partners

Monday, April 15, 2024

Launch Partners

Case study: Indonesia’s transport project retail green savings Sukuk

The Indonesian government issued its ST008 retail green savings Sukuk on the 22nd November 2021 to fund projects under the Ministry of Transportation and the ministry of railway connectivity and water resources.

The offering attracted a total order of IDR5 trillion (US$330.79 million) from 14,337 investors. It is the third green issuance under the Sukuk Tabungan (ST) national savings Sukuk series.

The two-year Wakalah-based facility offers monthly payments and features a floating rate of Bank Indonesia (BI) seven-day reverse repo rate plus a spread of 130bps with a coupon floor of 4.8%.

As part of the government’s policy to reduce the yield and cost of issuing government securities, the Sukuk paper had the lowest rate of return for a retail government security at the time of issuance.

The facility which followed this issuance under the ST series, the ST009, featured a 140bps spread with a 6.15% coupon floor.

Issued during the height of the COVID-19 pandemic, the Sukuk issuance is part of the government’s efforts to achieve financial inclusion by facilitating public access to retail state Islamic savings notes. Moreover, the facility also contributed toward financing Indonesia’s 2021 national budget.

Offered online, the government engaged 30 distribution partners through a four-step process with purchase orders submitted through the distribution partners’ electronic systems.

Investor participation in the Sukuk offer dropped by 15.63% compared with the previous green savings Sukuk facility issued in the series, which broke the record for investor participation one year prior. The decrease in investor participation is attributed to the ongoing COVID-19 pandemic at the time.

Millennial investors contributed to 33.7% of the total investors for the facility, representing 44.09% of new investors.

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

Indonesian Government ST008 green savings Sukuk

IDR5trillion (US$330.79 million)


22th November 2021
Summary of terms and conditions
Issuer
Indonesian government
Size of issue
IDR5 trillion (US$330.79 million)
Mode of issue
Online retail
Purpose
Finance and refinance environmentally friendly projects
Tenor
Two years
Issuance price
100%
Profit rate
BI seven-day reverse repo rate plus 130bps spread
Payment
Monthly
Currency
Indonesian rupiah
Maturity date
10th November 2023
Governing law
Indonesian law
Islamic structure
Wakalah
Underlying asset
Sovereign assets and green projects under the 2021 national budget
Tradability
Non-tradable, non-transferable
Face value/minimum investment
IDR1 million (US$66.16)

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