Shariah-compliant lender Bank Muamalat Indonesia plans to sell Rp 700 billion ($73 million) worth of sukuk Islamic bonds in the first half of 2013, of which the proceeds will be used for branch expansions.
The bond sale is part of the lender’s plan to issue a total of Rp 1.5 trillion worth across several years.
“Last year, we issued the first one, worth Rp 800 billion, that offers 10.21 percent yield,” Meitra N. Sari, the company’s corporate secretary, said on Friday.
Shariah bonds comply with the Islamic teaching that bans interest, instead using asset returns to pay back investors.
She said the proceeds from the bond sale will be used to help finance a branch office expansion.
Currently, Bank Muamalat has about 500 branch offices and outlets across Indonesia.
Meitra expected investor interest to remain strong this year after a successful sale last year.
Last year, Bank Muamalat decided to increase the proceeds target from its Sukuk sale to Rp 800 billion from Rp 500 billion previously, after investors displayed strong interest.
Bahana Securities, Danareksa Sekuritas and Indo Premier Securities were hired as the arrangers for the Sukuk sale.
Bank Muamalat is also advancing its plans to sell shares to the public. Meitra said the company will use its December 2012 financial report in the prospectus for its initial public offering.
Bank Muamalat is one of several lenders planning to tap the equity market for fresh funds to finance an expansion and strengthen capital structure.
Sunarso, a commercial director of Bank Mandiri, the country’s largest lender by assets, said last year that the bank is considering an IPO in 2013 for its Islamic unit, Bank Syariah Mandiri.
Bank Muamalat is 32.7 percent controlled by the Islamic Development Bank, 19.3 by Kuwait’s Boubyan Bank, 17.9 percent by Atwill Holdings, 6 percent by the National Bank of Kuwait and the rest by one of several smaller shareholders.
There are 11 Shariah-compliant lenders operating in Indonesia, including Bank Syariah Mandiri and Bank Mega Syariah. Many mainstream banking operators have chosen to launch separate Shariah subsidiaries to tap into the growing market.
Indonesia has the world’s largest Muslim population, with about 85 percent of people adhering to the faith. But development in Islamic financial instruments lags behind neighboring countries, especially Malaysia, which has become the center of Islamic finance in Asia.
(Jakarta Globe / 21 Jan 2013)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com