Indonesia May Sell First Sukuk Backed by Road, Rail This Month

May 5 (Bloomberg) — Indonesia may hold its first sale of sukuk backed by road and rail projects on May 31, said Dahlan Siamat, director of Islamic finance at the finance ministry.

The ministry is waiting for parliament to approve 30 trillion rupiah ($3.5 billion) of state-owned land and office buildings to be used to back sukuk offerings, Siamat said in an interview in Jakarta on May 4. Shariah-compliant bonds pay return on assets to comply with Islam’s ban on interest.

If approvals are not received, the ministry will use road, rail and other infrastructure projects to back the sale on May 31, Siamat said, declining to comment on the size of the offer. “We’ve run out of existing buildings and land that have been approved.”

Sales of sukuk in Indonesia reached 17.94 trillion rupiah so far this year, according to combined data from the finance ministry’s debt management office and the Capital Market and Financial Institution Supervisory. Issuance increased 45 percent to 27.76 trillion rupiah last year.

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