Sharia Bonds

Oct 10th, 2007, in Business & Economy, by

The Finance Ministry's $1 billion sharia bond issue.

Next year the Finance Ministry intends to issue 9 trillion rupiah worth of sukuk, or sharia bonds, which have to adhere to Islamic principles forbidding interest-based, non-collateralized debt, says the Jakarta Post.

The House of Representatives (DPR) is currently deliberating the international sharia bonds and sharia complaint banking bills, both of which are expected to be passed shortly.

The MPR and the executive are still discussing the exact underlying assets scheme for the bonds, which will be issued in four stages:

  • "ijarah" (leasing)
  • "mudharabah" (profit sharing)
  • "musyarakah" (profit and loss sharing)
  • "istisna" (project financing)

The Finance Ministry says the government has enough assets to cover the 9 trillion rupiah, or $1 billion, in collateral needed for the planned issue. The ministry itself owns land and buildings worth about 6.5 trillion, which will serve as the collateral for the bonds.

The ministry's director for state assets, Suyatno Harun said:

That's the way sharia bonds work - we have to back them up with physical assets.

Not all of the bond's value has to be covered. But even if our present holdings are considered inadequate, we can increase the value with the assets of other ministries.

The issue of the sharia bonds is intended as a means to take advantage of the growing global market for Islamic investments, which is estimated to be worth about $500 billion worldwide.


12 Comments on “Sharia Bonds”

  1. avatar Sputjam says:

    There is no such thing as Islamic banking. Malaysia invented this phenomena through Anwar Ibrahim and now Singapore and Dubai is trying to gain dominance in this sector.
    Islamic banking is worse than normal banking practice. You will be charged for your assets based on the value in 10 years if you borrow now. Hence although you borrow IDR1million, they will charge you for what your assets will be upon finalising the loans, say ten years and the assets is IDR2million. If you default within 6 months, you will still owe IDR2million based on contract.

    Messages in the koran permit interest, but forbids excessive profiteering. By introducing Islamic banking, the Muslims are again going against God’s guidelines.

    Because loan are for appreciating assets, Islamic banking cannot be used for car purchase and machinery. It is good for properties transactions only and purchase of stocks and shares.

  2. avatar Ihaknt says:

    Is it related to James Bond?

  3. avatar Pakmantri says:

    Why???? Just another loop hole for corruption.

    Why not introduce Mohammad Yunus’ Grameen bank system? It will benefit everybody, specially the poor.

  4. avatar WP says:

    Ok, so where can I buy a share of a sjariah bank!? :):) The way Sputjam explained it, and put it against 500 billions USD market, I expect to get rich very fast!

  5. avatar Dimp says:

    The Finance Minister must have studied at the same economic school with Sukmawati Suryaman.

    Has anyone considered my proposal for the “Islamic” air?

  6. avatar Hassan says:

    You’re currently in the US right, dimp? Now why don’t you try selling “Christian” air first. I’m sure it will be da bomb in the southern states. 😉

  7. avatar Dimp says:

    “Christian” air? I think “American” air would sell better, or “Patriot” air, or maybe “Liberty” air.

  8. avatar Janma says:

    Even just clean air would be a plus in most countries right now.

  9. avatar Hassan says:

    Did you know what made the rednecks in the southern states so gullible to Bush’s Republican administration whims? Their government kept selling them the “Terrorists” hot air. 😉

  10. avatar Dimp says:

    I just realised Nike has been selling their Nike “air” for quite some time as well….

  11. avatar Dragonwall says:

    $1 billion sharia bond issue.

    I wonder who will be interested… Yes there are few.. Yayatola Howmany, O same been Laden, (Prince) Fahd and (King) Abdullah of SA..JK, ARB, maybe Bob Hasan! Nice words.

    “ijarah” (leasing) = how is this done??? That anyone cane loan these bonds and mortgage it to the banks?

    “mudharabah” (profit sharing) = Wa pasti rugi…

    “musyarakah” (profit and loss sharing) = Jangan rugi aja sudah syukur..profit ma–?

    “istisna” (project financing) = Any BOT, Turnkey takers? Used the bonds and gadai ke bank di eropa in exchange for Euros…HA.HA.HA. I am sure no banks with a sound mind in Indonesia will take them.

    all these

    owns land and buildings worth about 6.5 trillion,

    yang semua disita BLBI dan nilanya sudah dibengkakkan dan tidak laku… akhirnya Games Bond akan jadi kertas sampah kayak dulu uang Jepang..

    How nice..Hey you guys from europe get ready when the sharia bonds will flood the european market, get your money ready…

    What will they think of next.

  12. My Dear Beloved Pastor Sharia Bond in Christ Jesus,
    Greetings to you in his most trusted name of our lord and savior Jesus Christ.
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    With much love in Christ Jesus,
    I look to receive your mail soon,
    Yours in Christ Jesus,
    Pastor B Sanjeeva Rao.

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