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Indonesia’s MoF Sell Retail Bond Through Online

Director General of the Ministry of Finance's Financing and Risk Management Luky Alfirman accompanied by 11 Distribution Partners attended the Opening of the SBR004 Series Retail Savings Bond Offer Period on IDX (08/20).
JAKARTA (TheInsiderStories) – The Ministry of Finance (MoF) has officially opened the offering period of Savings Bond Retail series SBR004 through online system (e-SBN) on Monday (20/8). Director General of Finance and Risk Management for the MoF Luky Alfirman said the launch SBR004 is part of the financial market deepening program.

The ministry initiially issued the SBR003 on May 5, which is aimed to increase the number of young local investors’ participation in financing the State budget.

Government was set to commence the offering period of its SBR through an online platform with targets up to Rp5 trillion (US$357.14 million), in a move to reach out to young people as it plans to expand Indonesia’s investor base.

The government has assigned 19 sales agents, consisting of 18 banks and one securities firm. Sales agents also conduct road shows in 35 cities around the archipelago to promote the issuance, primarily in several cities of eastern part of Indonesia, including Ambon in Maluku and Jayapura in Papua.

The low number of domestic retail investors is one of the reasons why the Indonesian financial market is highly vulnerable to global shocks. For the record, foreign portfolio ownership of government bonds is increasing steadily.

The foreign investor portion of government bonds has reached 46.54 percent (Rp793.47 trillion) of a total of Rp1,704.75 trillion. If there is global turmoil, then there emerges serious risks of outflows, rocking the country’s financial markets, and weakening the rupiah exchange rate as well as yields.

Government has repeatedly warned that Indonesia should be aware of the high number of foreign investors holding debt portfolios.

On the one hand, the keen interest of foreign investors indicates that they are optimistic about economic prospects in Indonesia. However, on the other hand, this gives rise to vulnerabilities, due to the above-mentioned risk of outflows in times of global panics. For this reason, the government has been continually pursuing efforts to increase the number of domestic investors in Indonesian bonds.

Unfortunately, pumping the popularity of bonds among domestic investors – particularly retail investors – is still problematic for a number of reasons, of which the main one is concerned with the lack of knowledge and trust among Indonesians about such investment instruments.

Furthermore, retail investors are still highly concentrated in the western part of Indonesia, especially Jakarta (55 percent of the country’s total). In the eastern part of Indonesia this ratio is only 10 percent.

Beside SBR, Alfirman explained that the government has several other instruments like Indonesian Retail Bonds (ORI) and SUKUK retail for retail investors.
SBR004 offer period will run from August 20 to Sept. 13. At the issuance of debentures, coupons offered 8.05 per cent per annum with a tenor of two years at three months.
The next coupon rate will be adjusted every three months from the date of the coupon adjustment until maturity. While a coupon of 8.05 percent applies as the minimum level unchanged until maturity.
US$1: Rp14,300
Email: linda.silaen@theinsiderstories.com