Indonesia's finance ministry is likely to sell government Islamic-compliant debt, or sukuk, with a maturity period of more than five years in an auction in October, a senior official at the ministry said on Thursday. The finance ministry plans to hold a regular auctions of the Islamic debt paper starting mid-October.
When asked on maturity period, Rahmat Waluyanto, the head of treasury at the finance ministry, said "I haven't decided but it's likely to have (a maturity) of more than 5 years." "It's important that the maturity will not be too long as we need to create benchmarks for sukuk...The amount will depend on demand," he said adding investors were more interested in longer-term debt.
Islamic bonds do not pay interest, which is banned as usury under Islamic law, and are structured as profit-sharing or rental agreements underpinned by physical assets. The world's most populous Muslim nation has fallen behind neighbours Singapore and Malaysia in developing its Islamic financial markets, although it recently brought in a new tax law partly aimed at stimulating the market.