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Indonesia plans alternative sukuk structures to boost volumes

[KUALA LUMPUR] Indonesia is aiming to boost volumes of Islamic bonds (sukuk) by introducing new assets to support the transactions, a government official said on Tuesday.

The government is considering the use of state goods and services as underlying assets on its sukuk, which have previously relied on projects and infrastructure assets under the ijara or wakala formats, Robert Pakpahan, head of financing and risk management at Indonesia's finance ministry, told Reuters. "We want to increase our capability in doing sukuk," said Mr Robert.

Authorities in Indonesia want to reshape the country's Islamic finance industry by encouraging consolidation and building a new regulatory system, as the sector seeks to catch up with more mature markets in Malaysia and the Middle East.

The new structures could expedite the issuance process for government sukuk, which typically involve prolonged due diligence before going to market, he added.

A study on the use of new sukuk structures is still underway, and the changes will not be implemented in 2015, he added.

The country has made a bigger push for other formats such as retail sukuk, which the government will use this month to raise US$1.5 billion to finance local developments.

It last went to the global market to raise US$1.5 billion from a sovereign sukuk in September, receiving an order book worth US$10.2 billion for the transaction.

The government will return with another foreign-currency transaction this year, Mr Robert said, without disclosing the size of the sukuk sale or timing.