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UPDATE 1-Indonesia to issue retail sukuk in February

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JAKARTA, Jan 7 (Reuters) - Indonesia’s finance ministry plans to issue Islamic-compliant bonds for retail investors in February to help finance the state budget, Rahmat Waluyanto, treasury director general at the finance ministry, said on Wednesday.

Indonesia halted all bond sales in October amid a global credit crunch, but it has announced plans to return to the capital markets this year by selling various instruments including Islamic-compliant bonds and yen-denominated bonds.

The retail Islamic compliant bonds, or sukuk, which will mature on Feb. 25, 2012, will be offered from Feb. 6-20 and will be listed on the bourse on Feb. 26. For more details on the retail sukuk please double click on [ID:nJAK409216].

The ministry plans to announce the yield for the issue on Feb. 5, a day before the offering period starts.

“The return must be higher than deposit interest rate in state-owned banks, but it will be comparable with the yield of government bonds with the same maturity,” Waluyanto said.

As the world’s most populous Muslim nation, Indonesia has a huge domestic market for sharia products.

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.

For more stories on Indonesia’s economy, please double click on [ID:nIDECONOMY]. (Reporting by Andreas Ismar; Writing by Tyagita Silka; Editing by Sara Webb)

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