SMF Issues Issuance Of First Social Bonds And Sukuk In Indonesia

Rupiah illustration (Photo: dock. Antara)

JAKARTA PT Sarana Multigriya Finansial (Persero) or SMF issued sustainable social-minded bonds and sukuk which officially took the floor on the Indonesia Stock Exchange in December this year.

The bonds and social sukuk issued by SMF consist of Shelf-Registered Social Bonds I Phase I Year 2023 amounting to IDR 500 billion with an interest rate of 6.90 percent tenor of 5 years, and Sukuk Musyarakah with Sustainable Social Insights I Phase I Year 2023 with IDR 200 billion with a yield of 6.90 percent tenor of 5 years.

President Director of SMF, Ananta Wiyogo said that the presence of social bonds and sustainable social sukuk musyarakah has made a new breakthrough in creative funding that has an impact on developing the country and changing people's lives, especially to increase awareness of Environmental, Social, and Governance (ESG) issues.

Ananta said that the issuance of sustainable social bonds is a new breakthrough in the Indonesian capital market as an effort to market widening and diversify products that have concerns over the implementation of ESG as mandated by the Government.

Meanwhile, the issuance of the first bonds and social sukuk in Indonesia is a commitment from his party as the Special Mission Vehicle of the Ministry of Finance in supporting creative funding efforts to support sustainable funding, so as to ease the government's fiscal burden in the housing sector.

"In the future, we will continue to strive to realize new sources of pandanaan in order to maximize our roles and functions in accordance with the expansion of the mandate from the government", said Ananta.

Ananta explained that all funds from the Public Offering of Socially-Intentioned Bonds and Sukuk Musyarakah, after deducting the costs of emissions, will be used by the Company to refinance Housing and Settlement Financing Activities to increase home ownership and increase the availability of affordable housing projects for Low-Income Communities (MBR).

The funds obtained will be allocated to FLPP which has been distributed since 2018 by PT SMF. This is in line with POJK No. 18 of 2023, concerning the Issuance and Requirements of Debt and Sustainability-Based Sukuk, where financing in order to support the FLPP program can be formalized in sustainable investment instruments.

Meanwhile, this issuance is also supported by the Asian Development Bank (ADB) in the process of drafting the issuance framework and reviewing external parties.

In addition, this issuance is in line with international standards from the issuance of bonds/social sukuk from the International Capital Market Association (ICMMA), where social bonds are debt securities whose proceeds from the issuance are used to finance the company's business activities which have a positive social impact.

Referring to POJK No. 18 of 2023, this social-minded business activity that can be financed by bonds is one of the affordable housing.

When compared to conventional bonds, social bonds have differences referring to several parameters, including first, to the parameter of using social bond funds, the use of funds is limited to social-minded financing.

Second, related to the framework of social bond issuance (bonds framework), social bonds are required to formalize the issuance framework in accordance with certain applicable standards.

Furthermore, the third, in terms of external review parameters, the framework and the underlying issuance of social bonds should be reviewed by an independent external reviewer.

Fourth, judging from the reporting parameters, social bond issuers have a commitment to reporting consisting of the realization of the use of funds, the realization of financed business activities and their impacts.

Furthermore, fifth, in terms of changing status, underlying social bonds that do not meet the criteria as social-minded portfolios must be allocated back to other social-minded portfolios.

Ananta said that until now SMF continues to be consistent in increasing access to decent and affordable housing for the community so that it can have a real socio-economic impact on the community, one of which is through the support of the FLPP KPR Program.

Since 2018 SMF has contributed to reducing the government's fiscal burden by financing the 25 percent portion of FLPP mortgage funding, so that the Government only provides 75 percent of the total FLPP funding from the original 90 percent.

Meanwhile, the source of SMF financing for the program comes from the State Revenue and Expenditure Budget (APBN) through State Capital Participation (PMN) from the Government to SMF.

The PMN was then blended with funds from the issuance of debt securities, then the total funds were all used to support the FLPP mortgage program in meeting the FLPP mortgage financing subsidy target for Low-Income Communities (MBR).

Meanwhile, from the beginning of the year to November 2023, SMF has succeeded in disbursing complementary funds to support the distribution of FLPP mortgages for MBR amounting to Rp5.48 trillion or equivalent to 144,409 houses. And in accumulation from August 2018 to November 2023 SMF has distributed KPR FLPP financing of Rp20.52 trillion, equivalent to 566,059 houses.