Posted by : Witarsanomic Minggu, 15 Desember 2013

The Opportunity of Sukuk al-Intifa’a For Financing Infrastructure Projects in Indonesia

Oleh :

Izzuddin Abdul Manaf, Lc., MA

Lecture SEBI School of Islamic Economics dan Director of Wafaa International

Email : zudin@yahoo.com

Phone : +62 0251-8616655, Fax : +62 0251-8604985

and

Hendro Wibowo, SEI., MM

The Chief to Majoring Islamic Banking of SEBI School of Islamic Economics - Indonesia

Email : hnd_wibowo@yahoo.co.id

Abstrac

The weakness of infrastructures has become one of factors that lead underdevelopment of Indonesia in economic development within the last thirty years. The availability of good infrastructure is basic foundation from sustainable economic development. Based on National Medium Term Development in 2010-2014, the macroeconomic policy will be aimed to encourage quality economic growth, maintain the stabilities of economics, to create inclusive economic development and equitable (RPJMN Bappenas 2010). The government will encourage infrastructure development reach IDR 1.924 trillion, assumed this value 5% from GDP IDR 6.7183 trillion in 2011.The amount of finance have plan to fulfill from many sources finance such as APBN IDR 559.5 trillion(29%) APBD IDR 355.1 trillion (18.4%) and private domestic party or BUMN IDR 685,5 trillion(35.6%). From the schema, there are still IDR 232.6 trillion(17%) that haven’t yet clear the sources of finance(finance gap). The condition indicate about the need of government to create immediate new innovations to cover how big of funding gap, which is almost impossible to be met by APBN and also internal funding BUMN. In addition, BUMN as an independent entity need to seek new innovations to duplicate ability to provision funding of infrastructure development.

New alternative has been given, one of them is the schema of infrastructure development financing through the issuance of sukuk, both SBSN and Ritel sukuk which is based on infrastructure development, for example construction of apartments to low income communities(MBR), integrated electricity network development. With potential large Middle Eastern fund, funding of asia country and domestic fund is expected to stop the dependence of funding based on debt which encourage interests. Indeed in 2012 is momentum to attract global investment fund to move from countries in Europe and Middle East that politically and economically is experiencing the shock of economic politic crisis. Clear evidence opportunity to withdraw global fund can be seen from Indonesia ration debt from Fitch, from BB become BBB-. This proves that Indonesia economic future will have bright prospect for investment growth. The consequence of the inclusion Indonesia into investment grade, for merely time it could be become hot issues among investors who have been meeting in World Economic Forum.

Key words: Sukuk, Financing, Infrastucture, BUMN.

Introduction

Economic global in generally, particularly in Asia has shown good growth, particularly Indonesia where the acceleration of economic growth in 2011, expected to reach 6,5%, at the end implementation was accordance with target of economic growth in APBN-P 2011 about 6.5%[1]. Stability of economic macro in 2011 was relatively stable, on of them are the movement of rupiah (IDR) against the U.S dollar, and inflation can still controlled within the target 5±1[2]. This can allow outside investors and domestic sentiment to make an investment to be more positive, much less supported by economic conditions in Asia (emerging markets) tend to have higher performance when compared with the performance of the United States and European economies, due to American and European countries are still trying to re wake of economic and financial conditions of the impact of the crisis. Impact of economic collapse, most investors from many countries are aiming its funds into the financial markets of Asia, including Indonesia

However, the next challenge is Indonesia is a big state and widespread, so the provision of infrastructure is an important role to support economic activity. If the infrastructure has been one factor of weakness, it will cause capital inflow into bias. Therefore, it will a big concern for government that potential funding should get into Indonesia, if it’s fail, then backwardness of Indonesia in spurring economic development within the last thirty years become real. If it was estimated by overall, investment needs for infrastructure development as follows:

Table 1

Estimated Need of Infrastructure Funding

Information	Tahun
Information	2009	2010	2011	2012	2013	2014
Growth (%)	5.1	5.5	6.2	6.8	7.3	7.7
Nominal GDP (Rp. Triliun)	5.206,5	5.989,5	6.718,3	7.632,3	8.611,0	9.523,3
Need of Infrastructure 5% GDP (Rp. Triliun)	260.3	299.5	335.9	381.6	430.6	476.2
Total Infrastructure Needs 2010-2014 IDR. 1.923,7 Triliun

Resource: Bappenas, 2011

Infrastructure financing needs based on a minimum 5% of GDP period 2010-2014 reaches IDR 1.924 trillion. Here is a government program in the next year to develop infrastructure, in which each sector to development infrastructure require funds indicated amount to IDR 1.774 until 1.924 trillion. But for a few years, projects that must be executed as follows.

Grafik 1

Indication of Infrastructure Investment in Indonesia (IDR Triliun)

Resource: MP3E Indonesia, Ministry of Economic Affairs

Availability of good infrastructure is the foundation of sustainable economic development. The existence of adequate infrastructure plays a very vital for economic national. This is to remind if the rate of movement and economic growth in a country cannot be separated from the availability of infrastructures such as transportation, communications, and energy availability.

In recent years, those facts have been recognized by Government and encourage Government to explore and empower all the potentials development financing availability. From the results of the Infrastructure Summit 2005, at least have been formulated plus minus about ten infrastructure sectors that will be priority of the government immediately to be realized. The infrastructure consists of: (1)land transportation, (2) railway, (3) sea port, (4) air port, (5)toll road, (6) oil and gas infrastructure, (7)electricity, (8) telecommunication, (9)drinking water, and (10) housing where the government's ability is only IDR 560 trillion (including the Special Allocation Fund). Other potential funding is from BUMN investment, private and local funding through APBD estimated at IDR 1.041 trillion. To achieve economic growth target of at least 7% by the end of 2014, there are still financing gap amount to IDR 323 trillion. So expect more enhanced role from government.

In order to implement the whole work program that has been set up in the development of infrastructure, the enough budgets will be necessary so that any planned activities can be accomplished. First, to consider internal budget provided by the government mainly at BUMN ministry until 2010, the budget which has been obtained by the Ministry of BUMN to support the tasks and functions are still very small relative ranges ± IDR 50 billion. Along with the increasing complexity of the activities and the increasing number of targets to be achieved, although BUMN ministry budget has been increased gradually so in 2011 the total budget received totaled ± IDR.144 billion. The availability of budget used to support every policy development BUMN in accordance to develop the infrastructure by Ministry of BUMN which is not still significant yet.

Table 2

The Development of Budget of Ministry of BUMN period 2005-2011 (IDR)

Year	Pagu	Actual	Actual (%)
2005	75,430,901,000	35,084,842,240	46.51%
2006	211,939,209,000	155,053,362,110	73.16%
2007	351,319,162,000	261,846,403,691	74.53%
2008	186,933,221,000	148,300,549,275	79.33%
2009	176,378,744,000	129,043,963,130	73.16%
2010	166,203,110,000	92,873,958,826	55.88%
2011	144,341,195,000	112,572,597,733	77.99%

Source : Strategic Plan BUMN 2010-2014

Second, based on Infrastructure Financing Road Map 2010-2014, noted that in the next 5 years, the Government of Indonesia will encourage the development of infrastructure which finance needs reach IDR 1.924 trillion assumed this value to 5% from GDP about IDR 6.718.3 trillions in 2011. The amount of finance will plan to be fill from the various sources of financing such as the APBN about IDR 559.5 trillion (29%), APBD about IDR 355.1 trillion (18.4%) and Domestic Private sector or BUMN about IDR 685.5 trillion (35.6%).

Picture 1:

Structure of Infrastructure Finance

Source: Bappenas (2011)

From the scheme there are still about IDR 323.7 trillion (17%) are not yet clear where the source of funding (funding gap). These funding gap will be offered to investors through the World Economic Forum 2012 and visitation to several other countries to open up investment opportunities in Indonesia.

Related to infrastructure development is a major business risk, such as the length of the project implementation period, the complex problems of land acquisition, the value of investments, coupled with the potential arise of social impact become a major factor in the high risk of this infrastructure business. Consequently, the banking industry (though it's BUMN banks) and other investors as a financing partner to be impressed very carefully to make loans to business people, despite of having assurances from the Government. This last condition also puts infrastructure BUMN who has small capital always in a state capital under capacity. This condition again indicating the need for government to make a break immediately to be able to meet the funding gap which is still very large, which is almost impossible to be met by internal funding of BUMN.

In addition, BUMN as an independent entity also needs to seek new breakthroughs in the ability to double the provision of infrastructure financing fund. For example, infrastructure in the field of electricity by PT National Electricity Company (PLN) is estimated to reach IDR 20 trillion. The funds are used to build power plants with a total of 900 megawatts about IDR 9 trillion, IDR 4.5 trillion for transmission, distribution network about IDR 6 trillion, and the rest for commercial facilities. The funding will be obtained from its own funds, loans and selling of obligation. PLN will continue to invite investors to the development of 20,000 megawatts of generation. The construction is expected to require funding of U.S. $ 30 billion. Construction is important to avoid a power crisis and fullfill the needs of the next 10 years. Of these needs, PLN can only fund of U.S. $ 9 billion to 10 billion. In addition, the government only gave a commitment to provide funding as much as 4 billion dollars.

Identification of Problem

The need of fund will reach IDR 1.924 trillion, assumed this value is 5% from GDP by IDR 6718.3 trillion in 2011. The amount of finance is planned to be fill from the various sources of financing such as APBN about 559.5 trillion (29%), APBD about IDR 355.1 trillion (18.4%) and Domestic Private sector or BUMN about IDR 685.5 trillion (35.6%), still there are about IDR 323.7 trillion (17%) are not yet clear where the source of funding (funding gap). One of the investment opportunities for infrastructure development, especially BUMN have a tremendous opportunity, mainly related to Infrastructure Summit program that offers the construction of number of large projects. The Government should make a breakthrough towards the development of Islamic finance (Islamic financial system) both local and global, so it will give an enormous multiplier effect for the future of infrastructure Indonesia. Some of the instruments that could be developed in order to attract global investors such as by developing the infrastructure-based sukuk. One impact that is expected to be very useful, that the global Islamic financial institutions in particular, being the excess liquidity will have a market to invest funds into infrastructure in Indonesia.

Islamic Financial Model

Islamic financial practice has, though, not just limited itself to these rudimentary financing instruments; rather, it has expanded its tool set in two important directions. To date, Islamic economists have rarely integrated these adequately into their macroeconomic models and are, therefore, more inclined to an overly optimistic assessment of the stability and allocative qualities of an Islamic financial system (nienhaus, 2010):

The first direction is the provision of liquidity at fixed costs/returns by a combination of trade transactions. In the original model, Islamic banks could only provide liquidity on the basis of profit and loss sharing, which presented two problems: on the one hand, the risks associated with this, and, on the other, the exact costs/ In countries with a lack of regulatory provisions, low levels of transparency, poor business ethics, and a legal system with deficient enforcement powers, financing based on profit and loss sharing harbors a great risk for the bank. returns, which could only be known retrospectively.

The second direction of expansion for Shariah-compatible instruments is the creation of tradeable securities that resemble fixed-interest securities in their economic character but are equity-based as they incorporate ownership rights: so-called sukuk (Islamic bonds) are created when companies, who are looking for finance for a fixed period of time, transfer ownership of such assets which generate a stable income stream (by long-term rental, for example) to a special purpose vehicle (SPV).

Picture 2

Islamic Financial Model

Sukuk

In its Standard No. 17, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) defines sukuk[3] as s "certificates of equal value representing after closing subscription, receipt of the value of the certificates and putting it to use as planned, thus it represents common shares and rights in the underlined assets or their usufructs and services". From this definition, it appears that Sukūk represent proportionate ownership of an underlying asset or service, thus entitling their holders to the cash flows there from.

Table 3

Comparision sukuk with shares and bonds

Information	Sukuk	Bonds	Shares
Nature	Not a debt but undevided ownership of assets/projects/services	Debt of issuer	Ownership share in a corporation
Asset backed	A minimum 51% of tangible assets for their contracts are required to abck issuance of sukuk al-ijarah	Generally not required	Not required
Claims	Ownership calims on the specific underlying assets/projects/service	Creditors claims on the borrowing entity and in some cases liens on assets	Ownership claims on the company
Security	Secured by ownership rights in the underlying asses or projects in addition to any additional collateral enchancements structured	Generally unsecured debentures	Unsecured
Principal & Return	Not guaranteed by issuer	Guaranteed by issuer	Not guaranteed by company
Purpose	Must be issued only for Islamically permissible (halal) purposes	Can be issued for any purposes	Can be offered for any purposes
Trading of Security	Sale of an ownership interest in a specific asset/project/service etc.	Sale of debt instrument	Sale of share in a company
Responsibility of holders (tanggung jawab pemegang)	Responsibility for defined duties relating to the underlying assets/projects/ transactions limited to the extent of participationj in the issue	Bondholders have no responsibility for the circumstances of the issuer	Responsibility for the affairs of the company limited to the extent of holding in the company

Source : compiled form several source

Types of sukuk :

Model Sukuk Mudharabah

These are investment sukuk that represent ownership of units of equal value in the Mudaraba equity and are registered in the names of holders on the basis of undivided ownership of shares in the Mudaraba equity and its returns according to the percentage of ownership of share. The owners of such sukuk are the rabbul-mal. (AAOIFI). Mudharabah sukuk are used for enhancing public participation in big investment projects.

Salient Features:

Following are the salient features of mudharabah sukuk (Nisar, 2007):

1. Mudharabah sukuk (MS) represent common ownership and entitle their holders share in the specific projects against which the MS has been issued.

2. The MS contract is based on the official notice of the issue of the prospectus which must provide all information required by shariah for the Qirad contract such as the nature of capital, the ratio for profit distribution and other conditions related to the issue, which must be compatible with shariah.

3. The MS holder is given the right to transfer the ownership by selling the deeds in the securities market at his discretion. The sale of MS must follow the rules listed below:

a. If the mudharabah capital, before the operations of the project, is still in the form of money, the trading of MS would be like exchange of money for money. In that case the rules of bay al-sarf would be applied.

b. If mudharabah capital is in the form of debt then it must satisfy the principles of debt trading in Islam.

c. If capital is in the form of combination of cash, receivables, goods, real assets and benefits, trade must be based on market price evolved by mutual consent.

4. The Manager/SPV who receives the fund collected from the subscribers to MS can also invest his own fund. He will get profit for his capital contribution in addition to his share in the profit as mudarib.

5. Neither prospectus nor MS should contain a guarantee, from the issuer or the manager for the fund, for the capital or a fixed profit, or a profit based on any percentage of the capital. Accordingly;

a. The prospectus or the MS issued pursuant to it, may not stipulate payment of a specific amount to the MS holder,

b. The profit is to be divided, as determined by applying rules of shariah; that is, an amount access of the capital, and not the revenue or the yield; and

c. Profit and Loss account of the project must be published and disseminated to MS holders.

6. It is permissible to create reserves for contingencies, such as loss of capital, by deducting from the profit.

7. The prospectus can also contain a promise made by a third party, totally un-related to the parties to the contract, in terms of legal entity or financial status, to donate a specific sum, without any counter benefit, to meet losses in the give project, provided such commitment is independent of the mudharaba contract.

8. On the expiry of the specified time period of the subscription, the Sukuk holders is given the right to transfer the ownership by sale or trade in the securities market at his discretion.

Picture 3:

Sukuk Mudharabah

Sukuk Holders (Rabbul Maal)

Constructio (Istishna’ Construction Terms

Sukuk al-Mudharabah

Funding Company (Mudharib)

Constructuion Arranger

Case Study

Shamil Bank of Bahrain raised 360 million Saudi Riyal investment capital through the Al Ehsa Special Realty Mudharabah, representing an investment participation in a land development transaction with a real estate development company in the Kingdom of Saudi Arabia. The investment objective of the Mudharabah is to provide investors with annual returns arising from participation in the funding of a land financing transaction Profits due to investors will be accrued on the basis of returns attained from investing the subscriptions.

Sukuk Ijarah Model

Ijarah sukuk is a security that represents ownership of an equal share in the usufruct of an asset that is well defined, existing and known, tied to an Ijarah contract as defined by Shari’ah. The sukuk gives the owner the right to own the underlying assets, receive rent and dispose the sukuk without any impact on the sukuk issuer's right to use the asset. There are ownership risks related to this instrument; for example owners have to bear all costs related to the basic characteristics of the assets and the lessee is responsible for bearing the cost of maintenance (Manaf, 2007; Al-Amine, 2001; Ayub, n.d., Billah, n.d.).

According to Al-Amine (2001:6), Ijarah sukuk has four characteristics:

Ijarah bonds can be traded in the market at prices determined by market forces, such as general market and economic conditions, the financial market, opportunity cost and the price of real investment. The Ijarah bond is also subject to risk related to the ability and desire of the lessee to pay the rental payment, and the market risk arising from the potential changes in asset pricing, maintenance and insurance cost.
Due to the presence of maintenance and insurance expenses that cannot be perfectly known in advance, the expected return on some forms of Ijarah sukuk cannot be completely fixed and determined at the beginning of the contract.
Ijarah sukuk is completely negotiable and tradable in the secondary market.
Ijarah sukuk offers a high degree of flexibility, derived from the approach to issuance management and marketability. The flexibility rules in Ijarah mean that securitization of the Ijarah contract is the key factor to solving the liquidity management problem. Therefore, sukuk has both the characteristics and the necessary conditions to be a successful security.

Picture 4 :

Sukuk Ijarah Models

Sukuk Holders

Case Study

In practice, there are a number of different structures used for this instrument. Three examples will be discussed here: the Ijarah sukuk issued by Qatar Global Sukuk as illustrated by Tariq (2004); that issued by RH Capital PTC (2004), and the hypothetical case of an Ijarah sukuk issued by a Ministry of Defence, as illustrated by Al-Amine (2001).

The Government of Qatar issued US$ 700,000,000 Ijarah sukuk through the Qatar Global Sukuk, an SPV established by the government of Qatar, Qatar International Bank and HSBC. The Ijarah sukuk was issued in 2003 and will mature in 2010. The proceeds will be used to finance the construction and development of Hamad Medical City.

The lease payments or the periodic distribution given to the sukuk holders is calculated by a floating rate as follows:

§ For the first four distribution dates, the lease payments are

(LIBOR + 0.4%) * (700.000.000) * x/360

§ For the remaining distribution dates, the lease payments are

A + (LIBOR + 0.4%) * (700.000.000) * x/360

(x is days in return accounting period, A is an amortization payment)

In addition to two covenants underlying the birth of sukuk above, in fact some of contract are still potential to be developed, such as: (a) sukuk, murabaha, (b) salam sukuk, (c) sukuk istishna and (d) Musharaka sukuk. Thus sukuk still have a diversity of models that can accommodate a variety of financing needs of the most feasible and suitable for corporate and government.

Design resign

The method used in this research is qualitative research methods. Qualitative research methods are research methods that are based on the philosophy postpositivisme[4] is used to examine the condition of natural objects, (as his opponent is an experiment) in which the researcher is a key instrument, conducted the data collection technique of triangulation (combined), data analysis is inductive or qualitative and the result of qualitative research emphasize on the significance rather than generalization (Sugiyono, 2008).

Qualitative research is descriptive. The data analyzed is not to accept or reject the hypothesis (if any). The results are a description of the phenomenon observed and it doesn’t always in numbers or coefficients between the variables. However, qualitative research is not imposible to have quantitative data (Sudrajat, 2005).

Qualitative approach

The nature of sukuk itself is more towards on investment partnership, not merely debt. This, so far, still becomes debatable issues which may be never ending conclusions. In addition, each country thought has inherent characteristics which cannot be accepted by others. Rosly & Sanusi (1999) criticized the application of bay al-'Innah and bay al-Dayn in Malaysia for sukuk. He argued that those schemes were not allowed by the majority of ulama’ (Jumhur Ulama’) especially al-Shafie. Therefore, this could be risks for sukuk to be accepted by different Islamic thought in sukuk. In addition, he added that it was similar to back-door interest.

Other issue was the possibility of reselling salam sukuk before taking possession might lead to gharar or riba (al-Amine, 2001), guarantee of sukuk and LIBOR benchmark in pricing (al-Amine, 2008). This may caused reluctance from pure shari’ah investors. In this case, Jabeen & Khan (2008) showed the experience of Pakistan sukuk which utilized WAPDA sukuk (water and power development authority) and musharakah sukuk and two tiered sukuk leading to IPO which was aligned to Islamic principles. Last concern, we should learn from the case when there was a default in payments. This related the clarity of regulation and fairness for both parties

especially in a secular regulation (McMillen, 2007).

Adam (2005) described the benefits of sukuk such as tradeable (sukuk can be traded at market prices), rateable (easily rated), enhanceable (sukuk may be secured), legal flexibility (sukuk can be structured and offered nationally and globally under difference tax regimes and allowing for redemption possibilities). He emphasized a good system and legal needed to the implementation of sukuk optimally.

So in this discussion merely refers optimization the use of sukuk funds to be developed as investment especially in developing infrastructure in Indonesia (translate). The most possible is doing a hybrid contract to sukuk transaction that it 's in the form of sukuk al-intifa'a Where the sukuk al-intifa'a is Represents a new asset class for Islamic securitization. It involves the right to benefit or enjoyment (haq al-intifa’) in the form of time sharing.

Picture 5

Analysis Method

Text Box: Comparison
&
Development Analysis

Learn application

Sukuk especially

Skim Ijarah

Review

Literature

Library Research

Analysis

Criticisms of Ijarah Sukuk

There are some disadvantages regarding the Ijarah sukuk structure. Not every potential issuer has access to the needed underlying asset. Ijarah sukuk carries high transaction costs such as maintenance and insurance costs, because Shari’ah requires the asset to be operable, otherwise the lease will be suspended until the asset is fixed; Shari’ah fees and audits which are not only expensive, but also time consuming; and penalties for the lessee or borrower if the lease payment is not paid on time. However, the major criticism is related to the use of interest rate as benchmark, because it is often the case that the return of Ijarah sukuk is benchmarked to LIBOR (London Inter Bank Offer Rate) on US$ funds, or the equivalent local rate of issue. Although the interest rate is only used for pricing, the close link between interest-based pricing and riba worries Shari’ah scholars (Sen, n.d.). According to Vogel and Hayes (1998) Islamic scholars do not recognize any difference between nominal and real rates of return. However, in the process of articulating an expected rate of profit for the assumed rate of investment, Muslims end up incorporating implicit inflation assumptions when they set profit expectation as a function of other conventional capital market returns on comparable risk.

Since interest rate is usually used as a basis of cost of capital and a benchmark against interest rate of return (IRR), in an economy without any interest rate there is no mechanism to calculate the cost of capital, and the efficiency of an investment project cannot be evaluated. To solve the problem associated with use of interest rate for pricing the Ijarah sukuk, Mirakhor (1996) suggested a procedure that utilizes Tobin’s q in a calculation of the cost of capital and investment. This calculation is done without resort to a fixed and predetermined interest rate; equity financing becomes the only source of financial capital and the economy’s financial system becomes equity based.

In an economy without debt, the stock capital is valued in the market for equities and the relationship between the supply price of capital and the rate used by the shareholder to discount the expected future earnings can be derived. Tobin’s q defines the supply price of capital as the rate of return which is required by a shareholder to absorb the existing capital stock to their portfolio. Incentive for companies to invest depends on the prospective profitability relative to the cost of capital. Investment is expected to occur when the demand price as reflected in the financial valuation exceeds the supply price as measured by the cost of physical capital. In other words, a company is expected to accept investment where the return will exceed the cost of capital (Mirakhor, 1996).

The q theory of investment relates investment to the ratio of market to the replacement value of capital. From the previous observation it can be seen that under certain conditions, the rate of investment of a share- value maximizing firm is the function of q. Marginal q is the ratio of market value of an additional unit of capital to its replacement cost. Marginal q is a fundamental determinant of investment, because it shows the increase in the market value of a firm, which reflects the profitability of existing capital (Mirakhor, 1996).

Sukuk Berbasis Profit (Infrastructure Project)

To anticipate that Islamic principles in accordance with the role maintained, so needed innovation steps developing of sukuk specifically with skim Ijarah sukuk. The development of sukuk in a model for developing Infrastructure in Indonesia. The development forms linkage between the government and the private (individual) where there is an element therein, (1) linkage with the purpose of profit or business orientation, (2) linkage without seeking profit or social orientation. Both development model linkages has the same boils that is to support infrastructure development in order to develop and adequately. In fact, the harmony of both linkages is expected to be optimal to drive economy with large-scale oriented to help develop the real sector. In this part, author would like to develop the business model of the development of sukuk into two parts, first part describes the linkage development of sukuk in the business orientation as Figure 3 below. In that model, there are few opportunities to develop the Infrastructure Development with capital, ie the profit funding sources, through a linkage program between the BUMN with other investor or often called a model of integration.

Picture 6

Structure of Ijarah Sukuk (Pooling of Multiple or Single BUMN Assets)

Sukuk Model Berbasis Social (Housing Project)/Sukuk Model based on Social (Housing Project)

With conditions in introduction, it is a challenge for us that how to build synergy and connectivity between sectors in Islamic economics, including between sector waqaf with other sectors. Regarding this, better we look an example of waqaf integration model with sukuk in a scheme called sukuk al-intifa ', which has been developed by Saudi Arabia in the development of Zam Zam Tower at Mecca.

In simply, mechanism of sukuk al intifa based on 'ijara contract. Nadzir (waqf administrator) lease waqaf land its manage to the developers who are interested in, for example company A. The agreed rental fee, which must be paid by A, is in the form of the building, and not in cash. To tell the contract is 25 years old. So after 25 years, A responsible to give building to nadzir as rental costs of waqaf land as managed. Thus, the payment system will not do in every month or every year, but in full (lump sum) after the end of the lease. Then, A builds needed building immediately. Of course as a company, A wants to make a profit in accordance with the investment made. For that, a building leased to other companies who are interested in, for example real estate company B for 20 years, with the agreement that the rent will be paid B every year (or every month). Considering how big the initial fund needed, then B issued ijara sukuk on the stock exchange.

Picture 7

Evidenced by Sukuk Certificates

Integration Model of Sukuk Al-Intifa’a

LAND OWNER

With the issue this sukuk, then B has sufficient capital to begin operations and pay obligations a rental fee to A every year. Sukuk issued by B is called a sukuk al-intifa '. It is called alintifa '(taken benefit) for sukuk (which issued by B) basically is not sukuk based on land, but the building. In this context, the existing building is actually a cost to be paid A to Nadzir, because A has used waqaf lands as managed. So that when B issue sukuk, basically used as underlying asset is in the form of "benefit". So take benefit from what A paid to Nadzir.

In Indonesia context, the mechanism of sukuk al-intifa 'can be utilized for many things, such as trade development, hospitals, office buildings, and others. We can find a breakthrough new product that is more suitable to be applied. Hopefully, impact to society can be felt widely. One of its project is residential housing for low-income people considering the concept of sukuk al-intifa'a integrated in the program cooperation between country autonomous institutions namely Indonesia Waqaf Instituion (BWI) with the Ministry of Housing (Kemenpera).

Picture 8

Development Land Waqf Models

Land Waqaf

(Wakif)

Nazhir

(Ministry of Public Housing)

Indonesia Waqaf Institution)

usage of asset waqaf

(development of low flat)

Explanation:

Wakif is giving waqaf to Nazhir to be managed and land where is indeed destined for housing the poor / less fortunate, or land to be waqaf might be used for public facilities including construction houses for the poor / underprivileged.
Nazhir coordinate with the Waqaf Institution(LW), namely Nazir (BWI) to follow-up or to flow up desire (intention) of Wakif.
LW or BWI is having cooperation (MoU) with government institutions to utilize waqaf land for development housing the poor / less fortunate in the form as a rented house, the budget provided by the Government.
Revenue from the rental house used again to build another rental housing for the poor / underprivileged.
Or mechanism of cooperation will be initiated between LW and Government Institutions.
Both sides agreed to conduct a study of waqaf lands which is coordinate LW or BWI both legal aspects and sharia aspect.
Then both sides create a pilot project to build a rent house in the waqaf land.

From this project can be considered some points: first, profits that earned by government, government no longer need to free the land with high cost. Second, the waqaf land can be utilized directly for the construction of flats with available cost by government. If we see from data the Ministry of Religious Affairs Directorate of Waqaf in 2011, states that the potential of asset waqaf is very large number waqaf land in Indonesia about 2171 M2 2,171,041,349.72 M2 or around2171 KM². The Waqaf is one of economy pillars that can be used to increase the society welfare , one of them is usage of waqaf assets with construction a public housing for low-income, which is a joint program with the government in this case is Ministry of Public Housing. However, with large waqaf and budget assets that owned by the ministry of public housing is limited then the concept of sukuk al-intifa'a is properly applied.

Picture 9

Development Land Waqf Models

This means that development programs have run already and assets as a house is already exist, but had limitation funds. Therefore, imposed skim sukuk al-intifa to shore up funding in developing infrastructure facilities in this regard is the development of housing for low-income communities (MBR) which is running by a real estate corporation. Then can issue the sukuk on behalf of the government's public housing that will be addressed to attract funding from local and domestic investors.

Conclucion

Other structures are also possible such as participation sukuk. Sukuk for Infrastructure project can also be worked out. Sukuk financing for Infrastructure Project ties directly with the real economic activity associated with provision of basic goods and services. Islamic Finance helps in two way development: from grassroots to top and from the top to grassroots level. Islamic Finance is not only a religious agenda but also vital for national development.

And other alternative investment for social oriented is a waqf. Waqf is a potential instrument from the Islamic heritage that viable to be used to enhance ummah welfare. Its past history and present implementation has proved its vital role in the socio economic of ummah. Waqf development approach is using a mutulism combination of primary and secondary project of waqf. Sukuk al-intifa’a is one of the instrument to finance waqf project. Some prerequisites are needed in place for the implementation of al-intifa’a waqf project.

References

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[1] Perkembangan Ekonomi Makro dan Kondisi Fiskal Tahun 2011 dan 2012. Kementrian Keuangan, 2011

[2] Nota Keuangan dan Rancangan Anggaran Pendapatan dan Belanja Negara Perubahan Tahun Anggaran 2011. Kementrian Keuangan Republik Indonesia.

[3] Sukūk is an Arabic word in plural; the corresponding singular is ‘Sakk’.

[4] Postpositivisme philosophy often referred to as the interpretive and constructive paradigm, which views social reality as something that holistic / whole, complex, dynamic, meaningful, and the relationship of symptoms is interactive (reciprocal).