BTN to sell Rp 100b of Islamic bonds

BTN to sell Rp 100b of Islamic bonds

JAKARTA: PT Bank Tabungan Negara (BTN), a state-owned lender, plans to sell this year Rp 100 billion (US$10.2 million) of bonds that comply with the requirements of Islamic law.

The Jakarta-based bank will offer investors its first Islamic bonds "some time" in the fourth quarter of this year, President Director Kodradi told reporters in Jakarta. "We are still in talks to choose the underwriters," he said without elaborating. The funds raised will be used to provide housing loans.

BTN joins PT Polytama Propindo, an Indonesian petrochemical company, and other borrowers such as PT Indosat, the nation's second-largest telecommunications company, in selling bonds that adhere to the laws of Islam, which prohibits the payment or receipt of interest.

Indosat sold Rp 1.1 trillion of bonds in June to fund the expansion of its network. Of that total, Rp 285 billion was raised through the sale of Islamic bonds.

Islamic bonds are often backed by assets sold to a bank or a company that is created by the borrower. Indonesian companies have raised Rp 1.4 trillion through Islamic bond sales, or 1.7 percent of the Rp 84.2 trillion of outstanding corporate bonds, according to data from the Capital Market Supervisory Agency as of March. -- Bloomberg