Home Affairs Ministry Explains Differences Between Sukuk and Regional Bonds

Dr Agus Fathoni, Director-General of Regional Financial Management at the Ministry of Home Affairs, has explained the differences between sources of regional government financing. Regional loans, for instance, are debt instruments bound by a loan agreement rather than issued in the form of securities.

“Regional loans are bound by an agreement and are not in the form of securities. Municipal bonds are securities in the form of debt acknowledgement issued by a regional government,” said Agus Fathoni, quoted by detikSumut on Monday (20 July 2026).

Regional sukuk, meanwhile, are securities based on sharia principles that serve as evidence of a share in the underlying assets of the regional sukuk, also issued by a regional government.

He made these remarks at the MPR RI National Dialogue addressing ‘Municipal Bonds as an Alternative Source of Regional Financing and Public Investment Instrument’ in Pekanbaru.

Among the advantages of municipal bonds, the principal payment need not be paid in instalments, yields can be determined flexibly, and the maturity period can also be set flexibly. In addition, municipal bonds can be used to accelerate regional development.

“These funds can be used to finance several projects at once,” he said.

In terms of procedure, under existing regulations, approval is required from the Ministry of Home Affairs, the Ministry of Finance, the National Development Planning Agency (Bappenas) and the Coordinating Ministry for Economic Affairs. From a regulatory standpoint, stronger rules are needed so that municipal bonds can deliver greater benefit.

Regional development currently requires sustainable financing support so that various strategic programmes can continue to run. Amid this need, municipal bonds are regarded as one instrument with the potential to support development financing whilst opening space for public participation through investment.

Through municipal bonds, regional governments have an alternative source of financing beyond the regional budget (APBD) to support infrastructure development, improvements in public services and economic sector growth. At the same time, members of the public have the opportunity to take part in development through investment instruments managed in accordance with prevailing regulations.