ISSUES AND CHALLENGES FOR DEVELOPING CORPORATE SUKUK: LESSONS FROM AN INDONESIAN CASE STUDY

Abstract

This research is trying to find the issues, challenges, and strategies development of corporate sukuk in Indonesia. This objective arises because the level of supply and demand for corporate sukuk in Indonesia is still prolonged. This case in Indonesia is almost similar to cases in some countries, especially in Asian countries that are making efforts to develop sukuk market. Based on the method of mapping and root problem analysis, this study found three problem structures inhibiting the growth rate of corporate sukuk in Indonesia. The first stage of the problem is a surface issue, namely: concerns of potential double taxation; lack of understanding from investors; lack of knowledge of the issuer; unparted investor base; less liquid in the secondary market; very complex publishing documents; the contract variation remains unclear. Seven issues of this first phase are caused by five sources of the second issue, namely: there is still the required information regarding the issuance of sukuk is asymmetric; unavailability of supporting profession; unavailability of supporting industries; costly issuance costs; complex sukuk structures. The third stage of the problem causes the first and second problems, also called the root of the slow growth of corporate sukuk in Indonesia, namely: low socialization and education and the limited human resources of capital market actors concerning sukuk. On the three structures of the problem, the proposed development strategy sukuk corporations in Indonesia consist of two priority suggestions, namely: increasing socialization and education on corporate sukuk and clarify rules on corporate sukuk, related to rules on supporting institutions, contract structure, human resources, and administration. This result can be a reference to create the right strategy to encourage the growth of corporate sukuk in the long term. This research is also beneficial as a pilot development of corporate sukuk in several countries with cases and characters that are almost similar to Indonesia.

Keywords

• Corporate sukuk
• corporate growth
• socialization
• education
• sukuk rules