Yana Aditya, Finance Director of Rajawali Nusantara Indonesia, said the funds that are generated through the issuance of the medium term notes are to be used for the company's sugar production process in 2017.

The latest sukuk sale is part of the company's total IDR 665 billion worth of medium term notes program. The previous sukuk sales involved IDR 77 billion (April 2017) and IDR 388 billion (June 2017) worth of sukuk. Danareksa Sekuritas was the arranger of the sales.

Aditya said the source of funding of the company are either bank loans or bonds. Its capital expenditure has grown 286 percent in 2017 compared to the budget in the preceding year. Local credit rating agency set its rating for Rajawali Nusantara Indonesia at idA-.

Didik Prasetyo, President Director of Rajawali Nusantara Indonesia, said the shareholders of the company (namely the government) requested it to enter the sharia (Islamic banking) sector. He added that Indonesia's sharia banking is very promising, reflected by great demand for the company's sukuk. Therefore, Rajawali Nusantara Indonesia expects to use this source of funding again in the future.

Data from the Financial Services Authority (OJK) also show good growth of sukuk demand in Indonesia. Up to May 2017 total outstanding value of corporate sukuk has reached IDR 14.6 trillion and has great potential for further growth. In 2016 corporate sukuk sales only reached IDR 11.8 trillion. Rising sukuk demand is also attributed to the government's ongoing efforts to accelerate the development of the nation's sharia financial sector.

Although between 85 and 90 percent of the Indonesian population is Muslim, Islamic banking, also known as sharia banking (financing activity that is in line with Islamic principles), remains underdeveloped in Indonesia. In 2016 sharia banking assets only accounted for 5.3 percent of total assets in Indonesia's banking sector. Meanwhile in countries like Saudi Arabia and Malaysia these figures are much higher at 51.1 percent and 23.8 percent, respectively.

Finance: New Efforts to Boost Sharia Banking in Indonesia