Following in the footsteps of Indonesia which took a leaf from Kenya’s M-Akiba bond playbook, Malaysia is reaching out to retail investors with its first mobile-enabled Sukuk to assist with building back its pandemic-battered economy.
Malaysian Prime Minister Muhyiddin Yassin officially launched the country’s Sukuk Prihatin worth RM500 million (US$119.24 million), the proceeds from which will contribute to Malaysia’s COVID-19 Fund combating the pandemic and moving toward economic recovery.
In a ceremony held at the Ministry of Finance and broadcast live, the prime minister said that the Sukuk Prihatin facility is part of the government’s 6R strategy (Resolve, Resilience, Restart, Recovery, Revitalize and Reform), a plan outlined by the ministry in June 2020 to mitigate the effects of the coronavirus crisis. He also mentioned that the Sukuk facility was the result of requests he received from the public to assist in the country’s economic recovery.
The ‘bottom-up’ approach to the issuance allows members of the public and corporate parties to subscribe to the Sukuk, also touted as Malaysia’s first digital Sukuk as subscriptions can be done via online banking channels JomPAY and DuitNow.
Minimum subscription has been set at RM500 (US$119.24) at a profit rate of 2% per annum. The Sukuk facility has a tenor of two years, and payments will be made quarterly. Investors also have the option to donate their profits to the COVID-19 Fund, for which they will receive a tax relief.
Proceeds from the facility will be channeled into the COVID-19 Fund, particularly to fund and improve connectivity in rural schools, support MSMEs affected by the pandemic especially women entrepreneurs and fund health expenditure, which includes research on infectious diseases.
The launch was attended by the King of Malaysia Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah, who also agreed to be the first Sukuk investor at the ceremony.
The Sukuk Prihatin facility was first announced in June 2020, a retail Sukuk facility designed specifically to allow investors (both individuals and businesses) to contribute to Malaysia’s economic recovery in the wake of the coronavirus outbreak. This offering is a significant one because unlike in neighboring Indonesia which has several retail Sukuk under its belt, retail Sukuk are few and far between in Malaysia despite the country being one of the largest Sukuk issuers in the world. The decision to sell the Sukuk via mobile banking platforms for the first time, something Indonesia has been doing since 2018, also signals the Malaysian government’s propensity to utilize fintech to drive Islamic finance adoption.