Constraints and Strategies of Issuing Municipal Sukuk in Indonesia

Abstract

The purpose of this paper is to analyze the potential of Islamic municipal bonds in Indonesia focused on its constraint and strategy using Analytic Network Process (ANP). Methodology proceeded by literature research to construct a model and in-depth interview with practitioners and regulators both on government and sharia perspective to fully understand and develop an appropriate ANP Network. The experts are divided into two categories as direct relation and non-direct relation experts. The constraints are divided into five nodes, they are political risk, trust between stakeholders, lack of sharia knowledge, law constraint and risk of municipal loan. While the strategies contain of building trust, sharia education, comprehensive law basis, market strategy, and strategy of product innovation. Islamic municipal bonds may be developed by implementing comprehensive law basis as primary strategy to provide the need of law basis as main constraint. Both main constraint and strategy are agreed by all experts except BPK which is more concern in risk of municipal loan.

Analytic Network Process (ANP) Method: Factor Analysis of the Non-Implementation of Municipal Islamic Bonds in Sukuk Potential Areas in Indonesia

“…According to data from 2023, the macro-APBD deficit continues to increase. This indicates that there is still regional dependence on the center, which is not in accordance with the ideals of regional autonomy (Hamzah et al, 2022).…”

“…Based on previous research, there are several bloodlines that have the potential to issue regional sukuk. Like Hamzah et al, (2022), mapping potential sukuk regions in Indonesia is carried out in four stages: determining the IKK (Financial Capability Index) value through elasticity, share, and growth analysis; determining the IMP (Maximum Loan Index) value; and based on BPR's opinion on LKPD (Local Government Financial Statements), the results of the three analyses are included in the matrix calculated by the Bayes method to determine the IKP (Suk Issuance Capability Index) value. From the research obtained, it appears that there are five regions that have the potential for sukuk, namely West Java, DKI Jakarta, East Java, Central Java, and the Riau Islands.…”