Arsianews, Jakarta – Indonesia is seeking new channel to invest a part of its $8 billion Haj funds. But the potential suitors need to be shariah compliant.
The Indonesian agency managing the Haj fund gas accumulated Rp 111 trillion ($ 7.9 billion) as the waiting list to make the holy pilgrimage for applicants stretches to 15 years, according to official data.
Indonesia is the world’s largest Muslim-majority country. The Saudi government has set Indonesia’s Haj quota at 221,000 this year, the largest contingent of pilgrims to attend the rite.
According Beny Witjaksono, a member of the board of Badan Pengelola Keuangan Haji (BPKH), with the cost of subsidising the trip rising every year, the agency is exploring ways to generate higher returns.
The agency’s ability to boost returns is crippled by a law curbing direct investment to 20 percent of the fund, forcing it to mostly park the money with the banks and in sukuk. As Indonesia offers limited shariah investment opportunities, the agency is exploring opportunities overseas.
“Why do we need direct investments? Because the return rate in Islamic bonds is limited,” Witjaksono said. “We have the potential to reach 10 percent direct investment, but it’s unlikely for us to execute all of those in pipeline this year.”
Badan Pengelola’s direct investments include a small stake in PT Bank Muamalat Indonesia, an Islamic bank, an agreement with state energy firm PT Pertamina on discounted jet fuel price for Haj flights and a $ 270 million investment deal with national carrier PT Garuda Indonesia. The agency recently signed Rp 300 billion deal with a catering service near Mecca and is exploring partnerships with accommodation providers or hotels in Saudi Arabia.
“If we want to increase the allocated portion for the direct investment, we can then reduce the investment portion in Islamic bonds,” Witjaksono said in a phone interview to ArabianBusiness.com.
At least Rp 6 trillion worth of Islamic bonds held by the agency will mature this year and can be used for direct investment, he said. The Haj fund may increase to Rp 121 trillion by the end of the year with its average return seen at 6.5 percent.