The Islamic Investment Infrastructure Bank, a unit of the Jeddah based Islamic Development Bank (IDB) is expected to be founded in 2016 as a new cross-border institution jointly by the IDB, Indonesia and Turkey, according to a person with knowledge of the deal. The bank will act to raise funds by means of sukuk issuances to fund infrastructure projects. The bank’s founding members will invite other countries to join as shareholders.
“Having IIIB in Indonesia will help build infrastructure, bring in capital and boost Islamic banking assets,” Achmad Kusna Permana, secretary-general at the Indonesia Islamic Banking Association has previously stated in an interview with Bloomberg. “Malaysia and Saudi Arabia may offer more sophisticated markets, but the greatest funding need is here” added Permana.
Indonesia is a regular issuer of US dollar sovereign sukuk as well as local currency retail issuances. Its last sovereign issuance was on 22 May 2015 when it raised $2 billion dollars at 4.325% with a 10 year maturity, whilst in the past week it successfully auctioned as part of its domestic issuance programme IDR2.5 trillion (US$174.5 million) of retail sukuk.
Indonesia is home to the world’s biggest Muslim population and its Shariah compliant financial assets rose 12 percent in 2014 to $21 billion according to local data.
Indonesia is also among the 57 prospective founding members of the China-led Asian Infrastructure Investment Bank (AIIB) founded in late 2014. This international financial institution, which aims to support infrastructure development in the Asian region, has been regarded as China’s strategy to reduce the influence of the International Monetary Fund (IMF), Asian Development Bank (ADB) and World Bank.