Sukuk Prihatin a good idea, avoids borrowing from external banks - DON

Professor Dr Mohd Nazari Ismail of Universiti Malaya’s Department of Business Strategy and Policy said in contrast to normal people who lend money from savings, commercial lenders particularly banks create new money when they lend to the government which could contribute to higher inflation.

However, he said although involving the participation of the rakyat is good, sukuk, as a credit instrument, will actually increase the debt burden of the government.

“The government is obligated to pay back within two years together with the `profit' for the subscriber/lender.

“If the government does not have the money in two years, then it will be forced to make another issuance of Sukuk Prihatin, or simply borrow more from the debt market, thereby increasing the government's debt burden again,” he told Bernama.

He said a more laudable method is creating investment projects that people can directly invest in and also bear the burden of risks in order to get the profit.

“That is closer to the concept of Mudarabah or Musharakah that is encouraged by Islam,” he said.

However, he said that would require a mind-set where the rakyat are willing to take risks in order to get returns on their investment.

He noted that a risk-free investment scheme (because it is guaranteed by the government) can create problems for the government in the future just as what happened in the case of Tabung Haji.

The only difference, he said, is that the Sukuk’s return guaranteed by the government is much lower at two per cent compared with the case of Tabung Haji, where the return went all the way up to eight per cent.

On the other hand, he said, if people think that the inflation rate is going to be more than two per cent in the coming two years, the Sukuk’s profit rate of two per cent may not be attractive enough.

On Tuesday, Ministry of Finance launched Malaysia’s first digital sukuk, the Sukuk Prihatin, as one of the initiatives under the National Economic Recovery Plan (PENJANA).

The RM500 million Sukuk Prihatin can be subscribed to with a minimum investment of RM500 with no maximum limit, and can be fully subscribed digitally through JomPAY dan DuitNow.

The sukuk, which is based on the principle of Tawarruq via the Commodity Murabahah arrangement, aims to raise funds from the public and corporates who wish to contribute towards the COVID-19 Fund. It offers a profit of two per cent per annum, which will be paid on a quarterly basis and be exempted from tax.