Indonesia taps into Hajj fund to raise cash

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Indonesia pilgrimsThe cash-strapped Indonesian government is using liquidity from its Hajj pilgrimage fund to buy domestic Islamic bonds, or sukuks, in a move to reduce its exposure to foreign lender, the Financial Times reported.

The country has accumulated a $5.4 billion in the fund from from prospective pilgrims who make a $2,000 downpayment to join the 12-year waiting list for a place on the Hajj. The move is also designed to stimulate more private investment in government sukuk by injecting liquidity into the domestic Islamic finance market.

“We rely on foreign bondholders and that makes us vulnerable,” the paper quoted Finance Minister Chatib Basri. “Now we’re trying to diversify the source of funding away from global bonds and we’re working with . . . the Hajj fund,” he said.

The Saudis operate a strict quota of one Hajj place per 1,000 Muslims in each foreign country because of a history of overcrowding and stampedes at the main religious sites. The quota has been cut this year because of renovations to Mecca’s Grand Mosque, with Indonesia getting just 168,000 places.

Indonesia’s Hajj fund is expected to triple in size over the next decade as more Indonesians become wealthy enough to afford the pilgrimage, which costs $3,800 per person and is a key tenet of the Islamic faith.

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Reading Time: 1 minute

The cash-strapped Indonesian government is using liquidity from its Hajj pilgrimage fund to buy domestic Islamic bonds, or sukuks, in a move to reduce its exposure to foreign lender, the Financial Times reported.

Reading Time: 1 minute

Indonesia pilgrimsThe cash-strapped Indonesian government is using liquidity from its Hajj pilgrimage fund to buy domestic Islamic bonds, or sukuks, in a move to reduce its exposure to foreign lender, the Financial Times reported.

The country has accumulated a $5.4 billion in the fund from from prospective pilgrims who make a $2,000 downpayment to join the 12-year waiting list for a place on the Hajj. The move is also designed to stimulate more private investment in government sukuk by injecting liquidity into the domestic Islamic finance market.

“We rely on foreign bondholders and that makes us vulnerable,” the paper quoted Finance Minister Chatib Basri. “Now we’re trying to diversify the source of funding away from global bonds and we’re working with . . . the Hajj fund,” he said.

The Saudis operate a strict quota of one Hajj place per 1,000 Muslims in each foreign country because of a history of overcrowding and stampedes at the main religious sites. The quota has been cut this year because of renovations to Mecca’s Grand Mosque, with Indonesia getting just 168,000 places.

Indonesia’s Hajj fund is expected to triple in size over the next decade as more Indonesians become wealthy enough to afford the pilgrimage, which costs $3,800 per person and is a key tenet of the Islamic faith.

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