DEBT MARKET “ISLAMIC PUBLIC DEBT” GROUP MEMBERS: Adliyana Bt Hasan Ermawaty Bt Suhaili Norzalina Bt Md Satar Nurnabilah Bt Zainal Nur Syaza Bt Mohd Nasaruddin

ISLAMIC PUBLIC DEBT Public debt is the debt owed by the citizens of a country in a collective capacity to themselves in their individual capacities. In practical perspective, Islamic public debt and conventional public debt are relatively similar. Islamic Public Debt consists of instrument based on murabahah and bai bithaman ajil contracts.

ISLAMIC VIEWS ON PUBLIC DEBT The government’s need for debt finance mainly arises for three different reasons : –needs short-term finance. –needs medium and long-term finance. –needs huge financial resources.

GOVERNMENT INVESTMENT ISSUE (GII) Long-term non-interest-bearing Government securities based on Islamic principles. Issuance size ranging from RM1 billion to RM3.5 billion and original maturities of 3-year, 7- year, 5-year and 10-year. Based on Bai' Al-Inah principles, part of the sell and buy back concept in Islamic finance.

Cont. Profit rate is based on the weighted average yield of the successful bids of the auction. The nominal value of buying back the assets will be settled at a specified future date or maturity, while the profit rate will be distributed half yearly. The obligation of the Government to settle the purchase price is securitised in the form of GII and is issued to the investors.

New Profit-based Government Instrument Additional instrument to the existing discounted- based GII. Issued at par via Islamic concept of Bai Bithamin Ajil Characterized by the element of profit, payable every half-yearly until its maturity. The new benchmark for the issuance of long-term Islamic bonds and consequently will promote market liquidity

Merdeka Saving Bonds A bond structure based on Shariah principles with the purpose of providing assistance to retirees who depend primarily on interest income from deposits placed with the banking institutions.

Key Features of Merdeka Saving Bonds Name of bond Bon Simpanan Merdeka 2008 (BSM) Date of issuance 1 April 2008 Frequency of issuance One issuance in 2008 Allocation of BSM First come first serve basis Total BSM size RM2 billion Bond type The BSM is issued based on the Commodity Murabahah contract in accordance with the Syariah Tenure 3 years Profit to investors 5 % per annum Frequency of profit payment Profit will be paid on a quarterly basis by crediting directly into the BSM holder's account maintained with the Agent Bank

Eligibility Malaysian citizens who are 55 years old and above and are not employed on a full-time basis Minimum holding Minimum holding per BSM holder is RM1,000 at the point of application and in a multiple of RM100 e.g. RM1,100, RM1,200, etc. Maximum holding Maximum holding per BSM holder is RM50,000 at any point of time for the duration of BSM (2008 to 2011) Early redemption - BSM holder may redeem the BSM before the maturity date but only after the first profit payment date. The profit payments will be apportioned on daily rest basis - Minimum redemption amount allowed is RM100 and in multiples of RM100

Agent banks Commercial banks, including Islamic banks, Bank Kerjasama Rakyat Malaysia Berhad, Bank Simpanan Nasional and Bank Pertanian Malaysia Tax exemption Returns on the BSM to be exempted from tax Transferability and assignability The BSM is non-negotiable, non- transferable and non-assignable