Get to know SBN, an Investment Instrument Guaranteed by the State

Government Securities, abbreviated as SBN, include both government bonds and state sharia securities. Both are securities in the form of debt acknowledgments denominated in Rupiah and other currencies. The Republic of Indonesia guarantees interest and principal payments from SBN purchases for the duration of the validity period offered. The government issues SBN as an alternative source of funds to finance community welfare programs and developments. Simply put, you as a member of society lend money to the government, and the government returns the money in full when it is due. You will also receive yields from the purchase of SBN, which will be credited monthly to your account before the due date.  

Types of SBN

The government provides SBN products to investors in two ways: auction and non-auction systems. Products available through the auction system are aimed at large-capital investors such as institutions, investment managers, and insurance companies. Meanwhile, the non-auction products are aimed at retail investors (individuals), and the capital required to purchase them is relatively low. SBN with an auction system consists of Government Bonds (SUN) and State Sukuk. SUN products are classified into two types: State Treasury Bills (SPN) with a maturity date of up to 12 months and government bonds with a maturity date of more than 12 months. Meanwhile, Sharia State Treasury Letters (SPNS), Islamic Fixed Rates (IFR), and Project-Based Sukuk are three types of State Sukuk products (PBS). A non-auction method SBN has four products that can be categorized based on management principles and yields. Saving Bond Retail (SBR), Retail Government Bonds (ORI), Retail Sukuk, and Savings Sukuk are the four. The general public can invest in these four products with small amounts of money ranging from Rp1 million to Rp3 billion.  

Types of SBN Based on Management Principles

SBN products are classified into two types based on their management principles: conventional SBN and Sharia SBN. Debt securities with monthly interest yields are examples of conventionally managed products. The principal will be paid by the government at the end of the period. Meanwhile, Sharia-compliant products can be recorded as participation in state assets with regular returns as rent (ujrah) from tangible assets rented by the government. Conventional SBN types consist of:

1. Savings Bond Ritel (SBR)

SBR is a retail investment instrument in the form of government bonds that has characteristics similar to savings or bank deposits. The general public can invest in this product in multiples of Rp1 million up to a maximum of Rp3 billion. Despite the fact that this product cannot be re-traded on the secondary market, SBR has an early redemption facility with a maximum redemption value of 50% of total SBR ownership.

2. Retail Government Bonds (ORI)

ORI is a retail investment instrument in the form of government bonds that can be traded on the secondary market. ORI also has a fixed coupon in the form of monthly yields paid to the investor who purchases it. The general public can invest in ORI in multiples of Rp1 million up to a maximum of Rp3 billion. Types of Sharia SBN consist of:

1. Savings Sukuk (ST)

The ST product is similar to the SBR in that it is not tradeable on the secondary market but is redeemable early. However, because this product is managed according to Sharia law, there are differences in contracts (agreements and settlements) in the issuance of state asset ownership as underlying assets or ST base assets. The general public can invest in this product through distribution partners with a minimum purchase of Rp1 million and a maximum purchase of Rp3 billion, with a fixed yield and payment made monthly.

2. Retail Sukuk (SR)

SR is similar to ORI, but it is managed according to Sharia law. Secondary market trading is also available to retail investors with SR holdings. This product has a nominal value of Rp1 million and a fixed yield that is paid monthly to the investor's account.  

Types of SBN Based on Yield

SBN types can also be grouped based on the yield, namely fixed rate and floating rate with a floor. Here's a brief explanation.

Fixed-Rate

Fixed-rate is a fixed yield of SBN products from the beginning to the due date. Therefore, this return scheme can be beneficial for retail investors to avoid changes in market interest rates. SBN products with a fixed-rate yield scheme are ORI and SR.

Floating rate with Floor

Because it follows the change in Bank Indonesia (BI) interest rates, a floating rate with a floor is an unfixed return scheme for SBN products. However, the government has established a minimum coupon limit from the start of the SBN issuance, so the yield for a retail investor can rise but cannot fall below the limit established at the start. SBR and ST are SBN products with a floating rate with a floor yield scheme.  

Maximizing the Benefits of SBN as an Investment Product Through Technology

Rapid technological advancement has resulted in numerous changes in almost every aspect of our lives, including the way we select investment instruments. SBN, as an investment product, is also affected by the shift. The Indonesian people's interest grows year after year whenever the government issues SBN products. This year, the government plans to issue seven retail SBN series, with a total issuance of Rp100 trillion. This target has risen since the completion of Retail SBN issuance in 2021, which totaled Rp97.21 trillion. The seven retail SBNs set to be issued in 2022 are as follows:

1. ORI021 series with an offer period on 24 Jan - 17 Feb 2022.
2. SR016 with an offer period on 25 Feb - 16 Mar 2022.
3. SWR003 with an offer period on 1 Apr - 2 Jun 2022.
4. SBR011 with an offer period on 23 May - 16 Jun 2022.
5. SR017 with an offer period on 19 Aug - 14 Sep 2022.
6. ORI022 with an offer period on 26 Sep - 20 Oct 2022.
7. ST009 with an offer period on 28 Oct - 16 Nov 2022.

The public can obtain the seven retail SBNs easily through official distribution partners' online services, both bank and non-bank. Aside from the security factor, because the government guarantees this investment, several advantages become reasons for people to invest in this product. Among them are:

• By investing in SBN, you indirectly participate in building the country.
• SBN yields tend to be unaffected by the ups and downs of the market.
• Less tax.
• Competitive returns compared to deposits.
• Ease of SBN disbursement, either through early redemption or trading on the secondary market.