Understanding ORI and SUKRI in the Capital Market

Recently, several banks offered Retail Government Bonds (ORI) series ORI023, whose offering period has now ended. Previously, the government, through selling agents including banks and securities companies, also offered previous ORI series and Retail Sukuk (SUKRI), which is the sharia-based version of ORI.

According to the Head of the Indonesia Stock Exchange (IDX) Representative Office in North Sumatra, Muhammad Pintor Nasution, ORI and SUKRI are part of Government Securities (SBN) issued by the government to finance the state budget. These instruments are specifically designed for retail or individual investors, denominated in Indonesian Rupiah. On the other hand, there are also SBNs targeted at institutional investors, both domestic and international, issued in Rupiah or foreign currencies.

History and Purpose of ORI and SUKRI Issuance

ORI was first issued in 2006. Since then, the government has routinely issued ORI several times each year. By the end of July 2023, there have been 23 ORI series issued. The main purpose of launching ORI is to provide the general public with the opportunity to invest directly in government bonds. ORI can be resold in the secondary market, allowing investors to potentially gain capital gains or experience capital loss, depending on the selling price in the secondary market compared to the purchase price.

As ORI is intended for individual investors, it can be purchased with a relatively small minimum denomination, starting from Rp1 million up to a maximum of Rp2 billion. ORI offers a fixed coupon that is paid monthly, making it an attractive investment instrument for the general public.

SUKRI, on the other hand, shares similarities with ORI but is based on sharia principles. Retail Sukuk is sold to individual investors through selling agents with a minimum purchase of Rp5 million. The returns on Retail Sukuk are fixed and also paid monthly. Like ORI, SUKRI can also be traded in the secondary market, providing flexibility for investors. Retail Sukuk was first issued in 2009, and as of now, 18 series have been issued.

Investment Prospects and Risks

For the remainder of 2023, the government plans to issue one more ORI series and one more SUKRI series, namely Retail Sukuk series SR019, which will be offered from mid-August to mid-September 2023, and ORI024 in early October to early November 2023.

Although ORI and SUKRI offer the potential for profit in the form of capital gains and returns or coupon payments, they also come with investment risks, like other investment products. One of the main risks is capital loss, which can occur if an investor sells ORI or SUKRI in the secondary market before maturity at a selling price lower than the purchase price.

However, the risk of default is almost non-existent because the payment of principal and returns is guaranteed by the state and regulated by law. To mitigate the risk of capital loss, investors are advised to hold ORI or SUKRI until maturity or only sell them when the market price is higher than the purchase price, after accounting for transaction costs.

In addition to providing monthly coupons, ORI and SUKRI can also be used as collateral for loans to banks or other financial institutions, as well as collateral in securities transactions in the capital market. This enhances the utility of these two investment instruments for retail investors in Indonesia.