Sukuk Prihatin: How you can help Malaysia while earning something for yourself

KUALA LUMPUR, Aug 20 ― The Malaysian government on Monday launched the Sukuk Prihatin with the target of raising RM500 million to aid the country’s economic recovery amid the Covid-19 pandemic, by opening up an opportunity to Malaysian individuals and companies to invest in the Shariah-compliant investment instrument or Islamic bond through the lending of their money to the government for two years.

Beyond helping with the government’s efforts in rebuilding the economy after the Covid-19 pandemic, Malaysians who choose to put money into Sukuk Prihatin will be able to get back the principal or initial sum at the end of the two years, along with profits at a fixed rate every three months during the two-year period.

Below is a quick highlight and summary of some of the key points in the government’s 61-page knowledge pack on Sukuk Prihatin:

1. What is it?

The government is the issuer of Sukuk Prihatin, which means the government has a direct obligation to the investor for the principal and the profit payments. The Sukuk Prihatin is a one-off issuance by the government.

It is poised as a gateway for Malaysians to unite and join in Malaysia’s economic recovery measures, with the knowledge pack stating: “Themed ‘Forwarding The Nation’s Future Together’ and #KitaUntukKita, the Sukuk Prihatin will carry nationalistic and patriotic elements to rally fellow Malaysians to participate in rebuilding the economy and the nation while enduring Covid-19 crisis.”

2. Who is it for?

To be eligible to invest in Sukuk Prihatin, you have to either be a Malaysian aged at least 18; or a company incorporated in Malaysia; or a cooperative, foundation, sole proprietor, partnership, association or other incorporated bodies operating in Malaysia. A registered trustee can act on behalf of any of the previous three categories, but will not be able to enjoy tax exemptions related to the Sukuk Prihatin.

With Sukuk Prihatin having a short two-year tenure, it is stated to be suitable for investors who “wish to diversify their investment portfolio and are comfortable taking a short-term risk with a minimum return on investments”.

3. How do you apply?

This is Malaysia’s first-ever digital sukuk, which means investors can apply during the subscription period from August 18 to September 17 to invest in Sukuk Prihatin via internet or mobile banking through the JomPAY and DuitNow platforms, depending on the banks involved.

Since Sukuk Prihatin is being offered fully digitally, applications cannot be made over the counter or through the ATM with such applications to be rejected and refunded.

There are 27 participating banks for both corporate and retail investors, with some either offering JomPAY or DuitNow e-channels or both.

Specifically for retail investors, they can subscribe to the sukuk via the internet or mobile banking through their accounts at: Affin Bank, Agrobank, Alliance Bank, Al-Rajhi Bank, AmBank, Bank Islam, Bank Muamalat, CIMB, Hong Leong Bank, Maybank, MBSB, Public Bank, RHB, Bank Rakyat, Bank Simpanan Nasional, Bank of China (Malaysia) Berhad, Citibank, HSBC, ICBC Bank, OCBC Bank, Standard Chartered Bank, or United Overseas Bank (Malaysia) Berhad.

But applications to subscribe to Sukuk Prihatin will be reviewed to see if all requirements have been met, with applicants to be informed 14 days after the offering period on whether they were successful and with refunds of the money to be done within five days if an applicant is unsuccessful.

4. How much is the minimum and maximum investment amount?

You can apply more than once to invest in Sukuk Prihatin which is on a first-come-first-served basis.

But the condition is that you have to use the same bank account to apply, and with each application to be at least a minimum of RM500 and in multiples of RM100. There is no maximum limit for how much can be invested.

What this means is if you were to apply to invest RM610 in Sukuk Prihatin, RM10 will be refunded to your account within five business days as only multiples of RM100 are allowed.

If you then decide to make another application to invest RM400 or any other amount below RM500, that would not be possible and you will need to top it up to at least RM500 when applying to avoid your application being rejected.

Only applications made from the bank account for the first application will be accepted, while subsequent applications from other bank accounts from the same or different bank will be rejected and refunded.

Make sure you will not need the money that you invested in Sukuk Prihatin for two years, as investors are not allowed to redeem or take the money out before the sukuk’s maturity date and with all such investments required to be held until the end of the two-year period.

You can’t sell off your holding in Sukuk Prihatin or transfer or assign it, which means you have to hold the sukuk which you bought until its maturity date of September 22, 2022.

(With lots sizes of RM100 and a minimum RM500 amount, Sukuk Prihatin is different from the traditional sukuk where institutional investors would have to invest in standard lot sizes of RM5 million.)

5.  How much would you get in return for your investment?

At a fixed profit rate of 2 per cent per annum, putting in RM1,000 into Sukuk Prihatin will translate into a RM20 profit per year, which will then be paid to you in four tranches of RM5 for each quarter in a year.

At the same profit rate, putting in RM10,000 would mean a total profit of RM200 per year, which will then be divided into four to be paid to you in sums of RM50 for each quarter or every three months.

If the Sukuk Prihatin’s issue date is September 22, 2020, the first time you will receive your profit payment will be on December 22, 2020.

The government will continue to pay the profit payments to you every quarter until the end of the two-year period for Sukuk Prihatin (September 22, 2022), which will be also when you get your initial investment sum or principal back, unless you choose to donate either all or some of the principal to the government for spending related to Covid-19.

For example, if you decide to waive RM3,000 of your RM10,000 initial investment sum at the end of the two years, you will get RM7,000 back while the RM3,000 will go to a government-approved trust account.

The profit is tax-exempted but you will have to keep the monthly e-statement for Sukuk Prihatin for such purposes, while the waived or contributed amount will be tax-deductible.

You can choose whether to waive your principal when making the application, and can decide in the final quarter whether to change your decision or change the amount you wish to waive or contribute.

6. What will the funds be used for

According to the knowledge pack, the proceeds from Sukuk Prihatin will go to the Kumpulan Wang Covid-19 to fund measures announced in the government’s economic stimulus packages and recovery plan to address the Covid-19 crisis.

Examples of such measures include medical spending related to Covid-19, financing or grants for micro and small and medium enterprises especially women entrepreneurs, grants for research for infectious diseases, and improving connectivity to rural schools which will act as hubs to connect nearby villages, the government said.

But before actually deciding to invest in Sukuk Prihatin, the first thing you should do is to read the full knowledge pack and the terms and conditions, and preferably consult professional advisers to evaluate the merits and risks of the investment.