Preferences of Green Sukuk In Environment Projects (Case Study In Indonesian Power Industry))
Maulana Prahaji (a*), Tika Arundina (b)

a) Faculty of Economics and Business, University of Indonesia, Gedung Dekanat FEB UI Kampus Widjojo Nitisastro, Jl. Prof. DR. Sumitro Djojohadikusumo, Kukusan, Kecamatan Beji, Kota Depok, Jawa Barat 16424, maulana.prahaji01[at]ui.ac.id

b) Faculty of Economics and Business, University of Indonesia, Gedung Dekanat FEB UI Kampus Widjojo Nitisastro, Jl. Prof. DR. Sumitro Djojohadikusumo, Kukusan, Kecamatan Beji, Kota Depok, Jawa Barat 16424, tikarundina[at]gmail.com

Abstract

Increasing interest in climate change adaptation requires countries to integrate financial instruments into more sustainable initiatives. The green sukuk, as one of the Islamic financial instruments used for this purpose, has not met expectations even though others continue to show exponential growth. Therefore, this study aims to analyze the factors causing the low issuance of green sukuk and simulate the green sukuk issuance scenario for project financing. It was achieved through a mixed-method methodology conducted with the participation of players in the Indonesian power industry. As a result, it was revealed that the most significant factors in deciding to issue green sukuk are issuance costs and incentives, which were not optimal. This study provides the simulations which impact decreasing issuance costs and increasing the available cash flow ratio for the coupon.

Keywords: green sukuk- Indonesian power industry- project financing- debt services coverage ratio- coupon

Topic: Management