Jakarta: Indonesia raised 8 trillion rupiah (Dh3.114 billion) from its first sale of Islamic bonds to individual investors on Sunday, almost three times more than originally planned.

The notes maturing in February 2013 will pay a return of 8.7 per cent, Rahmat Waluyanto, director general of debt management at the finance ministry, said yesterday in Jakarta. Investors bid for 8.75 trillion rupiah of the 3 trillion rupiah notes on offer, he said. Similar maturity government notes due in March 2013 yielded 8.05 per cent, according to midday prices from the Inter Dealer Market Association.

Indonesia, the world's most populous Muslim nation, is tapping individual investors after it was forced to scale back an overseas debt sale as it seeks to fund its budget deficit. Sales of Islamic bonds may increase 24 per cent to $25 billion this year, led by Southeast Asia, as the region's expansion helps drag the world out of recession, CIMB Group Holdings Bhd., the leading arranger of such issuance, said last week.

"Demand is strong because the government is paying a bit of an extra yield from what you can get in the secondary market," said Suryandy Jahja, managing director at PT Kresna Graha Sekurindo in Jakarta.

Malaysia, Philippines and Japan also sold retail bonds last year to alleviate pressure on domestic debt supply. Retail bonds are usually offered in small amounts to make them affordable to the general public.

Indonesia has projected a budget deficit of 98 trillion rupiah this year, equivalent to about 1.6 per cent of gross domestic product. The shortfall was 87.2 trillion rupiah in 2009, according to the finance ministry.

The government in January raised 950 billion rupiah from the sales of Islamic bonds, less than the 1 trillion rupiah it sought. It also scaled back a sale of dollar-denominated bonds to $2 billion the same month, cancelling plans to sell 30-year debt.

Indonesia raised $650 million from its first-ever international sale of Islamic dollar bonds last April. The government may also sell $750 million of sukuk overseas in 2010, Dahlan Siamat, director of Islamic finance at the Debt Management Office, said in December.

Malaysia, which accounted for about half global sukuk sales in 2009, will continue to dominate Islamic debt offerings, followed by Indonesia, Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd., a unit of CIMB Holdings, said last Wednesday.