KUALA LUMPUR: Khazanah Nasional Bhd, via Ihsan Sukuk Bhd, will issue the first tranche of its inaugural sustainable and responsible investment (SRI) sukuk of RM1 billion — at RM100 million — this year.

Proceeds from the maiden issuance of the SRI sukuk will be channelled to Khazanah’s non-profit foundation Yayasan Amir to manage its cash flow for the deployment of the Trust School Programme (TSP) for schools identified this year. Ihsan Sukuk is a Malaysian-incorporated independent special purpose vehicle of Khazanah.

“The first issuance will be at RM100 million, to roll out 20 schools in 2015. God willing, we will do an annual issuance of the sukuk in the coming years,” Khazanah executive director and chief financial officer Mohd Izani Ghani told a press briefing after the launch of the SRI sukuk here. He said the coupon rate of the SRI sukuk is estimated at 4.3%, which will be finalised soon.

According to Mohd Izani, a “diverse” group of some 50 investors, comprising financial institutions, foundations and asset management firms, have indicated their interest to participate in the SRI sukuk. But he declined to reveal who the interested parties are.

Meanwhile, Deputy Prime Minister and Education Minister Tan Sri Muhyiddin Yassin, who launched the SRI sukuk, has called upon Malaysian corporates to support the Islamic bond programme, which will enable the smooth roll-out of the 20 schools. “This sukuk presents a new method for funding for the purpose of education and a means for investors to fulfil their corporate responsibility,” he said.

Khazanah said the social impact of this “pay for success” structure is measured using a set of predetermined key performance indicators (KPIs), which will be measured over a five-year period. It said if the KPIs are met at maturity, sukuk holders will forego a pre-agreed percentage of the nominal amount due under the SRI sukuk as part of their social obligation in recognising the positive social impact generated by the TSP.

On the other hand, if the KPIs are not met, the sukuk holders will be entitled to the nominal amount due under the SRI sukuk in full.

The SRI sukuk has been assigned a preliminary rating of AAA(s) by RAM Rating Services Bhd.

This article first appeared in The Edge Financial Daily, on May 19, 2015.