Jakarta, Indonesia - January 23, 2025: Bank BRI (Bank Rakyat Indonesia) headquarters on Jenderal Sudirman Street in Jakarta, Indonesia.
This story is based on several articles originally published in KONTAN Indonesia from June 16–22, 2025.
THERE are many ways to contribute to developing sustainability in one’s economy. A practical approach is by lending to companies that run large-scale social empowerment programme. These companies act as “social bond” issuers and will carry out planned social programmes that address social challenges like affordable housing and healthcare.
PT Bank Rakyat Indonesia Tbk (BRI) published its social bonds on June 8, which were called the Sustainable Social Bond I Phase I 2025 for an amount of up to IDR5 trillion. It recorded an oversubscription of up to IDR6.57 trillion, or 1.31 times the initial target. With this issuance, BRI is noted as the first bank in Indonesia to issue a social bond.
The signing ceremony for the BRI Sustainable Socially-Responsible Bond Issuance Agreement Phase 1 Year 2025 was held at the BRI Head Office in Jakarta, Indonesia. It was attended by BRI president director Hery Gunardi, Treasury and International Banking director Farida Thamrin, operations director Hakim Putratama, as well as the board of directors of the Joint Lead Underwriters, and representatives of supporting institutions and agencies involved in the bond issuance.
The bond issuance was part of a larger Sustainable Social Bond I programme, which has a total fundraising target of IDR20 trillion. According to the bond’s prospectus, BRI has outlined a number of intended uses for the funds.
For one, the net proceeds (minus the issuance costs) from this public offering will be used to finance social projects focused on affordable infrastructure services, affordable housing, food security and sustainable food systems, as well as social and economic empowerment and development.
At least 50% of the funds raised through this public offering will be allocated for job creation and unemployment reduction programmes, including financing for small and medium-sized enterprises (SMEs) and microfinance.
This socially-oriented bond from BRI was issued in three series:
> Series A: A two-year tenure, at 6.45% fixed interest rate per annum
> Series B: A three-year tenure, at 6.55% fixed interest rate per annum
> Series C: A five-year tenure, at 6.60% fixed interest rate per annum
The benefits of these bonds appear to be more attractive compared to fixed deposit interest rates. The highest deposit rate guaranteed by the Indonesian Deposit Insurance Corporation is 4% for commercial banks and 6.5% for rural banks. These bonds also offer more attractive coupon rates than BRI’s Sustainable Green Bond I Phase III, which ranged between 6.15% and 6.25%.
The issuance of the BRI Social Bond was carried out through a sustainable public offering scheme using the book-building method, and involved a number of leading joint lead underwriters, namely PT BRI Danareksa Sekuritas, PT Trimegah Sekuritas Indonesia Tbk, PT Mandiri Sekuritas, PT DBS Vickers Sekuritas Indonesia, PT Indo Premier Sekuritas and PT Bahana Sekuritas. Investors will receive bond interest payments every three months, starting from the issuance date. The first interest payment date is set to be on Sept 26.
Credit rating agency Pefindo has assigned an idAAA rating to this bond. This rating reflects Bank BRI’s strengths in the financial sector, such as strong government support, solid capital backed by high retained earnings and a robust liquidity profile.
Bank BRI’s asset quality is expected to remain moderate even under the assumption of a non-performing loan (NPL) ratio between 2.8% and 3.3% over the medium term. Its NPL ratio could increase to 2.8% if it is affected by the large-scale write-off of microcredit loans amounting to IDR4.35 trillion. Efforts to improve Bank BRI’s asset quality may be hampered by the limited repayment capacity of micro-debtors, who remain vulnerable to macroeconomic conditions.
Trimegah Sekuritas Retail and Partnership Fixed Income Market head Legazea Syifa said that the environmental or social investing feature is a strength of this type of bond. “Today, people are already aware of the purpose behind their investments. They not only seek returns, but also impact,” said Legazea.
This aspect of generating positive environmental and social outcomes makes investors feel more comfortable investing. As for coupon rates, the ranges are usually not far off from those of standard corporate bonds, as they follow prevailing interest rates in the bond market.
Investing in bonds is also relatively safer compared to buying shares in companies with social action programmes, since share prices tend to be more volatile and therefore pose a higher risk. However, investing in bonds still carries its own risks. For this reason, Legazea advises prospective investors to review the issuer’s track record before purchasing the bonds. One should also assess the company’s financial condition and business outlook.
“What’s also important is monitoring the use of funds—whether they are being used in line with the original objectives stated in the prospectus,” she said.
In BRI’s Social Finance Framework, which was published back in May, several programme initiatives have already been outlined. For example, in expanding access to affordable infrastructure, BRI will support development of access to clean water, drainage systems, sanitation, transport and energy.
To reduce unemployment and create jobs, BRI provides financing and promotional support for micro, small and medium enterprises (MSMEs), particularly those with environmentally friendly businesses. The benefits of investing in social bonds can also be reaped by large institutions seeking to build portfolios that adhere to environmental, social and governance principles—or ESG.
Sinarmas Sekuritas head of Fixed Income Aryo Perbongso stated that such investments demonstrate that investment managers or institutions are prepared to meet the ESG-based investment transition that has already been implemented overseas. This allows investment managers or companies to more easily convince foreign investors to invest with them, as they already have portfolios that meet ESG criteria. “For instance, if at some point Indonesia starts to implement investment regulations requiring adherence to ESG principles, such investors would have the advantage of transitioning more quickly than others,” he said.
Meanwhile, the appeal of a bond’s coupon will depend on its rating and issuer. Historically, if the bond issuer is from the banking sector with an AAA rating, the coupons typically range from 5.75% to 6.85%.
