There are several reasons why the number of corporate bond sales in Indonesia is still low compared to other Asian countries (even though we do detect a rising trend in Indonesia from year to year). Anup Kumar, senior fixed income analyst at Maybank Indonesia, said the number of corporate bonds sales in Indonesia is on the rise this year, but total outstanding bonds in Indonesia is considerably lower than in other Asian nations. What explains this situation?

Firstly, in Indonesia it is a more complicated process to issue bonds than it is to obtain a loan from a bank.

Secondly, for the company there is no major difference in terms of costs when comparing the issuance of a corporate bond to a bank loan. With a relatively insignificant difference in costs, the company will therefore opt for the easier way, that is a bank loan.

Thirdly, not all companies can issue bonds. Only those companies that have obtained an investment grade rating are able to sell bonds. However, in Indonesia there is a limited amount of these companies.

Fourth, in Indonesia, many companies lack the knowledge of processing and issuing bonds, or even lack the understanding of accessing the capital market. Lack of education from regulators is cited as a contributing factor to this matter.

Fifth, not all companies are willing to fulfill the obligation to disclose company information to the public as a requirement to raise public investor funds.

All in all, it makes Indonesian companies prefer to opt for bank loans when seeking funding for business expansion rather than selling corporate bonds. However, Kumar added that he is unsure whether the number of corporate bond sales in Indonesia is actually lower than other countries. What is certain, though, is that in terms of value Indonesian corporate bonds are lower compared to regional peers. The main difference is that Indonesian corporate bonds have a much smaller face value, while foreign companies abroad tend to set high face values.