KUALA LUMPUR -- Shariah-compliant sukuk is another great option to finance green technology investments in renewable energy and other environmental assets, said Energy, Green Technology and Water (KeTTHA) Minister, Datuk Seri Maximus Johnity Ongkili.
He said the green technology industry would be further enhanced if the project financing were based on 'green sukuk'.
"Green sukuk, with roughly four per cent minimum return, is a cheap option that the players should consider, besides applying the Green Technology Financing Scheme (GTFS) for financing,” he said at press conference on the sidelines of the 8th International Greentech and Eco Products Exhibition and Conference Malaysia (IGEM 2017) here today.
Besides the popular solar energy sector which gives fairly stable income proceeds, Ongkili said Malaysia was expected to issue more green sukuk to finance environmental-friendly infrastructure projects in other areas such as mobility and waste including biomass and biogas.
The minister said the issuance of two green sukuk recently was a significant milestone in product innovation that strengthens Malaysia's position as a leading lslamic finance marketplace as well as its value proposition as a centre for sustainable finance.
Tadau Energy Sdn Bhd and Quantum Solar Park Semenanjung Sdn Bhd became the first and second entities in the world to issue green sukuk worth RM250 million and RM1 billion, respectively, through a framework that had been certified by the Centre for International Climate and Environmental Research in Oslo, Norway.
Sukuk is an Islamic bond that can generate returns to investors without contravening Islamic Shariah law, which prohibits interest. A sukuk sells a certificate, with proceeds used to purchase an asset that is mutually owned by both buyer and seller.
Meanwhile, KeTTHA Secretary-General, Datuk Seri Ir Dr Zaini Ujang, said sukuk could drive green technology because the industry framework of the industry in the country is well developed.
" The business community now have trust in our framework.
"Bankers and investors know exactly how much they can expect and what kind of equity stake they want to participate in green investment in this country. It’s very clear," he told Bernama.
On GTFS, Zaini said the local green industry needed up to RM1.7 billion funding next year.
"We hope that in Budget 2018, there will be a mention on GTFS. We have indicated our interest, that the industry requires about RM5 billion over five years, starting from next year,” he said.
The GTFS scheme which was introduced in 2010 with a funding of RM3.5 billion and originally scheduled to end in December 2017, offers a 60 per cent guarantee of the financing amount and a rebate of two per cent (by the government) on the interest/profit rate charged by the financial institutions, to accelerate the expansion of green investments.