Assessing the Feasibility of KPI-Linked Sukuk Issuance: A Regulatory Impact and Strategic Analysis in Indonesia
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KPI Linked Sukuk, sovereign sukuk, RIA, SOAR, Sustainable
Abstract
Research Originality - This study offers one of the first comprehensive assessments of KPI-linked sovereign sukuk as a performance-based climate financing instrument. Whereas prior literature predominantly focuses on sustainability-linked bonds or sukuk from corporate-level applications or conceptual and framework-based perspectives, this study examines the sovereign issuance context by assessing regulatory feasibility, cost–benefit considerations, and strategic preparedness. Employing Regulatory Impact Assessment (RIA) and SOAR analysis, the study advances the existing discourse beyond conventional use-of-proceeds financing toward a performance-based sovereign funding model that is closely aligned with Indonesia’s national climate objectives.
Research Objectives – This study aims to evaluate the regulatory, economic, and strategic feasibility of issuing KPI-linked sovereign sukuk in Indonesia, with particular emphasis on cost–benefit considerations and institutional readiness for implementation.
Research Methods - An exploratory qualitative approach is employed by integrating Regulatory Impact Assessment (RIA) and SOAR analysis to examine the regulatory, economic, and strategic dimensions of KPI-linked sovereign sukuk issuance, drawing on expert interviews, stakeholder consultations, as well as relevant regulatory and policy documents.
Empirical Result - The findings indicate that KPI-linked sovereign sukuk issuance is feasible, supported by positive cost–benefit outcomes and strong institutional and regulatory capacity as reflected in the strength–result strategic positioning.
Implications - KPI-linked sovereign sukuk offer a policy-relevant mechanism to enhance performance-based climate financing, provided that KPI design, regulatory readiness, and monitoring capacity are adequately strengthened.
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