ADB grants $6.6m for Aceh

ADB grants $6.6m for Aceh

The Jakarta Post, Jakarta

The Asian Development Bank (ADB) and the Indonesian government
signed three grant agreements on Wednesday totaling US$6 million
to help improve livelihoods, rehabilitate natural resources and
provide earthquake-resistant housing in the tsunami-affected
province of Aceh.

Also signed was a $600,000 technical assistance grant to
support the initial operation of Indonesia's newly established
secondary mortgage facility agency, PT Sarana Multigriya
Finansial (SMF).

The agreements were signed by ADB Country Director Edgar A.
Cua and the Ministry of Finance's Director General of the
Treasury, Mulia P. Nasution. Present at the event was SMF
president director Erica Soeroto.

Cua explained that the grants for Aceh would consist of a $2.5
million grant to help develop sustainable livelihoods in 20
coastal communities in Aceh Besar and Aceh Utara regencies by
providing fishing boats and post-harvest facilities for small-
scale fishermen and farmers.

Another $1.5 million grant would further support the
communities by rehabilitating 30 hectares of coral reefs and 300
hectares of mangrove forest, both of which locals had relied on
for food, construction materials and coastal protection.

Lastly, a $2 million grant would be used to develop prototypes
of earthquake-resistant housing, build 300 such units in 16
tsunami-affected areas, and provide a purchase loan scheme, Cua
said. It is estimated that 115,000 new houses are needed after
the tsunami destroyed about $1.4 billion worth of residential
property.

The projects to be supported by the three grants, which are
part of the ADB's $290 million Asian Tsunami Fund, will be
carried out over a period of two years, with the money coming
from the Bank's Japan Fund for Poverty Reduction (JFPR).

Meanwhile, regarding the $600,000 in technical assistance
grants for SMF, Cua said that the money would be used to develop
the agency's operating guidelines, standardize its documentation,
and support its formulation of secondary mortgage facility
proposals.

The funds are derived from the ADB's Japan Special Fund and
will be implemented over the next six months.

SMF was established in July to provide a market-driven
approach in financing the development of low-cost housing, while
also providing affordable mortgage loans for the purchase of low-
cost housing.

Under the scheme, SMF will purchase qualified mortgages from
financial institutions with proceeds of bond sales backed by
these assets.

However, since a sufficient quantity of qualifying mortgages may
not yet be available, SMF will for the first three years firstly
lend to the financial institutions, which will on-lend for
qualifying mortgages. These loans will help financial
institutions build qualified mortgage portfolios for later
purchase by SMF, as well as track records.

Erica said that the target market for these mortgaged-backed
securities would be long-term investors, such as insurance firms
and pension fund managers.

The government has invested initial equity of Rp 1 trillion
(some $100 million) in the SMF, which will eventually be replaced
by equity from the private sector up to a third of the total
equity.