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.