SMF is a secondary mortgage company established in 2005 to support the government program to provide affordable housing for Indonesian families. Mortgages are a long term lending product that requires long term funds and needs to be affordable and sustainable to match with the needs of borrowers. The government plan is to take long term funds from the capital market and use it for property lending which is undertaken mainly by banks for 99% of the market and around 1% by property developers.

Our vision is to support the government program to assist every Indonesian family in getting decent and affordable housing as well as promote the development of the secondary mortgage market. Therefore we have two main tasks; securitisation and providing financing to mortgage lenders.

The mortgage to GDP ratio is now only 2.7% which is very low compared to our neighbour Malaysia which has a ratio around 20 to 25%. As a secondary mortgage company we are supporting the growth of mortgage lending and this ratio must be increased given that the demand is very high in Indonesia. There is an issue of supply as the backlog for housing in 2010 was 13.6 million units and our estimate at the end of 2012 was 15 million units given the population growth. This means 1.5 million units would need to be built every year to clear this backlog.

In terms of mortgage securitisation and financing, our KPI is how much money we are able to obtain from the capital market and channel to the mortgage lenders and our growth in this regard has been very substantial. Over the last two to three years, we have enjoyed a period of significant growth due to our success with banks. Working with shariah banks in particular has proven to be very fruitful and we expect that this will continue to be the case, as their concept for lending requires a fixed rate which makes our lending model the most suitable for them. 

We always provide assistance to the banks that offer mortgages in the form of training and guidance for documentation in issuing a mortgage, and are particularly committed to supporting development banks. In the case of shariah banks, we work with them to form new agreements to securitise the mortgages after they have been issued.

We have regular investor gatherings, particularly for institutional investors. As we issue bonds on the capital market and mortgage backed securities, our products are mainly purchased by institutions such as pension funds and insurance companies such as Jamsostek. Our products are open to overseas investment however our source of financing is in Rupiah. We do have some international investors from countries such as Malaysia that purchase our bonds in small amounts and we are open to this type of cooperation.

In the past we have worked with organisations such as USAID and we are interested in further cooperation but it is important to recognise that our product is limited. At present, in securitisation we are only able to work with one bank, BTPN, but plan to extend to further banks in the near future. For financing we also face challenges brought about by the fact that banks are using deposit savings as it is cheaper than long term funds. However if they use long term funds there is greater value to be had.

I hope that foreign investors can participate in buying our bonds and new products that are suitable for investment funds, and look forward to building strong partnerships and working ties that accelerate the development of Indonesia’s mortgage sector.