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World Bank approves new financing to support affordable housing in Indonesia

March 20, 2017

WASHINGTON, March 20, 2017— The World Bank’s Board of Executive Directors has approved $450 million in financing to support the Government of Indonesia’s efforts to expand access to affordable housing for low-income families.

Part of the financing will support the government’s Mortgage-Linked Down Payment Assistance (BP2BT) scheme, which targets low-income, first-time homeowners. The scheme provides down payment assistance to match beneficiary savings and a market-rate mortgage from a participating lending institution. Additionally, the financing will also support the scaling up of the Home Improvement Assistance Program (BSPS), which targets the bottom 40 percent of the Indonesian families.

“Indonesia is taking a major step forward through this program towards ensuring that low income households have access to an adequate, safe and affordable home. Providing Indonesian families with access to affordable housing is essential to increasing shared prosperity and reducing poverty in the country. Improved housing has further been proven to have a positive impact on public health, education and labor force outcomes”,” said Rodrigo Chaves, World Bank Country Director for Indonesia.

Indonesia faces substantial demand for affordable housing, with one million new units needed annually. Around 20 percent of the 64.1 million housing units are in poor condition. Approximately 22 percent of Indonesia’s urban population, or around 29 million people, live in slums.  

The financing will also support the government to advance policy and institutional reforms which aim to strengthen the fundamentals of the housing market. The program will be implemented through the Ministry of Public Works and Housing with a focus on addressing housing shortages and poor quality housing stock in rapidly growing urban areas.     

As more people move and work in urban areas, it will be critical to support inclusive and well-planned urbanization and increase the supply of adequate housing in well-serviced and connected neighborhoods to improve living standards,” said Taimur Samad, World Bank Program Leader

The government of Australia’s Department of Foreign Affairs and Trade (DFAT), provided the financing for preparation of the loan, through the Indonesia Infrastructure Support Trust Fund (INIS).

The World Bank’s support to housing finance in Indonesia is a key component of the World Bank Group’s Country Partnership Framework for Indonesia, which focuses on government priorities that have transformational impact. The government of Indonesia has made reducing the housing backlog a top priority in in its medium-term development plan. 

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