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State-owned PT Sarana Multigriya Finansial on Wednesday offered Rp 360 billion ($38.52 million) of residential mortgage-backed securities on the Indonesia Stock Exchange.

The company said the issue was fully absorbed by the market, with buyers that included pension funds, banks and even retail investors.

A residential mortgage-backed security, or RMBS, is a bond-like fixed-income instrument backed by mortgages on residential property. The cash flow is derived from interest payments made by the holders of the mortgages.

Subprime mortgage loans packaged as securities have been cited by some economists as the trigger of the global financial crisis. However, Wednesday’s issue was backed by high-quality mortgages issued by PT Bank Tabungan Negara, the country largest home lender, and sold to Sarana Multigriya Finansial, known as SMF.

The securities offered an interest rate of 11 percent.

Investors shunned SMF’s first issue of Rp 100 billion of the securities in February after the outbreak of the financial crisis.

SMF president director Erica Soereto said investors’ understanding of the securities had improved since the first issue and they had now come to see RMBS as relatively secure and offering attractive rates. “We are seeing a growing appetite for the products,” Erica said.

Sutomo, a director of SMF, said the company is planning to provide more access to RMBS for retail investors. “We will offer public education for investors to get to know the products better,” Sutomo said.

“The minimum investment in RMBS is only Rp 5 million, which is the same amount when investing in government retail bonds. So we also see potential demand for retail [RMBS].”

Sutomo said more banks are expected to securitize their mortgages as interest in the products grows.

He said several banks, including PT CIMB Niaga, the country’s second-largest mortgage lender, had already discussed a plan to securitize its mortgages, but added that it would probably not be implemented soon.

BTN president director Iqbal Latanro said his bank is planning to securitize at least another Rp 500 billion of its mortgages next year. He added that securitizing mortgages would give the bank access to capital and enable it to boost mortgage lending.

“If the RMBS market becomes more established and liquid, there is a possibility that BTN will rely on fee-based income [from the RMBS] as its main revenue generator” rather than interest income from bank lending,” Iqbal said.