Ethiopia and IFC Sign Deal to Build the Country's First Mortgage Refinance Company.
A 100 billion Birr wholesale lender won't hand a single Ethiopian a mortgage directly, it exists to fix what's stopping banks from offering longer, cheaper home loans in the first place.
Prime Minister Abiy Ahmed said Tuesday he had overseen the signing of a Framework for Cooperation between the National Bank of Ethiopia and the International Finance Corporation to establish the country's first dedicated Mortgage Refinance Company, capitalized at 100 billion Birr, roughly $637 million.
IFC is committed to contributing at least $200 million of that capital, according to the Prime Minister's statement. The new institution is a wholesale lender, not a retail one: it won't issue mortgages to homebuyers directly. Instead it will buy mortgage loans off commercial banks' books, or lend against them as collateral, funded by issuing its own long-term bonds — the same second-tier model IFC has built in Kenya, Tanzania, Nigeria and Egypt.
That structure is meant to solve a specific problem: Ethiopian banks fund mortgages mostly from short-term deposits, which forces them to offer short loan terms and high rates. A refinance company lets banks offload that mismatch and extend longer, cheaper mortgages instead.
Abiy tied the deal to a target of 1.5 million affordable homes, the government has planned to deliver.