Ethiopia moves to establish $620m mortgage refinance company with IFC backing
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Ethiopia is establishing its first dedicated mortgage refinance company, capitalised at 100 billion birr (about $620 million), under a National Bank of Ethiopia and IFC cooperation framework aimed at unlocking long-term housing finance.
Ethiopian Prime Minister Abiy Ahmed oversaw the signing of a Framework for Cooperation between the National Bank of Ethiopia (NBE) and the International Finance Corporation (IFC) to establish the country's first dedicated Mortgage Refinance Company, capitalised at 100 billion birr, about $620 million.
The IFC, the private-sector arm of the World Bank Group, is set to contribute a minimum of $200 million to the wholesale institution, Prime Minister Abiy said in a statement after the signing in Addis Ababa on September 3. The company is designed to address a structural mismatch between the short-term deposits banks rely on for funding and the long-term capital that mortgage lending requires.
By acting as a wholesale intermediary, the refinancing company would allow banks to pledge eligible mortgage assets in exchange for longer-term liquidity, freeing up balance-sheet capacity to issue new housing loans instead of holding existing ones to maturity.
The prime minister linked the initiative to the government's goal of delivering 1.5 million affordable and dignified homes for Ethiopian families, while expanding private-sector participation in the financial system.
Ethiopia's mortgage market remains small and heavily concentrated, with the Centre for Affordable Housing Finance in Africa estimating outstanding mortgage loans at about 24.1 billion birr and the Commercial Bank of Ethiopia holding roughly 69 percent of that portfolio, Businessfront reported. Commercial lending rates have stayed high since the central bank allowed lenders to set their own rates, meaning the cost of mortgages will determine whether expanded liquidity translates into wider home ownership.
The structure and terms of the IFC contribution have not been disclosed, and the institution is expected to take shape as the framework is implemented in coming months.