WASHINGTON D.C./CAIRO, January 26 2004—The
International Finance Corporation, the private sector arm of the World
Bank Group, signed a $1.6 million agreement in Cairo today for a 20 percent
equity stake in the Egyptian Housing Finance Company (EHFC), helping establish
Egypt’s first private company in this sector.
Egypt has strong pent-up demand for long term housing loans, which are
relatively small and are now provided by only a few public sector banks.
Most Egyptians buying (non subsidized) housing units currently face the
choice of either paying the whole amount up front or paying short-term
installments to property developers at high interest rates. With IFC’s
investment, EHFC will tackle the scarcity of long-term loans for potential
homeowners, acting as a pioneer for mortgage financing. Homes will be better
quality, more readily available and affordable for Egypt’s burgeoning
middle class in particular.
EHFC is expected to play a catalytic role in developing a housing finance
industry that will indirectly bolster economic growth and job creation
in Egypt. The “real” economy will get a sustained lift from higher output
and jobs growth in the construction sector and other downstream industries,
while financial markets will deepen as more savings held by local and expatriate
Egyptians pass into the formal economy.
Sami Haddad, IFC director for Middle East and North Africa, noted that
“IFC’s investment in EHFC demonstrates our commitment to supporting the
deepening of Egypt’s financial markets through technical assistance and
institution building, while, at the same time, creating an outlet of affordable
long-term housing finance will enable a vast number of Egyptians to obtain
a higher standard of living.”
Total capitalization of EHFC amounts to $8.1 million (EGP50 million), with
the Egyptian American Bank, the anchor investor in EHFC, holding a 40 percent
equity stake. Other shareholders in EHFC include 20 percent held by Deutsche
Investitions-und Entwicklungsgesellschaft (DEG), a member of the German
KfW group and one of the largest European institutions for long-term project
and company financing; Housing Development Finance Corporation (10 percent),
one of India’s premier financial companies and the dominant force in the
Indian mortgage market; and Bank of Alexandria (10 percent), Egypt’s state-owned
Drawing on the technical expertise and other strengths of its stakeholders,
EHFC will enhance competition in the housing finance sector and introduce
a model of “best practices” for future entrants into the field.
The mission of IFC (www.ifc.org)
is to promote sustainable private sector investment in developing countries,
helping to reduce poverty and improve people’s lives. IFC finances private
sector investments in the developing world, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY03, IFC has committed more than $37
billion of its own funds and arranged $22 billion in syndications for 2,990
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY03 was $16.8 billion for its own account and $6.6 billion held
for participants in loan syndications.