JOHANNESBURG, SOUTH AFRICA, April 3, 2000
—IFC has broken new ground in signing an agreement to take a 10 percent
shareholding in SA Home Loans, South Africa's first home loan securitization
company, recently established to refinance existing home mortgages at significantly
lower costs to home owners.
Home loan finance in South Africa has traditionally been the domain of
large retail banks. However, SA Home Loans is now purchasing existing home
loans which it then securitizes by packaging them into a discrete pool
of investment assets. Each pool is then credit rated and sold to investors,
such as pension funds, mutual funds, and insurance companies. By avoiding
the use of banks as intermediaries and using state-of-the-art software—which
SA Home Loans has developed in-house to keep loan processing costs to a
minimum—the company is able to offer significant interest savings to home
owners. At the same time, it will also offer returns over and above what
investors in the securitized asset pools would otherwise receive on equivalent
high quality classes of investments, such as SA Government Bonds.
The other shareholders are Peregrine Holdings of South Africa, International
Bank of Southern Africa (a joint venture of Dresdner Bank and Banque Nationale
de Paris) as well as executives of SA Home Loans. IFC's experience with
securitization in emerging markets is expected to make a valuable contribution
to the company.
Cesare Calari, IFC's Director for sub-Saharan Africa, said that the introduction
of securitized home mortgages is an important innovation for the South
African market. Home owners will benefit from cheaper financing and institutional
investors will profit from a new range of fixed income higher yielding
quality investments being offered. The company's operations will initially
service the higher income segment of the market but, as securitization
becomes established, it will make home ownership more affordable for all
segments of society.
The mission of IFC, part of the World Bank Group, is to promote private
sector investment in developing countries, which will reduce poverty and
improve people's lives. IFC finances private sector investments in the
developing world, mobilizes capital in the international financial markets,
and provides technical assistance and advice to governments and businesses.