Washington, D.C., March 16, 2006—More
than 100 countries have significant problems with access to housing finance,
leaving many poor and even middle-income families without adequate housing
or hope of becoming homeowners. At the same time, population growth is
driving up demand for housing and housing finance. Research and experience
show that the private sector can play a vital role in tackling housing
finance issues in the developing world.
This was the theme of a global conference, Housing Finance in Emerging
Markets, organized by the World Bank and the International Finance Corporation.
The conference addressed the real value of home ownership and many of the
challenges facing financial policymakers and practitioners, especially,
the critical need to develop strong housing finance markets that are sustainable,
less prone to risk, and more accessible to lower- and middle- income families.
The International Finance Corporation, the private sector arm of the World
Bank Group, has worked with companies in emerging markets to increase access
to housing finance and provide affordable housing.
In Latin America, access to housing finance remains relatively underdeveloped
and, except for Chile where the mortgage debt as a percentage of GDP is
about 16 percent, no other country crosses the 13 percent level.
IFC is complementing the reforms put in place by governments in Latin America
and has implemented a step-by-step program to develop the primary and secondary
mortgage markets in Mexico. In 2005, IFC provided a local currency loan
of 553 million pesos (equivalent to $50 million) to Mexican mortgage-lender,
Hipotecaria Su Casita, S.V., to help the company finance mortgage loans
to lower- and middle-income groups.
According to Manuel Campos, vice president, Hipotecaria Su Casita, “The
Mexican housing market has been growing significantly for the past five
years as a result of basic reforms that were introduced more than 14 years
ago. We have been very fortunate as a sector because economic stability
has allowed us to grow significantly. To give you an example, in 1995 we
originated 450 loans; last year we originated 20,000.”
Mr. Campos adds, “We’ve been able to help create a market that every
day allows for more people to have a home in Mexico. When we entered the
market 10 years ago, having a mortgage was like having a Rolex: it was
very exclusive. Now, we are in the Swatch business: everybody can have
a home. And that’s what we are very proud of.”
Titularizadora Colombiana, Colombia’s first secondary mortgage company,
has also seen a huge growth in the mortgage industry. Says President, Alberto
Gutiérrez, “Titularizadora was created in Colombia five years ago, and
we have securitized about one-third of our total mortgage loans. We have
provided funding of about $2 billion to the mortgage sector. The other
important impact is that the mortgage rates – the rates of the loans –
have come down by about 400 basis points, which is an important benefit.”
In 2001, IFC helped create Titularizadora
Colombiana to acquire and securitize residential mortgage loans with equity
of $40 million and a local currency guarantee facility of $100 million.
In 2002, IFC invested $2.2 million in a local currency credit enhancement
facility to support the company’s first mortgage-backed securities issue.
Meanwhile, the World Bank continues to work closely with developing country
governments to create the necessary legal and regulatory frameworks, notes
Loic Chiquier, the World Bank’s lead financial officer. “We are
putting systems in place by which lenders can manage their risks and mobilize
funding. This may require laws to mobilize capital market resources or
what we call the development of secondary mortgage markets to establish
all the conditions necessary for a legal regime, a regulatory regime, and
a tax regime to have a sustainable and comprehensive housing finance system
in place,” Mr. Chiquier says.
A sound housing finance system has broad benefits for a country, its people,
and its economy. According to Kenroy Dowers, principal financial specialist,
IFC, “Without a doubt there are specific economic benefits that accrue
from investing in housing finance systems. We know it's linked to construction.
We know it's linked to employment.”
Mr. Dowers adds, “I grew up in Trinidad and Tobago. I recognize what the
acquisition of a house means – what it meant to my parents. Seeing for
myself the importance of home ownership is what drives me. When I see the
smile on our clients’ faces – and on their clients’ faces – I see the
real value of home ownership.”
The International Finance Corporation
the private sector arm of the World Bank Group, promotes sustainable private
sector investment in developing and transition countries, helping to reduce
poverty and improve people’s lives. IFC finances private sector investments,
mobilizes capital in the international financial markets, helps clients
improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. Its 178 member countries
provide its share capital and collectively determine its policies. From
its founding in 1956 through FY05, IFC has committed more than $49 billion
of its own funds and arranged $24 billion in syndications for 3,319 companies
in 140 developing countries. IFC’s worldwide committed portfolio as of
FY05 was $19.3 billion for its own account and $5.3 billion held for participants
in loan syndications.