Jeddah/Riyadh, January 30, 2007—Lars
Thunell, Executive Vice President and CEO of IFC, a member of the World
Bank Group, has reaffirmed IFC’s commitment to helping expand housing
finance in Saudi Arabia. He signed today a memorandum of understanding
with three of the country’s leading savings institutions—the Public Investment
Fund, the General Organization for Social Investment, and the Public Pension
Agency—as a first step to establishing a housing finance facility.
šAccess to housing finance remains limited
in the Middle East and North Africa. IFC will continue to work with partners
in Saudi Arabia to improve the market. We are also helping our partners
transfer expertise to markets across the region,” Thunell remarked,
during his first visit to Saudi Arabia since joining IFC in 2006.
The facility to be formed by IFC and local
public agencies will provide long-term funding to banks and housing finance
institutions to help them provide affordable financing to lower- and middle-income
people. It will mobilize local currency funding and help create a
vibrant local capital market.
Developing the housing finance market is
a key priority for IFC, which not only provides funding but also offers
global expertise, experience in structuring transactions, and a wide range
of partners. IFC’s approach to market development helps build institutions,
expand investment, and strengthen the regulatory and legal environment
for business. IFC has helped develop housing finance markets in Africa,
Asia, and Latin America as well as the Middle East.
There is strong demand for housing in Saudi
Arabia: this is why IFC chose the country for this joint venture. The country
has one of the fastest-growing populations in the region, with 56 percent
of its people under age 25. To help, IFC worked with the World Bank
to prepare an assessment of Saudi Arabia’s housing sector. IFC also partnered
with Euromoney to organize a housing finance conference, helping raise
awareness of the market’s needs and mobilize the private and public sectors
IFC’s housing finance transactions in the
country include an investment of $27 million alongside three leading Saudi
companies to launch the Saudi Home Loans Company, which offers affordable,
Sharia-compliant financing to middle- and lower-income borrowers. IFC
also arranged for India’s Housing Development Finance Corporation to train
the Saudi Home Loans Company in credit risk management, operations, and
management information systems. IFC provided $25 million in credit
enhancements for a mezzanine tranche issued by Kingdom Installment Company,
in the first residential mortgage-backed securitization based on Islamic
finance in the Gulf Cooperation Council countries. In another Islamic
finance deal, IFC provided a long-term Murabaha facility of $50 million
to help Saudi British Bank expand its housing finance portfolio.
Thunell’s visit highlights IFC’s continuing
commitment to its well-established partnership with Saudi Arabia, as well
as the recognition of the country’s reforms toward developing the private
sector. Saudi Arabia has one of the most active private sectors in
the Middle East and North Africa. In FY07, more than 25 percent of
IFC’s total commitments in the region were with Saudi businesses that
are expanding in the region. IFC has established a presence in Saudi
Arabia and will continue to expand. So far, IFC has committed more than
500 million riyals ($130 million) in key sectors, including housing, insurance,
Thunell’s agenda includes meetings with government
officials and discussions with representatives from the private sector.
He will also sign a public-private partnership agreement with the General
Authority of Civil Aviation to work closely with the government in developing
three “airport cities” in the country.
IFC, a member of the World Bank Group, fosters
sustainable economic growth in developing countries by financing private
sector investment, mobilizing private capital in local and international
financial markets, and providing advisory and risk mitigation services
to businesses and governments. IFC’s vision is that poor people have the
opportunity to escape poverty and improve their lives. In FY07, IFC committed
$8.2 billion and mobilized an additional $3.9 billion through syndications
and structured finance for 299 investments in 69 developing countries.
IFC also provided advisory services in 97 countries. For more information,
About Saudi Arabian Partners in the New
The Public Investment Fund was established
by a royal decree to finance investments in productive projects of a commercial
nature, in both the public and private sectors. Its funding is handled
through loans or guarantees, and in special cases, through allocations
of public funds to specific projects.
The General Organization for Social Investment
is a government arm that administers Saudi Arabia’s social insurance scheme
for workers. It provides pensions for retired nationals and benefits under
the occupational hazards scheme. GOSI is supported by payroll contributions
from local and expatriate workers in Saudi Arabia.
Saudi Arabia’s Public Pension Agency, established
in 1958, is responsible for implementing the government’s pension policies.
It receives and manages pension contributions and makes monthly benefit
payments to government retirees.