The World Bank’s Board of Executive Directors has approved a loan in the amount of $ 37.1 million in support of a Mortgage Finance Project.
The Government of Egypt (GOE) is pursuing a major agenda for macroeconomic and structural reform and modernization of the financial sector, including restructuring public sector banks, increasing the share of the private sector in the banking sector, reforming the insurance sector, developing a new system of mortgage finance for a more sustainable housing finance market, and strengthening regulatory capacity and financial supervision apparatus. The World Bank approved on June 15 a Development Policy Loan for the Financial Sector. The Mortgage Finance Project will help to lay a firm foundation in the banking sector for mortgage finance.
For most Egyptian households, access to affordable housing and home ownership is greatly constrained by an undeveloped housing finance system. The banking sector has offered very little formal housing finance to households. For borrowers, secure or favorable conditions are scarce in the mortgage finance market, and housing affordability is not improved because loan maturities are too short.
To address these constraints, the GOE is developing an enabling environment for a modern residential mortgage market that will enable most of the burden of housing finance to be shifted away from the government budget and onto the financial markets and the private sector. Reforms envisaged include the policies, institutions and systems necessary to facilitate the emergence of an efficient, low risk residential mortgage finance system in which mortgage lenders compete on a market basis to make housing finance available to Egyptian households on economically attractive terms and conditions.
The project’s development objective is for primary lenders in the financial market to provide longer-term, market-based mortgage loan financing for residential housing. By supporting the development of the Egyptian Company for Mortgage Refinancing (ECMR) into a well-functioning, financially sustainable, market-based institution, the project will further strengthen the regulatory and institutional framework for the mortgage market; and alleviate existing constraints hindering reliable, easy and quick registration and transfer of property titles and mortgage liens by homeowners and mortgage lenders, particularly in the new urban communities.
“This project will contribute to the development of a more competitive and efficient financial sector. The Country Assistance Strategy for Egypt highlights the Bank’s support to develop new financial sector activities including an active residential mortgage market that will support the development of a more efficient and responsive financial sector,” stated Emmanuel Mbi, Country Director for Egypt, Yemen and Djibouti. “By improving access to longer-term housing finance and improving the affordability of housing, the project will contribute to social equity,” he further added.