The African Development Bank Group’s (AfDB) approved a Partial Credit Guarantee (PCG) of up to USD4m to Tanzania Mortgage Refinance Company (TMRC), on May 5th 2016.
The credit guarantee is aimed at supporting TMRC’s plan to raise long-term funding from the bond markets on the Dar es Salaam Stock Exchange (DSE).
The PCG will allow TMRC’s bond to meet minimum requirements for listing on the DSE.
TMRC will use the capital raised for on-lending to local banks for mortgage finance operations, thereby mobilize critical long-term funding required for the growth of Tanzania’s housing finance markets, and catalyzing the construction of affordable housing.
The intervention of AfDB will also have multiplier effects on industries related to the real estate sector and creation of jobs in the construction industry, the Bank explains.
It will also assist in developing the Tanzanian capital markets by increasing the number of listed corporate bonds in the local bond market as well as match assets and liabilities of the institution.
Stella Kilonzo, Division Chief, Financial Markets Division, of AfDB stated, “By extending this partial credit guarantee, the Bank adds on its existing initiatives to support the development of local currency financial markets on the continent and the private sector.”
Aming its priority objectives, the AfDB supports investments that contribute to the widening and deepening of financial markets in Africa, and enabling the private sector capacity to mobilize long-term funding from local financial markets.
The AfDB approved a concessional resource assistance package for Tanzania worth over USD1.1bn in 2016, for the 5 years period 2016-2020.
The package will support the country to achieve inclusive growth and macroeconomic stability through more effective public financial management (PFM) and conducive business environment.
TMRC is a financial institution co-founded by the Tanzanian Government and the World Bank to support mortgage lending in the country.
The majority of working class Tanzanians lack access to housing finance due to the absence of mortgages in the market, Oscar Mgaya, CEO of TMRC explains.
TMRC has the objective of supporting financial institutions to do mortgage lending by refinancing Primary Mortgage Lenders’ (PMLs’) mortgage portfolios.
TMRC refinances mortgage loan portfolios rather than individuals mortgage loans, and caters to banks rather than individual borrowers.