Star Activity Report
Tue Jul 5 2022 12:00 AM Last updated on: Tue Jul 5 2022 12:52 AM
About 80% of people in Bangladesh’s cities live in rented properties their whole lives, mainly due to a lack of mortgage finance, which accounts for 3% of the loan market in the country, below the average of 4.9 % in the south. Asia and 8.9% in emerging markets. Picture: star
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About 80% of people in Bangladesh’s cities live in rented properties their whole lives, mainly due to a lack of mortgage finance, which accounts for 3% of the loan market in the country, below the average of 4.9 % in the south. Asia and 8.9% in emerging markets. Picture: star
Thousands of low- and middle-income urban and rural families in Bangladesh, often underserved by commercial banks, should be able to take out affordable home loans thanks to the International Finance Corporation’s investment in the country’s first housing bond issued by Brac Bank.
The IFC will underwrite up to $50 million of Bangladeshi taka-denominated senior bonds, with a maturity of five years, by Brac Bank, to fund and expand the Bangladeshi lender’s affordable housing finance program , said the World Bank’s private sector lending arm. Group in a press release yesterday.
For all the latest news, follow the Daily Star’s Google News channel. This move is expected to create thousands of new jobs in construction and related industries.
It is estimated that around 80% of people in cities in Bangladesh live in rented properties all their lives, mainly due to a lack of mortgage financing. Home loans represent only 3% of the loan market in Bangladesh, below the average of 4.9% in South Asia and 8.9% in emerging markets.
Indeed, most financial institutions focus on housing finance for high-income people, while access to formal housing loans for low- and middle-income segments is very limited. This results in a surplus of high-end housing and a shortage of housing finance and housing units for low- and middle-income people.
“We, along with IFC, recognize that far too many low- and middle-income people simply cannot access the funds they need to buy a home. Now people in semi-urban areas can also achieve their dream to own a home with our affordable mortgage facilities,” Selim RF Hussain, Managing Director of Brac Bank, said in the press release.
As a bond investor, the IFC will help deepen the country’s long-term bond market which remains underdeveloped, according to the press release.
The investment was supported by the Joint Capital Markets Program (J-CAP), a World Bank Group initiative to develop debt capital markets. IFC’s upstream work with J-CAP’s efforts was to support Brac Bank in the structuring and preparation of the bond in Bangladesh.
The investment is also supported by the International Development Association’s Private Sector Window Local Currency Facility through a currency exchange between US Dollar and BDT to facilitate local currency lending.
“This innovative agreement marks an important step in the development of the domestic long-term bond market and offers multiple benefits for Bangladesh, first and foremost helping to address the acute need of low and middle income people to obtain financing for a affordable housing,” said Allen Forlemu, regional industry director for IFC’s Financial Institutions Group for Asia and the Pacific.
“This is also the first time that a foreign investor has considered investing in an onshore local currency bond that will be issued by a local private institution to finance housing. This then demonstrates the opportunities for new foreign and local investors to d ‘invest in such thematic bonds in the domestic corporate bond market’.
