Source: Inter-American Development Bank.
Original news wire here.
New Inter-American Development Bank (IDB) financing facility will accelerate access and enhance product offering for the low-income housing market in Peru under the Opportunities for the Majority program
The IDB approved today a US$10 million financing facility to support the low-income housing market in Peru.
The facility will increase the flow of home improvement and mortgage financing to low-income families by leveraging the extensive distribution platform of Peru’s nonbanking microfinance institutions while increasing their participation in local mortgage markets.
Facility resources will provide subordinated debt to strengthen the borrowers’ capital positions as well as leverage their loan portfolio growth potential, while the senior mortgage and home improvement loans will provide medium and long-term funding for housing solutions to benefit a larger segment of the Peruvian population.
Peru’s deficit in the area of low-income housing is estimated at between 1.7 million and 2.1 million units. This housing shortfall affects more than two-thirds of the population, basically, those with low incomes at the base of the pyramid.
More affordable housing could help generate economic opportunities in Peru, where over 70 percent of the economically active population is employed by one of the country’s 3.1 million microenterprises and small businesses, many of which are run from homes.
“The establishment of this facility is a first step in a larger effort that we have undertaken at the IDB, through the Opportunities for the Majority initiative, to leverage the installed capacity of existing in-country platforms, broad distribution networks in low-income communities, with the goal of providing new products and services that will reach majority markets more effectively and at a larger scale,” said Opportunities for the Majority Team Leader Susan Olsen.
The lending program is in parallel to a nonreimbursable technical cooperation of USD 900,000, of which up to USD 500,000 will come from the IDB’s Multilateral Investment Fund (MIF), which will assist the microfinance institutions’ design and implementation of standardized mortgage and home improvement loan products and support the design of a securitization program with a view to future access of local capital markets.
Building on the IDB’s capability of leveraging partnerships, the facility will receive a local-co-financing contribution of USD 10 million from Peru’s state-run Corporación Financiera de Desarrollo.
The IDB’s involvement in this initiative ensures that each of the projects financed under the facility will undergo a rigorous evaluation of its financial and social viability. Loan terms will range between 5 and 10 years, either in US$ or local currency and carry a London Interbank Offered Rate (LIBOR)-based variable interest rate.
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