IFC partners with BRAC Bank to launch first-ever housing bond

Published : 04 Jul 2022 09:23 PM

Thousands of low and middle-income urban and rural families in Bangladesh, often underserved by commercial banks, are expected to be able to take out affordable housing loans through IFC’s investment in the country’s first housing bond to be issued by BRAC Bank.

In a first for the country, IFC will make a subscription of up to $50 million-equivalent Bangladeshi taka (BDT) denominated, five-year senior bond by BRAC Bank to fund and expand its affordable housing finance program. The move is expected to create thousands of new jobs in construction and related industries.

It’s estimated about 80 percent of people in Bangladesh’s cities live in rented properties all their lives, mostly due to lack of mortgage finance. 

Home mortgages only account for three percent of the loan market in Bangladesh, below the average of 4.9 percent in South Asia and 8.9 percent in emerging markets. Most financial institutions focus on providing housing finance to the higher-income people, while access to formal housing loans for low and middle-income segments is very limited. 

This causes a surplus in premium housing and a shortage of both housing finance and housing units for low and middle-income people.

“This marks a whole new strategic priority for BRAC Bank, since our establishment in 2001, with our goal then to improve access to finance for underserved small and medium enterprises. We, along with IFC, recognize that far too many low and middle-income earners simply cannot access the funds they need to buy a home,” said Selim R. F. Hussain, BRAC Bank Managing Director and CEO.

As an investor in the first ever privately placed housing bond issuance in Bangladesh, IFC will help deepen the country’s long term bond market which remains underdeveloped. 

The investment is also supported by the local currency facility of the International Development Association’s Private Sector Window through a US dollar/BDT cross-currency swap to facilitate local currency lending.

“This innovative deal marks an important milestone in the development of the domestic long-term bond market and offers multiple benefits for Bangladesh, with first and foremost helping to tackle the acute need of low and middle-income people to obtain affordable housing finance.,” said Allen Forlemu, IFC Regional Industry Director, Financial Institutions Group, Asia and Pacific.