UniBank HousingFinance

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25911
Company name	UniBank
Country	Azerbaijan
Sector	Finance & Insurance
Environmental category	C
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	December 13, 2007
Projected board date	January 15, 2008
Previous Events	Invested: June 23, 2008 Signed: March 29, 2008 Approved: March 25, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

IFC is launching an Azerbaijan Housing Finance Program, designed to facilitate the development of Azerbaijan’s mortgage sector and to increase access to funding. The program would include providing long-term mortgage facilities to selected commercial banks as well as advisory services to the participating banks and other key market players.

The proposed transaction with Unibank Commercial Bank Open Joint-Stock Company (the Bank or Unibank) is the first investment under the program and consists of a seven-year senior loan for up to $15.0 million for the purpose of originating mortgages.

Anticipated development impact of the project

IFC’s investment is expected to have a high developmental impact in the following areas:

- Development of Azerbaijan’s housing finance sector:

Consistent with the IFC’s strategy, the project presents the opportunity to promote the development of the primary mortgage market in Azerbaijan by:

- providing the much needed long-term funding to the banking system;
- raising the mortgage underwriting standards in accordance with the best industry practices;
- increasing standardization of mortgage files, documentation, and quality.

Furthermore, the project would enable the Bank (and potentially other players) to build a pool of suitable assets for securitization, which would create conditions for the development of secondary mortgage market and potential refinancing mechanisms.

- Increased Access to Funding:

By providing long term funding, the project will also increase the affordability of home purchase, thus promoting home ownership in the country, as well as providing financing for houses renovation. Furthermore, by developing the mortgage market in Azerbaijan, the project is expected to lower the cost of mortgage loans over the short to medium term.

- Strengthening of the Financial Sector:

The successful implementation of this project will develop financial intermediation by increasing the range of products and services available in the market.

- Demonstration Effect:

IFC’s involvement will help bring credibility to the country’s growing mortgage finance sector and will facilitate attracting long-term funding from other sources.

IFC's expected development contribution

The proposed project fits well with the strategic objectives of IFC and the World Bank Group as it will support the development of the housing finance sector and increase the financial intermediation in the economy.
IFC’s developmental contribution is two-prong: - IFC's growing and successful experience in the housing finance sector will ensure that the best international housing finance practices are incorporated;
- IFC’s longer term funding will extend the maturity of the mortgage loans available in Azerbaijan and will further stabilize and diversify the funding base of the country’s financial sector.

Environmental and social issues - Category C

This project entails IFC support for the business of mortgage finance and has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. No further review is required.

IFC PROJECTS