Egyptian Liquidity Facility

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	25052
Company name	Egyptian Mortgage Refinance Company
Country	Egypt
Sector	Finance & Insurance
Environmental category	C
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	March 14, 2007
Projected board date	April 17, 2007
Previous Events	Invested: June 11, 2007 Signed: May 24, 2007 Approved: May 10, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of an IFC investment in, and Technical Assistance (TA) Program to the Egyptian Mortgage Refinance Company (EMRC or the company), previously known as Egyptian Liquidity Facility (ELF) which has been established as part of the initiative of the Egyptian Government to develop a viable housing and housing finance sector in Egypt.

EMRC represents the second prong of reform which is aimed at enabling and encouraging commercial banks and other financial institutions to lend for housing. In this context the government has encouraged the formation of specialized finance companies and has established the Mortgage Finance Authority (MFA) to promote and oversee the housing finance sector. One of most important initiatives of MFA has been to push for the establishment of EMRC as a refinancing vehicle for commercial banks and other financial institutions engaged in mortgage lending. It is envisioned that as the primary mortgage market deepens, and primary mortgage lenders (PMLs) will be able and willing to offload their originations that they will do so to EMRC thus creating the possibility of efficient securitization into the capital markets.

Anticipated development impact of the project

The projects’ development objective is to encourage the primary lenders in the financial market to provide longer-term, market-based mortgage loan financing for residential housing. The development impact of this project is expected to be achieved in three specific ways:

- Development of the Primary Mortgage Market:

Access to long term fixed rate funding through the EMRC would encourage primary lenders to make longer term housing loans and would improve the access to housing finance for middle and lower income segment of the society.

- Mobilization of Resources for the Housing Sector:

As a refinancing entity EMRC will be able to connect the primary mortgage lenders to the capital markets and channel funds raised from the capital markets to the housing finance sector.

- Development of the Domestic Debt Market:

As a non deposit taking entity, EMRC will need to repeatedly tap the domestic market to raise long term resources for onlending to the primary mortgage lenders. This will offer institutional investors a new and much needed channel of investing their resources into highly rated fixed income instruments which are practically non existent in the markets today.

IFC's expected development contribution

IFC, in conjunction with the World Bank, is coordinating to improve the access to housing finance to middle and lower income individuals in Egypt. Specifically, under this program IFC plays three important roles:

- Providing credibility and confidence to a startup institution:

IFC has the experience of dealing with similar situations in a number of countries and having experience both success and failure.

- Capacity building advisory services:

IFC is and will be providing substantial advisory services to EMRC in a wide range of operational areas. Operational advisory services from IFC will cover a wide range of key areas spanning the front end as well as the back end of EMRC’s business operations.

- Support on the funding side:

IFC will in the future make available the full range of its advisory and investment products to EMRC to help the company establish its funding program in the domestic market.

Environmental and social issues - Category C

EMRC is a secondary mortgage company. This is a category C project according to IFC's environmental and social review procedure. There will be minimal environmental and social impacts associated with this project. Therefore, no further environmental or social analysis is required.

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