Press Release
Monday, July 28, 2008
OPIC ANNOUNCES $250 MILLION TO EXPAND MORTGAGE LENDING IN EGYPT
CAIRO, Egypt – Robert Mosbacher, Jr., President & CEO of the Overseas Private Investment Corporation (OPIC) today announced $250 million in financing to enable Egypt to expand its mortgage lending to low- and middle-income home buyers, following the implementation of mortgage finance reforms that have made it easier for Egyptians to purchase property and obtain home loans.
OPIC’s loan will enable Commercial International Bank (CIB), the largest privately-owned commercial bank in Egypt, to extend long-term mortgage loans to middle-income home buyers. It will also be used to allow other Egyptian financial institutions to originate long-term mortgages to low-income home owners. Eighty percent of the OPIC loan proceeds will go toward low-income home buyers, the remaining 20 percent to middle-income customers. The low-income loans will finance residences with values of no greater than US$21,000.
Ripplewood Holdings, a private equity firm based in New York, is the U.S. sponsor of the project. In 2006, the firm led a consortium in purchasing a substantial interest in CIB.
The project was memorialized in a signing ceremony attended by ranking Egyptian ministerial officials. President Mosbacher and CIB Bank Chairman Hisham Al-Arab signed the Memorandum of Understanding. U.S. Ambassador Margaret Scobey witnessed the event.
Mosbacher said the project would create a “broad distribution system to finance the expansion of home ownership, stimulate new home construction, and in turn increase the wealth-building capacity of low- and middle-income Egyptian families.”
“This OPIC loan facility will establish a ‘best practices’ approach to mortgages by insisting upon strict loan-to-value ratios, down payments and limits on note payment-to-monthly income ratios of 30-40 percent. This not only supports responsible home ownership, but will also demonstrate to future investors the profitability of mortgage lending in underserved markets,” Mosbacher said.
Mosbacher noted that the project also followed the implementation of reforms to Egypt’s banking, mortgage and capital market systems during the past five years that have established a framework to allow mortgage financing to take place, making it easier to purchase property and securitize mortgage loans.
“Egypt has significantly improved its mortgage finance system in the past few years, a process that will have important benefits for low- and middle-income Egyptians, as this project demonstrates. OPIC is pleased to be able to take advantage of these reforms and improve working Egyptians’ access to mortgage finance,” Mosbacher said.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.
OPIC’s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency’s 35-year history, OPIC has supported $177 billion worth of investments that have helped developing countries to generate over $13 billion in host-government revenues and create over 800,000 host-country jobs. OPIC projects have also generated $71 billion in U.S. exports and supported more than 271,000 American jobs.