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Housing Finance Bank of Uganda


Overview

  • Reference: P-UG-HA0-002
  • Approval date: 04/11/2015
  • Start date: 22/08/2012
  • Appraisal Date: 13/12/1901
  • Status: OngoingOnGo
  • Implementing Agency: Housing Finance Bank
  • Location: Uganda

Description

An LOC to avail long term funding to Housing Finance Bank Limited (HFB), Uganda for the purposes of supporting new residential and commercial mortgages from its projects pipeline aimed at benefiting low and medium income earners in Uganda and SME businesses.

The proposed transaction is a USD20 mln, 10 year Line of Credit (LOC) to enable HFB's achieve the following objectives: Provide long term funding to enable HFB fund its mortgage projects pipeline. HFB has a projects pipeline for the construction of more than 14,000 housing units and commercial business premises to be delivered in a phased program. Address the high assets and liabilities mismatches it is currently carrying on its books in pursuant of its mortgage lending mandate. HFB depends largely on retail deposits to fund its mortgage loans. These deposits, by their nature are short term such that as at 31/12/2009, HFB had a negative (assets exceeding liabilities) funding gap in excess of USD60 mln for the maturity buckets in excess of one year. Introduce and promote new mortgage products, including Construction Finance; targeted at real estate developers to promote the provision of quality housing in properly planned housing estates and offering the requisite infrastructure and utilities as a result of the developers observing Uganda's town and urban planning laws. The ADB's LOC will assist HFB augment existing funding sources and continue growing its business to meet the demand for housing and other mortgage backed products. The LOC will be secured by a debenture to be established in favour of ADB over selected performing mortgage assets of HFB.


Objectives

The proposed transaction is a USD20 mln,( to be offered in Uganda shillings) 10 year Line of Credit (LOC) to enable HFB's achieve the following objectives: Provide long term funding to enable HFB fund its mortgage projects pipeline. HFB has a projects pipeline for the construction of more than 14,000 housing units and commercial business premises to be delivered in a phased program. Address the high assets and liabilities mismatches it is currently carrying on its books in pursuant of its mortgage lending mandate. HFB depends largely on retail deposits to fund its mortgage loans. These deposits, by their nature are short term such that as at 31/12/2009, HFB had a negative (assets exceeding liabilities) funding gap in excess of USD60 mln for the maturity buckets in excess of one year. Introduce and promote new mortgage products, including Construction Finance; targeted at real estate developers to promote the provision of quality housing in properly planned housing estates and offering the requisite infrastructure and utilities as a result of the developers observing Uganda's town and urban planning laws. The ADB's LOC will assist HFB augment existing funding sources and continue growing its business to meet the demand for housing and other mortgage backed products. The LOC will be secured by a debenture to be established in favour of ADB over selected performing mortgage assets of HFB.


Rationale

There is a huge demand for housing in Uganda, and HFB is developing the branch network and business plan necessary to begin to partly meet this demand. In view of its focus on housing finance, and being the market leader in the mortgage market, HFB is the ideal strategic partner for the ADB to assist Uganda's housing sector. HFB envisages that demand for mortgage finance shall continue to grow, given the current shortage of housing units in Uganda - especially in the urban centers, and the projected population growth rates and urbanization. Mortgage loans shall continue to be the main product of the bank and the bank plans to grow the mortgage asset book at an average rate of 28% per annum over the next five years.

The global financial crisis has affected capital inflows for long term projects in RMCs, such that funding for mortgages is being crowded out in favour of shorter term projects. The provision of suitable shelter and supporting infrastructure within RMC's is suffering due to lack of adequate funding. The result has been a continued decline in the living standards and conditions of the general populace within RMCs, thereby entrenching poverty. Lack of capital targeted at suitable real estate developers is also affecting the development of orderly planned urban environments, making the provision of basic infrastructure difficult. It is therefore critical for the ADB to be involved by offering assistance to suitable institutions in RMCs capable of making a significant impact in the provision of decent housing and infrastructure. HFB is a key player in the provision of housing and other commercial mortgages in Uganda. It has, over its 40 years of operations, developed a particular niche in managing risks related to real estate development. It is a very innovative institution, profitably managed and includes SMEs, women and low income earners in its loan book portfolio. It nevertheless needs support in order to balance its need to balance the development of its target markets and the general shortage of appropriate funding to finance mortgages. HFB's activities will improve the quality of life in Uganda and by expanding its reach in the country; contribute to spreading banking services to the under-banked and making it possible for mortgages to be available to the majority of Ugandans.


Key contacts

BYARUHANGA Mpanga Juliet - PIFD


Costs

Finance source Amount
ADBUSD 15,496,146
Co-financierUSD 4,593,897
DeltaUSD 4,593,793
TotalUSD 15,496,250
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