Strengthening Armenia’s Housing Finance Sector
Supported by favorable macroeconomic conditions, the mortgage market in Armenia has started to develop during recent years. However, it remains very small and mainly serves the more affluent population in the capital city of Yerevan. This makes it virtually impossible for families, especially in the rural areas, to own homes or invest in needed home improvements.
 |
| Building standards and the cost of new housing are high relative to the incomes of many households. USAID’s DCA bond guarantee will help improve housing conditions for an estimated 200 middle and low income families in Armenia in 2008. |
In order to promote private sector lending to historically neglected market segments – particularly the middle and lower-income strata – USAID’s Credit Review Board recently approved a new Development Credit Authority (DCA) guarantee that will mobilize low-income housing finance in Armenia. The bond guarantee to First Mortgage Company (FMC) Universal Credit Organization, Armenia’s first private residential mortgage finance company, will allow it to issue $5 million in bonds with a maturity of up to 10 years.
With the USAID guarantee, First Mortgage will raise private funding for re-investment in housing finance and develop affordable housing finance programs targeted at low and middle income segments of the population, primarily in the regions of Armenia.
Furthermore, the proceeds will be used to fund completion of unfinished housing units, renovation, and upgrading of basic infrastructure needs such as heating, air-conditioning, and roof alterations in selected regions. FMC projects to improve housing conditions of an estimated 200 families in 2008 and an estimated 100 families between 2009 through the end of the guarantee agreement period.
It is expected that the DCA guarantee will serve as a catalyst to facilitate the flow of private-sector capital to new and previously undeveloped markets in Armenia. In addition, by stimulating an increase in market-based lending by a commercial financial institution, the project will demonstrate the existence of a large market for banking services as well as the potential of profitability of lending to this market, thereby stimulating further private sector lending and growth.
Back to Top ^ |
