TALLINN, ESTONIA, January 28, 1999 --- The International Finance Corporation today agreed to a financing package that will help the Estonian bank Eesti Ühispank (Estonian Union Bank), the second largest bank in the Baltics, to respond to the growing demand for housing finance in Estonia by providing affordable, residential mortgages to individual homebuyers.
The eight-year loan of up to DM32.375 million (US$19.196 million), and an option to acquire an equity stake of up to DM32.375 million (US$19.196 million) in Ühispank, are part of IFC's effort to promote the availability of affordable housing finance for individual homebuyers.
By strengthening a major Estonian banking institution, the financing will bolster the development of Estonia's banking sector, said Mr. Harold Rosen, Director of IFC's Central and Southern Europe Department who signed the agreement for IFC. He said the project would improve living standards by making mortgages more readily available to homebuyers. And, he added, the long-term finance would extend the maturity of Ühispank's funding base, and underpin the progress that AS Eesti Uhispank has made in improving its loan quality, risk management procedures and operational efficiency. Skandinaviska Enskilda Banken's (SEB) involvement by way of a 34% shareholding in Ühispank is a major positive development and was a key factor in IFC's investment decision, said Mr. Rosen.
Mr. Ain Hanschmidt, President of Eesti Ühispank who signed the agreement for Ühispank, said that the Bank is delighted by IFC's decision to grant the loan because IFC is a careful and selective investor.
Supporting the overall development of the Estonian banking system, the loan will enable Ühispank to better meet the needs of its clients as well as improve the Bank's funding base, said Mr. Hanschmidt. He noted that the significance of IFC's decision is underscored by the option to acquire an equity stake in the Bank. Ühispank hopes to co-operate with IFC in financing of other projects in the Baltics as well, Mr. Hanschmidt added.
SEB Baltic Holdings' President, Mr. Mats Kjaer, said that SEB has supported Ühispank's discussions with IFC from the start. We are happy to have IFC as a future co-owner in Ühispank and partner in our efforts to develop the bank, said Mr. Kjaer.
IFC, part of the World Bank Group, fosters economic growth in the developing world by financing private sector investments, mobilizing capital in the international financial markets and providing technical assistance and advice to governments and businesses.
