Moscow, June 23, 2003
—The International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, announced today an agreement to provide $66 million in loans to DeltaCredit Bank to help expand Russia’s fledgling mortgage industry.
This is IFC’s second loan to the Bank. IFC extended its first ten-year $20 million credit line to DeltaCredit for housing finance in 2002. As of now the Bank has originated over 1,700 mortgage loans and its combined mortgage portfolio outstanding stands at $65 million.
DeltaCredit Bank is Russia’s first specialized mortgage bank. IFC’s decision to extend additional $66 million in loans to DeltaCredit shows IFC’s continuous support for leading financial institutions in the country that bring best practices to the market, offer high quality services, and contribute to the deepening of ancillary services necessary for a well-functioning home mortgage market. The proposed IFC investment is a part of IFC’s strategy to develop Russia’s housing finance sector by increasing mortgage origination. In addition, IFC’s financing will promote competition and stimulate growth in the housing sector by providing affordable housing finance to Russian households, and develop the country’s financial markets by expanding an important asset class.
“The development of broad-based housing finance market is an important building block of the country’s financial sector. A functioning mortgage system will help create a more liquid housing market and enable more first-time buyers to purchase their own property. In addition, the development of the market will create employment in the construction sector and related industries,” said Edward Nassim, Director of IFC’s Central and Eastern Europe Department at the signing ceremony in Moscow
“We are proud that collaboration of DeltaCredit Bank and IFC, which began several years ago, has resulted in such a way and proves that our partnership is tested by time. For our existing and potential clients it means that they will continue to get banking service of global standard and will have best priced mortgage loan products in the market,” added President & CEO of DeltaCredit Bank Nikolai Chitov.
With population of over 145 million, Russia has the largest potential mortgage market in Europe. Potential residential mortgage market is conservatively estimated between $10 billion and $30 billion. However, the current size of the market in Russia is only about $200 million or less than 0.01% of GDP.
DeltaCredit Bank is the first full-scale residential mortgage provider in Russia. DeltaCredit Bank’s mission is to be the best and most respected provider of mortgage loan products in Russia, which help people build new quality of life by means of purchasing a new home through the highest quality banking services, professional advice and support. By offering mortgages for the first time in Russia, DeltaCredit Bank revolutionizes the way people live and purchase residential real estate in the country.
Futhermore, IFC has arranged a technical assistance program to be provided to DeltaCredit Bank by Abbott & Associates Co. and focusing on management information system and staff training. IFC is also assisting DeltaCredit Bank, together with Region Investment Company ZAO, to implement mechanism to safe keep DeltaCredit’s mortgage documentation by introducing the “Custodian” arrangement, in preparation to the future development of the a secondary mortgage market in Russia.
The International Finance Corporation is a member of the World Bank Group. IFC’s mission is to promote sustainable private sector investment in transition economies, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the emerging markets, mobilizes capital in the international financial markets,
helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
Russia joined IFC in 1993. Since then IFC has invested over $1.3 billion to finance nearly 70 projects across a variety of sectors. IFC significantly increased its investment program in Russia in the last two years, investing $217 million in FY02 (July 1, 2001 – June 30, 2002) and over $500 million this fiscal year. IFC’s increased activity reflects the improving investment climate in Russia, greater opportunities in an increasingly broad range of sectors, and stronger foreign investor interest.
