IFC proposes $40m investment in IDLC Finance

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The International Finance Corporation (IFC), the private investment arm of the World Bank, has proposed to provide up to $40 million in senior financing in IDLC Finance Ltd (IDLC), the largest non-banking financial institution in Bangladesh.

In a pre-investment disclosure, IFC said the proceeds, which will be in Bangladeshi Taka equivalent, will be utilized by IDLC for supporting affordable housing finance for purchase or construction and extension of houses to individuals under low and medium income group in Bangladesh. Registered with the Bangladesh Bank, the country’s central bank, IDLC has a substantial SME portfolio and presence in tier II and tier III cities across the country.

It was the first Bangladeshi leasing company (now financial institution) established in 1985 through the alliance of IFC, DEG, Kook-min Bank and Korean Development Leasing Corporation of South Korea, the Aga Khan Fund for Economic Development, the City Bank Limited, IPDC of Bangladesh Limited, and Sadharan Bima Corporation. IFC was one of the original sponsors of IDLC, according to dealstreet asia.com.

IFC invested BDT25 million ($301,000) to pick up a 10 per cent stake in IDLC before fully divesting from the latter in 2005.

Currently, there are ongoing advisory projects with IDLC via FIG. The proposed IFC investment will be for a longer tenor than is currently available to IDLC, at seven years.

IFC expects the proposed investment to provide commercially viable affordable housing finance product that can open up a new frontier segment for financial institutions contributing to the financial sector development and create additional jobs. “Real estate & housing industry is one of the largest job creators in Bangladesh. By supporting the expansion of housing finance, this project will also contribute to job creation in Bangladesh,” IFC said in its disclosure.

The project will be supported by the Local Currency Facility of the IDA18 IFC-MIGA Private Sector Window (PSW), created by the World Bank Group to catalyze private sector investment in IDA countries, with a focus on fragile and conflict-affected states.

“The Local Currency Facility will help deepen the housing market by supporting longer-term local currency lending, and will contribute to making homeownership more affordable thanks to the extension of mortgage loans maturities,” IFC said.