IFC eyes further capital market diversification, energy efficiency via new investment

ISTANBUL

The International Finance Corporation, a member of the World Bank Group, said on Oct. 16 it is investing the Turkish Lira equivalent of $150 million in covered bonds issued by Turkey’s Yapı Kredi Bank to help strengthen the country’s capital markets and boost its residential mortgage sector, including green mortgages.

IFC’s investment in the issuance aims to support Turkey’s nascent covered bond market, it said in a statement.

The bond has a five-year maturity and is issued as part of Yapı Kredi Bank’s 1 billion euro covered bonds program launched in 2016.

At least 15 percent of IFC’s funds will be used to provide green mortgages for the purchase of energy-efficient housing, according to the statement.

Covered bonds are a relatively new funding instrument for Turkey’s capital markets. They offer an attractive funding cost and are viewed as low-risk investments since they are backed by the assets of the issuing banks.

“With this financing, we are addressing some of IFC’s key development priorities in Turkey - capital markets development, climate change and sustainable cities,” said Manuel Reyes Retana, IFC director for Financial Institutions Group for Europe, Middle East and North Africa.

“Diversified and innovative funding instruments in Turkish Lira help to deepen capital markets, boost financial inclusion and increase investor confidence. Green mortgages also offer better borrowing rates, while helping to save energy costs,” he said.

Green mortgages increase the purchasing power of buyers by folding in the costs of the home’s improvements. Buyers can thus pay for features that lower utility bills, while banks can offer new loans.

Yapı Kredi Bank expects its green housing loans portfolio to be worth $250 million by the end of 2021, according to the statement.

In line with the World Bank Group’s Country Partnership Strategy for Turkey for the fiscal years 2012 to 2017, IFC has invested nearly $5 billion in private sector projects in the country.