BTA Ipoteka Mortgage Securitization

MIGA has issued $75 million in guarantee coverage to the First Kazakh Securitization Company, B.V., for a mortgage-backed securitization in Kazakhstan. MIGA is insuring a portion of the principal and interest payments generated by the mortgage portfolio against the risks of currency transfer restriction and expropriation. This was a groundbreaking deal—the country’s first true-sale securitization of mortgages—and MIGA’s third capital markets transaction.

First Kazakh Securitization Company—a newly created special purpose vehicle located in the Netherlands, and funded by a multi-seller conduit sponsored by ABN Amro Bank, N.V.—purchased the portfolio of residential mortgages from BTA Ipoteka, the consumer lending subsidiary of Bank TuranAlem. MIGA’s guarantees were instrumental in helping obtain international commercial paper funding for the transaction.

This innovative capital markets transaction represents an important step in the development of the country’s financial sector. The project is expected to help increase the availability of housing finance and introduce an important new capital markets instrument to the arsenal of funding sources available to Kazakhstan’s financial institutions, both banks and non-banks. Developmentally, the project will improve access to mortgage financing for middle-income borrowers and contribute towards making the mortgage market more competitive and transparent.

The 1998 Russian treasury default and the Asian financial crisis—coupled with years of severe economic depression, devaluation and inflation—led to a severe flight of foreign capital investment from Kazakhstan in the late 1990s. There have been positive changes in the economy since then. MIGA’s support, along with these changes, is playing a critical role not just in encouraging the growth of capital markets in Kazakhstan, but also in building market confidence. MIGA’s participation in the project addresses one of the main priorities envisaged in the World Bank Group’s Country Assistance Strategy for Kazakhstan—supporting the diversification of its economy and improving its competitiveness.