Project Description
This summary covers an application made by Fondo Mivivienda S.A. (FMV) to cover a proposed lending facility to be provided to FMV from Lender(s) yet to be identified.
MIGA’s coverage has been sought in relation to a Non-Honoring of Sovereign Financial Obligations of a State-Owned Enterprise (NHFO-SOE) guarantee for up to US$370 million to cover an up to US$300 million US dollar debt financing structure with a tenor of up to 6 years.
The proceeds of the MIGA- covered Loan(s) will be used by FMV to promote sustainable housing through green mortgage lending to middle-income households, and to increase access to mortgages to low-income households and vulnerable groups, including women-headed households and people with disabilities.FMV is a wholly owned financial institution of the Government of Peru with strategic importance in promoting and financing housing solutions in the country. It is the largest provider of affordable housing financing in Peru and plays a critical role in the government’s public policies to reduce the country’s housing shortage.
This project builds on MIGA’s previous engagement with FMV in FY2022. The proceeds of the first MIGA-guaranteed loan were devoted to funding green housing mortgages under the Green House Program “Mivivienda Verde”, which promotes green housing mortgages for the acquisition of certified green housing properties for vulnerable medium-income households and contributed to the development of the green mortgage market by commercial financial institutions.
Environmental Categorization
The MIGA Project will support mortgage access to middle-income households. The E&S risks associated with mortgage loans are considered minimal and this Project has thus been categorized as FI-3 under MIGA’s Policy on Environmental and Social Sustainability (2013). There will be no E&S requirements for the lending portfolio. As part of the FY22 transaction, MIGA reviewed FMV’s labor practices to ensure compliance with the requirements set under Performance Standard 2: Labor and Working Conditions and no gaps were identified.
Development Impact
The MIGA-guaranteed loan(s) are expected to promote increasing access to finance for social housing in Peru, aimed at reducing the country’s housing deficit while improving the quality of life of new homeowners. In particular, the Project will seek to increase access to mortgages to low-income households and vulnerable groups, as well as to increase green mortgage lending to middle income households. The mortgages will benefit from reduced interest rates, as well as grants/subsidies, promoting financial inclusion in Peru. By tailoring existing products to underserved segments such as women-headed households and people with disabilities, the Project will help closing gender and financing gaps, while carrying climate benefits through its support to green mortgages. The increase in mortgages will support green and inclusive housing construction, which in turn will boost job creation and promote economic recovery from the COVID-19 economic shock. As such, the Project is consistent with MIGA’s efforts to promote the recovery of economic activity, through knock-on effects on the housing construction sector and on job creation, under MIGA’s Fast Track COVID-19 Response Program.
The Project is consistent with the WBG Country Partnership Framework FY17-FY21 for Peru across its second pillar ‘Services for citizens across the territory’, by supporting the provision of housing with improved access to water and sanitation for the low and middle-income population across Peru, and with the third pillar ‘Natural resource and climate risk management’, since the ‘green’ housing will contribute towards mitigating climate change.
