46933 - Absa Housing

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Summary of Investment Information

Project Number

46933

Company Name

ABSA BANK LTD

Date SPI Disclosed

Jun 29, 2022

Country

South Africa

Region

Africa

Projected Board Date

Jun 28, 2022

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Jul 8, 2022

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Jun 28, 2022
Signed : Jun 29, 2022
Invested : Jul 6, 2022

Sector

Commercial Banking - Housing Finance

Project Description

The proposed project is an up to ZAR2 billion senior unsecured loan with a 5-year tenor to Absa Bank Ltd (“Absa” or the “Bank”) to support the expansion of its affordable mortgage finance portfolio in South Africa (“the Project”). The Project will be certified in compliance with Loan Market Association’s (“LMA”) Social Loan Principles (“SLP”). It will be the first such transaction in the market.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	128.12
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Housing Loans to Individuals

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Stakeholders Effects: Increased access to housing finance. The Project will contribute to increased access to affordable housing finance (mortgages) leveraging Absa's market position and substantial reach. The entirety of the ZAR2 billion loan proceeds will be allocated for affordable mortgage finance, thereby helping narrow South Africa's housing finance gap. Inclusiveness. This will be the first SLP certified loan by a commercial bank in South Africa thereby introducing a certified social loan in the market to mobilize capital for affordable housing. This demonstrates to other banks and investors the viability and replicability of mortgage lending centered around affordable segments. Other financial institutions may be expected to see the merit and business case of scaling up investments to reach these underserved groups, resulting in a wider adoption of social loan and bond frameworks and standards that will create a more inclusive environment.

Financial Additionality Financing Structure (tenor): Through a loan with a 5-year tenor IFC will be providing Absa with longer-term local currency funding. This will enable the Bank to increase access to housing finance (mortgages), which require longer tenors, while strengthening its financial sustainability by augmenting its funding base, adding longer-tenor liabilities and improving its maturity mismatch. Non-Financial Additionality Standard Setting: The loan proceeds will be exclusively dedicated to financing affordable mortgages in South Africa in accordance with the LMA SLP. IFC will share knowledge and support the Bank with this certification, which will be the first in the market. Only social bonds linked to housing have been introduced in the market thus far. The Project will help to introduce a certified social loan in the market to help mobilize capital for affordable housing.

E&S Category Rationale / Risks and Mitigation

This Project has been classified as a Category FI-3 project according to IFC's Sustainability Policy. The proposed transaction is a senior unsecured loan to support the expansion of affordable mortgage finance portfolio in South Africa. There are no construction activities involved. The overall environmental and social risks associated with the investment are considered low. The Project will not support coal-related activities, or higher risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on indigenous peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, or d) significant occupational health and safety risks. The Bank is an existing IFC client with a satisfactory E&S performance. It is largely aligned with the IFC Life &Fire Safety requirements and the requirements of IFC's Performance Standard 2 on Labor and Working conditions. As part of the Project, Absa will be required to remain committed to applying the labor standards established by IFC Performance Standard 2; IFC will monitor changes in the Bank's portfolio supported by the Project and may require additional E&S measures if there is an increase in E&S risk.

Contacts

For Inquiries About the Project, Contact

Absa Bank Limited
Rolf Van Den Heever
Head of Capital Markets Execution
+27 (0) 11 350 4000
Rolf.VanDenHeever@absa.africa
7th Floor, Absa Towers West 15 Troye Street, Johannesburg, 2001 PO Box 7735, Johannesburg, 2000 SA
www.absa.africa

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