The International Finance Corporation (IFC) announced Friday that it would invest $150 million in the equivalent of Turkish liras in covered bonds issued by Turkey’s Garanti Bank to support the development of green buildings in the country’s housing sector.
“The five-year maturity bond is backed by a portfolio of residential mortgages. Half of IFC’s funds will be used to provide green mortgages for the purchase of energy-efficient housing,” the IFC, a member of the World Bank Group, said in a statement.
The bond will be issued as part of Garanti Bank’s €5 billion (around $5.6 billion) covered bonds program, launched in 2015, the IFC said.
“They offer an attractive funding cost and are viewed as low-risk since they are backed by the assets of the issuing banks,” it added.
According to the IFC, Garanti Bank expects its green housing loans portfolio to be worth $100 million by the end of 2020.
“By offering green mortgages, banks 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,” it said.
Commenting on the IFC’s financing, Marcos Brujis, IFC’s Global Director, Financial Institutions Group, said that diversified and innovative funding instruments in Turkish lira would help deepen capital markets and increase investor confidence.
“Green mortgages also offer better borrowing rates for customers, while helping to save energy costs,” he added.
Garanti Bank President and CEO Ali Fuat Erbil, for his part, said that the bank reinforced its support for sustainable future of Turkey through the country’s first mortgage covered bond in local currency.