On September 3, 2026, the National Bank of Ethiopia and the International Finance Corporation signed a cooperation agreement to establish the country’s first Mortgage Refinancing Company (MRC), with an initial capital injection of Br 100 billion and IFC contributing US$ 200 million. Ethiopia is not the first country to bet on a mortgage refinancing company and will not be the last to discover that liquidity alone doesn’t build a mortgage market. A few African countries, including Kenya, Tanzania, and Egypt, have each invested in mortgage refinance systems for over a decade, creating valuable learning opportunities for the latecomer Ethiopia. Lessons from these countries show that establishing a refinancing company is a bet, not a guarantee, and depends on macroeconomic and political stability, a well-developed primary mortgage and bond market, and affordability design as key ingredients for the success of Ethiopia’s MRC.
The Egyptian Mortgage Refinancing Company (EMRC) case teaches Ethiopia that a refinancing company can’t outperform the financial and political system it sits inside. In its three-year operation from 2008 to 2011, EMRC enabled an increase in mortgage origination by Primary Mortgage Lenders (PML), initiated policy and regulatory reforms (e.g., mortgage laws), strengthened public agencies including the central bank, and increased the participation of mortgage finance companies. However, its performance was considered unsatisfactory when measured against the set goals: overall growth of the mortgage market and issuance of mortgage-backed securities within two years of its operation. An independent evaluation reported that in its early days, EMRC faced significant challenges that hindered its proper functioning, notably weak macroeconomic conditions, an underdeveloped bond market with no institutional investors capable of buying its bonds, and the Arab Spring’s political turmoil, which disrupted every part of the financial system at once. The lesson for Ethiopia is that MRC’s success is not self-contained. It requires enabling conditions, including macroeconomic and political stability, and a well-functioning domestic bond market, with institutional investors ready to absorb its bonds. This creates a clear exit path to capital market funding within a short period of its operation. Otherwise, it risks using initial funds intended only as a bridge to get started as a permanent solution and stalling, as EMRC did in its early days of operation.
The Tanzanian case illustrates what can’t be assumed: liquidity availability doesn’t matter if banks become reluctant to use the facility. After the Tanzanian Mortgage Refinance Company (TMRC) began operating, it was found that conservative Tanzanian banks were unwilling to hold mortgage loans even for a short period (i.e., until it became eligible for refinancing) due to fears of maturity mismatch, interest rate fluctuation, and opportunity cost of tying up funds that could otherwise be used for more profitable short-term lending. To address the commercial incentive problem and encourage more banks to enter the market, the TMRC was restructured in 2012 to incorporate pre-financing alongside refinancing, with a 5% concessionary discount loan for PML before those banks had accumulated a mortgage portfolio large enough to qualify for refinancing, giving them a reason to originate mortgages in the first place rather than waiting for a large, risk-bearing portfolio to build up first. This attracted Tanzanian banks to engage in mortgage origination and enabled them to accumulate sufficient mortgage portfolios for refinancing eligibility. TMRC also took additional measures to ensure its long-term sustainability by issuing bonds that attracted both domestic and international institutional investors, including the IFC. At the same time, it worked to make mortgages more affordable for low- and middle-income groups through a partnership with Habitat for Humanity. These structural adjustments enabled the growth of the mortgage market in Tanzania, with mortgage providers increasing from just three in 2010 to 31 in 2025, thereby opening competition and leading to a gradual decline in interest rates and extension of maturity periods from a maximum of 7 years to up to 25 years. The lesson for Ethiopia is that Ethiopian banks may be no more willing to hold mortgage risks than their Tanzanian counterparts. Hence, the proposed refinancing company should sharply reduce the mandatory holding period to meet basic eligibility criteria for refinancing or offer an immediate refinancing option for well-performing mortgage loans. The pre-financing arrangement implemented in Tanzania, whereby direct concessionary lending to banks occurs before the establishment of a refinancing company, offers a valuable lesson in this regard, as it enables Ethiopian banks to accumulate a sufficient mortgage portfolio to be eligible for later refinancing.
The Kenyan Mortgage Refinancing Company’s (KMRC) lesson is one the other two cases cannot offer, as it shows what happens when affordability is designed in from the start, rather than left to catch up after the backend has already been fixed, as in Egypt and Tanzania. KMRC was designed with two products: one targeting affordable housing loans capped between KShs 3-4 million and a 7% interest rate, and the other market-based mortgage loans. For the affordable segment, it provides concessional loans to PML, which will then be transferred to borrowers, making mortgages affordable for middle- and low-income groups. In addition, SACCOs, which are the major players in low-income segment housing finance, are also included in the refinancing scheme, enabling mortgage access for marginalized groups. The KMRC also went further to establish the Kenyan Mortgage Guarantee Trust (KMGT), offering partial guarantees to lenders serving informally employed borrowers, a group conventional underwriting routinely excludes. Despite these measures, the uptake of PML was minimal, primarily due to a shortage of housing supply, mortgage costs, and lack of consumer awareness, a reminder that even well-designed affordability rules cannot substitute for adequate housing stock. The KMRC case teaches Ethiopia a valuable lesson in incorporating affordability as an eligibility criterion early on with income-capped or rate-discounted approaches and deliberate inclusion of SACCOs and MFIs. It also highlights the importance of affordable housing supply, enhancing developer finance, and raising awareness about the MRC’s products, among other key lessons.
In sum, Ethiopia is not choosing whether to build a mortgage refinancing company, as that decision is already made. What remains open is whether it gets the sequencing right: a stable enough financial system for Egypt’s mistake not to repeat itself, a bank incentive structure that Tanzania had to learn the hard way, and an affordability mandate that Kenya proved is possible to design in from day one. Getting any one of these wrong would not sink the institution outright, but getting all three right, together and early, is what would separate Ethiopia’s outcome from a decade-old regional pattern of underperformance. These key measures are in addition to the holistic readjustment needed across the value chain, including construction and developer financing, property valuation infrastructure, a strong credit information system, targeted support to specialized mortgage banks that took the risk and started operating and accelerating the formulation of a mortgage regulatory framework that hindered the the operation of existing specialized mortgage banks and constrained the entry of new ones.
