The International Finance Corporation (IFC) utilizes capital market interventions to develop housing finance markets, which requires the development of legal and regulatory infrastructures. While these interventions have seen success in some countries, the IFC’s projects in Peru failed to take into account the needs of the lenders in the market, leading to less effectiveness.
In Peru, when a securitization company opened in 2007 and issued its first mortgage backed security (MBS) in 2010, lenders already had enough liquidity and had no need for credit relief. Investors were also deterred by the underdeveloped capital market, along with a general sales tax that was viewed as a burden. The securitization company operated at a loss and was unable to generate any revenue – so when shareholder banks shared that they were not interested in securitization because there were cheaper alternative sources of funding, there was no choice but liquidation of the company.
Source:
World Bank Group. (2016) World Bank Group Support to Housing Finance. International Bank for Reconstruction and Development / The World Bank.
Link: https://ieg.worldbankgroup.org/evaluations/world-bank-group-support-housing-finance