Ecuador issues world’s first Sovereign Social Bond, with the support of an IDB guarantee

THE ISSUANCE OF $400 MILLION WILL PROVIDE ACCESS TO HOUSING FOR MORE THAN 24,000 FAMILIES AND WILL MOBILIZE APPROXIMATELY $1.35 BILLION IN INVESTMENTS

Ecuador has issued a Sovereign Social Bond in the international market for $400 million, becoming the first country in the world to make this type of placement.

The issuance will serve to boost the government program Casa para Todos, providing access to decent and affordable housing for more than 24,000 medium- or low-income families. It will also mobilize approximately $1.35 billion in investments in the country’s housing sector.

This issuance is backed by a guarantee from the Inter-American Development Bank (IDB) for $300 million, making the operation highly attractive for international investors and reducing significantly financial costs for Ecuador.

The bonds proceeds will be used to provide mortgage loans at a preferential interest rate of 4.99% through the Ecuadorian financial system and a securitization scheme. The issuance is compliant with the Social Bond Principles of the International Capital Markets Association.

The beneficiaries of these loans will be low or middle-income individuals who seek to acquire their first and only home, within the following categories:

  • Social Interest Housing (VIS) with a commercial value of up to 177.66 Unified Basic Wages, or up to $71,064.
  • Public Interest Housing (VIP) with a commercial value between 177.67 and 228.42 Unified Basic Wages, or between $71,065 and $91,368.

The Representative of the IDB in Ecuador, Fernando Quevedo, said: “It is a great satisfaction to support Ecuador in becoming the first sovereign to issue a social bond, especially because these will be aimed at expanding access to homes for those in need of affordable and sustainable housing. At the same time, the bonds will help activate the economy, as the resources will be channeled to the construction sector, which has a highly dynamic impact on the economy.”

Importantly, this financing program includes a strong equity component, as 15% of the credits ($150 million) will be delivered for homes with a value of up to $40,000.

Juan Antonio Ketterer, chief of the IDB’s Connectivity, Markets and Finance Division, said: “This first Sovereign Social Bond is a historic milestone. It demonstrates how new forms of financing can be generated to promote social inclusion and equity.”

The Casa para Todos program is part of the Government Plan ‘Toda una Vida’, which foresees the construction of housing solutions for the benefit of Ecuadorian families and  thousands of jobs in a revitalized construction sector.

Source: IDB Press Release

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