Addis Ababa, September 4, 2026 (FMC) — Ethiopia’s establishment of its first dedicated mortgage refinance institution is poised to transform access to homeownership, expand affordable housing and create new avenues for household wealth accumulation, prominent Ethiopian-American investment banker and economist Zemedeneh Nigatu said in an exclusive interview with Fana Media Corporation.
His assessment follows the signing of a landmark Framework for Cooperation between the National Bank of Ethiopia (NBE) and the International Finance Corporation (IFC) to establish the institution, which will be capitalized at 100 billion Birr, with the IFC contributing a minimum of 200 million US dollars.
The agreement is intended to address longstanding constraints in mortgage financing while creating a dedicated source of long-term funding that can enable banks to expand housing finance without relying on short-term deposits to support long-duration loans.
Also Co-founder and CEO of CBE Capital, Mr. Zemedeneh described the development as particularly timely for Ethiopia, where a rapidly growing economy and young population are generating strong demand for housing, while the financial system has historically lacked the structure required to provide accessible, long-term mortgage financing.
He explained that commercial banks primarily mobilize relatively short-term deposits, while home loans require financing over considerably longer periods. This structural mismatch has limited banks’ capacity to provide mortgages on terms that make homeownership affordable for a broad segment of the population.
Even when developers succeed in producing relatively affordable homes, he said, the cost of a house alone does not determine whether it is affordable.
The decisive factor for many households, according to him, is how much they have to pay each month and how long they are given to repay the loan.
Drawing on international experience, particularly the mortgage market in the United States, Zemedeneh noted that repayment periods extending for decades have made homeownership more attainable for younger and middle-income households. Long-term financing, he said, allows the cost of a home to be distributed over a period that is more compatible with household incomes.
Against this backdrop, he regarded the new arrangement as a major achievement after years of discussion about how to establish an effective mortgage-finance system in Ethiopia.
He said the proposed 100-billion-Birr framework would provide a new long-term funding mechanism through which banks could access refinancing resources and subsequently extend mortgage loans to their customers. The model, he noted, draws on approaches that the IFC has supported in several countries and could allow Ethiopia to benefit from lessons accumulated through international experience.
Zemedeneh stressed that the significance of the arrangement goes beyond making housing finance available. A functioning mortgage market, he said, could also turn homeownership into a more widespread means of household wealth creation.
A home is both a basic necessity and a major asset, he explained, noting that property ownership can provide families with a foundation for long-term wealth accumulation, financial security and intergenerational asset building. Expanding access to homeownership could therefore help distribute wealth more broadly across society rather than concentrating asset ownership among a relatively small segment of the population.
He said this broader dimension is particularly important for Ethiopia, where financial-sector development should create opportunities for millions of citizens to accumulate productive assets and participate more fully in economic growth.
The new refinancing mechanism could also directly address a fundamental liquidity challenge facing commercial banks, he said. Banks must remain capable of meeting depositors’ demands for their funds at short notice, making it difficult to use those deposits to finance mortgages that may run for many years.
The resulting asset-liability mismatch constrains long-term lending and can create risks for individual institutions as well as the wider financial system.
A dedicated mortgage refinancing institution would provide banks with a separate source of longer-term funding for housing loans, reducing their reliance on short-term deposits for long-term lending.
For the system to deliver its intended impact, however, Zemedeneh emphasized that institutional strength, public awareness and transparency will be critical. Ethiopian banks have limited experience with this type of mortgage-refinancing model and will need to develop the expertise required to operate it effectively, he said.
He particularly stressed the need for clear and transparent criteria governing who receives mortgage financing, how borrowers are assessed and how funds are allocated. The system should be structured to ensure that access does not become concentrated among selected groups or employees of particular institutions.
The affordability of down payments will also be decisive, he said. Excessively high upfront requirements would prevent large numbers of households from benefiting from mortgage finance, undermining the broader objective of expanding homeownership.
Zemedeneh further argued that mortgage-finance expansion should be accompanied by measures to strengthen Ethiopia’s domestic construction-material manufacturing capacity.
He said heavy reliance on imported construction inputs puts pressure on foreign-exchange resources and can contribute to higher and more volatile housing costs.
Building a stronger domestic manufacturing base for construction materials, he said, would therefore complement housing-finance reform by helping reduce import dependence, contain construction costs and strengthen the wider housing and construction ecosystem.
He also pointed to the potential for a more diversified housing-finance market in which investment companies and other financial vehicles participate alongside commercial banks. International experience, he said, demonstrates that real-estate investment can be supported through a range of financing structures beyond conventional bank lending.
Such diversification could broaden the pool of capital available to housing and create a more sophisticated financial ecosystem around real-estate development, he said.
Ultimately, Zemedeneh said, the importance of Ethiopia’s mortgage-refinancing initiative lies in its potential to connect financial-sector reform with a wider transformation in homeownership and wealth creation—giving more Ethiopians an opportunity to acquire homes, build assets and participate more broadly in the country’s economic advancement.