Addis Ababa, September 3, 2026 (FMC) – Ethiopia is moving to build a new layer of financial infrastructure behind one of its most consequential development challenges: how to make homeownership more attainable in a country where housing demand has expanded faster than both housing supply and access to long-term finance.
The move took concrete shape on September 3, 2026, when Prime Minister Abiy Ahmed oversaw the signing of a landmark Framework for Cooperation between the National Bank of Ethiopia (NBE) and the International Finance Corporation (IFC) to establish Ethiopia’s first dedicated Mortgage Refinance Company, capitalized at 100 billion Birr.
In a message shared following the signing, Prime Minister Abiy said the IFC is set to contribute a minimum of $200 million to the wholesale institution. He said the company will address long-standing liquidity mismatches in Ethiopia’s banking sector and unlock accessible mortgage financing across the country.
The partnership, he said, is a critical step toward realizing the goal of delivering 1.5 million affordable and dignified homes for Ethiopian families while expanding private-sector participation in the country’s financial system.
The significance of the initiative lies in what happens between a bank and a prospective homeowner. A mortgage may be a long-term loan, but the funding available to a bank does not necessarily have the same maturity. When banks rely predominantly on shorter-term deposits to finance long-term mortgages, expanding housing credit can place pressure on their balance sheets. A mortgage refinance institution is designed to create another layer between the original lender and the longer-term sources of finance.
From a housing target to a financing system
The mortgage-refinancing initiative is not emerging in isolation. It follows a policy direction Prime Minister Abiy outlined at the House of Peoples’ Representatives on July 7, when he said 1.5 million homes would be constructed over the coming years and that the necessary mortgage system would be established to facilitate the effort.
That formulation is important because it places financing alongside construction at the center of Ethiopia’s housing challenge. Building more homes requires land, infrastructure, construction capacity and materials, but it also requires a financial mechanism capable of allowing households to purchase those homes over periods compatible with their incomes.
For years, the availability of long-term housing finance has remained one of the structural constraints on Ethiopia’s mortgage market. The World Bank has previously described the country’s housing-finance system as underdeveloped and noted that the formal housing market has not been adequately connected to a functioning mortgage system. Much housing has consequently depended on informal financing channels, while banks have faced difficulties offering affordable long-term products to a broader range of households.
The proposed refinance company addresses a different part of that equation. It is not intended to replace commercial banks that originate mortgages. Rather, it would operate as a wholesale institution, providing eligible lenders with an additional source of longer-term funding against mortgage portfolios.
That distinction matters.
A household would still generally approach a bank or other primary mortgage lender for a home loan. The refinance institution would work further upstream, helping those lenders obtain funding that is better aligned with the long-term nature of mortgage lending.
IFC describes mortgage refinancing companies as vehicles for capital-markets refinancing that can enable primary mortgage lenders to access longer-term funding and lengthen mortgage maturities. The institution’s housing-finance work across emerging markets similarly focuses on building the financial infrastructure that connects mortgage lenders with longer-term sources of capital.
An African model with an Ethiopian application
Ethiopia is entering a financial model that has already been used elsewhere in Africa, although the structure and circumstances differ from country to country.
Mortgage refinance companies have been developed in markets including Kenya, Tanzania and Rwanda, while regional mechanisms such as the West African CRRH-UEMOA have been used to mobilize longer-term funding for housing finance.
The underlying principle is broadly similar: mortgage lenders need funding that matches the duration of the loans they provide.
Tanzania offers one illustration. Its Mortgage Refinance Company was established to provide medium- and long-term liquidity to mortgage lenders. With IFC support, the institution has helped expand the availability of longer-term mortgage funding; mortgage maturities in Tanzania have subsequently extended substantially in the development of the market.
The broader African context is significant. IFC has identified housing finance as one of the continent’s major financial-development gaps, particularly as rapid urbanization and demographic growth increase demand for formal housing. Its approach includes supporting MRCs precisely because access to long-term funding can help primary lenders extend mortgage maturities and potentially improve affordability.
For Ethiopia, however, the challenge is larger than reproducing an institutional model developed elsewhere. The country is attempting to build a mortgage-finance ecosystem while its housing market, financial system and capital markets are themselves undergoing substantial transformation.
The Ethiopian mortgage market’s deeper challenge
Ethiopia already has mortgage lending. The significance of the September 3 agreement is therefore not that mortgage finance is being introduced for the first time, but that the country is establishing a dedicated secondary or wholesale financing layer for the sector.
That distinction helps explain why the initiative matters.
A bank that funds a 15- or 20-year mortgage primarily from deposits faces a maturity mismatch: the mortgage remains outstanding for decades while deposits can be withdrawn or repriced much sooner. A refinance institution can help separate the origination of mortgages from the longer-term funding of mortgage assets.
In principle, this can give banks greater capacity to originate new mortgages without having to carry the entire burden of long-term funding on their own balance sheets.
It can also create stronger links between housing finance and capital markets. IFC’s housing-finance model explicitly places MRCs within a wider system involving mortgage lenders, policymakers, housing developers and capital-market funding.
This is particularly relevant as Ethiopia’s financial system moves toward a more market-oriented architecture.
A financial-sector reform arriving at a wider reform moment
The MRC initiative comes as Ethiopia is reshaping the institutional foundations of its financial system.
The National Bank of Ethiopia has moved toward an interest-rate-based monetary-policy framework, while its current policy rate stands at 16 percent. The banking sector is also operating under a newer legal framework following the Banking Business Proclamation No. 1360/2024, while the revised NBE proclamation has strengthened the central bank’s regulatory mandate.
At the same time, Ethiopia has been developing the legal infrastructure surrounding real estate itself. The Real Estate Development and Real Property Marketing and Valuation Proclamation No. 1357/2024 provides a framework for real-estate development, marketing and valuation, while the Urban Landholding and Land-Related Property Registration Proclamation No. 1381/2024 seeks to strengthen urban land registration and land-information systems.
These reforms matter to mortgage finance because a mortgage is not simply a loan secured against a house. It depends on the ability to establish ownership, value property reliably, register collateral, enforce contractual rights and manage credit risk.
The stronger those foundations become, the more viable a broader mortgage market can be.
What the 100-billion-Birr institution can change
The 100 billion Birr capitalization gives the proposed institution substantial scale relative to Ethiopia’s still-developing mortgage-finance market. The announced minimum $200 million IFC contribution also gives the initiative an international development-finance dimension.
But the ultimate measure of success will not be the size of the institution’s capitalization alone.
The critical question will be whether refinancing translates into mortgage products that more households can actually afford and access.
If the mechanism works as intended, banks could gain access to longer-term liquidity, allowing them to expand mortgage lending and potentially offer longer repayment periods. Greater availability of wholesale funding could also support competition among lenders and reduce the extent to which each bank must rely solely on its own deposit base to finance long-duration housing loans.
That could become particularly important for households whose incomes are stable enough to service a mortgage but who cannot manage the financing terms currently available to them.
Yet refinancing cannot solve every part of Ethiopia’s housing problem.
Mortgage affordability also depends on household incomes, interest rates, house prices, construction costs, land availability, property valuation, registration systems and lenders’ assessment of credit risk. A well-capitalized refinance institution can improve the supply of mortgage liquidity, but it cannot by itself make houses inexpensive or make every household mortgageable.
That is why the initiative is better understood as a piece of financial infrastructure than as a standalone housing programme.
Building the financial bridge to 1.5 million homes
Ethiopia’s 1.5 million-home objective gives the new institution a concrete development test.
The challenge is not simply to increase the number of houses constructed. It is to connect housing production with a financing system capable of allowing households to acquire those homes on sustainable terms.
That requires several parts to work together: developers need access to finance to build; banks need liquidity to originate mortgages; households need predictable and affordable repayment structures; property needs to be properly registered and valued; and the broader financial system needs mechanisms for mobilizing long-term capital.
The new Mortgage Refinance Company is intended to occupy an important position within that chain.
Its establishment therefore marks a shift in the way Ethiopia is approaching the housing challenge—from treating finance primarily as one of the constraints on housing construction toward building a dedicated institutional mechanism around the financing of homeownership itself.
For a country seeking to deliver 1.5 million affordable and dignified homes while increasing private-sector participation, the deeper question is no longer only how many houses can be built.
It is whether Ethiopia can build the financial architecture capable of putting those houses within reach of millions of households.
The September 3 NBE–IFC framework is an attempt to build that missing bridge.