VZCZCXYZ0002
RR RUEHWEB

DE RUEHEG #0278 0441350
ZNR UUUUU ZZH
R 131350Z FEB 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 8152
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0378

UNCLAS CAIRO 000278 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR NEA/ELA, NEA/RA 
USAID FOR ANE/MEA MCCLOUD AND RILEY 
TREASURY FOR MATHIASON AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN EG
SUBJECT:  OPIC CONSIDERING LOW COST MORTGAGE PROGRAM IN EGYPT 
 
Sensitive but Unclassified.  Please protect accordingly. 
 
¶1.  (SBU) OPIC has been trying for several years to provide 
financing to Egypt's mortgage market.  As part of that effort, OPIC 
VP Robert Drumheller visited Cairo February 5-6 to discuss an OPIC 
proposal to guarantee a loan to a local bank to provide low cost 
mortgages to Egypt's nascent mortgage market.  While liquidity is 
not a problem in the Egyptian banking system, the rates that banks 
must charge are quite high for the average consumer, and an OPIC 
guarantee would likely result in lenders being able to lend at 
slightly lower rates than currently prevalent in the market.  Low 
income borrowers are an increasing portion of the market, as they 
are given an up-front cash subsidy from the government if they 
qualify financially. 
 
¶2.  (SBU) Drumheller met with representatives from Commercial 
International Bank (CIB), Egypt's largest private bank and the only 
one with significant U.S. ownership.  The CIB reps responded 
favorably to the guarantee proposal, but asked that OPIC consider 
providing a loan, rather than a guarantee.  Drumheller agreed to 
provide CIB with a proposal for a direct loan of approximately $200 
million for 20-25 years, which CIB would then either offer as 
low-interest, 20 year mortgages directly to "category C" (families 
earning under LE 18,000/year, about $3300) customers, or 
alternatively, act as an agent and re-lend the money to other banks 
(most likely the state-owned banks) and/or mortgage finance 
companies which would then offer the low cost mortgages.  The logic 
of the latter scheme is that the state-owned banks have more 
branches and greater contact with category C customers than does 
CIB.  CIB agreed to provide OPIC with a feasibility study for 
raising money under the loan guarantee scheme that OPIC originally 
proposed. 
 
¶3.  (SBU) Drumheller also met with USAID-funded Egyptian Financial 
Services Project contractors to discuss property registration.  The 
registration process is still quite complicated, but the time 
required for registration has been cut from up to 10 years to 
approximately 6-9 months, at least in the new urban communities, 
which are serving as pilots for the new registration system, before 
it is implemented in older areas of Cairo and other large Egyptian 
cities. 
 
¶4.  (SBU) At a lunch with representatives from the Egyptian Mortgage 
Refinance Company, the Egyptian Housing Finance Company, the Arab 
Land Bank, Benchmark Capital Corp., Piraeus Bank and the Ministry of 
Investment, all of the guests expressed interest in the OPIC 
proposal to inject the mortgage market with low-cost, long-term 
liquidity, and discussed several possible ways OPIC could structure 
the loan, bearing in mind that any deal would have to involve an 
U.S. entity, per OPIC rules.  The main question the bankers asked, 
as did CIB management, was what the interest rate for the loan would 
be.  The rate would have to be low enough to make the OPIC loan 
attractive to whatever entity ultimately receives the proceeds. 
 
¶5.  (SBU) Drumheller also met with Lobna Helal and Atef Ibrahim, Sub 
Governors of the CBE, to discuss how CBE could assist in "swapping" 
the dollars that OPIC has to loan for Egyptian Pounds.  Ibrahim was 
receptive to the idea of CBE involvement in a possible swap, and 
agreed to consider how it could be done, once OPIC has provided CIB 
with an actual loan proposal.  The next step is for OPIC to come 
back to CIB with a loan proposal. 
 
¶6.  (SBU) Comment:    While OPIC's cost of funds are significantly 
lower than the typical rate obtainable by Egyptian banks, the 
ultimate cost of the loan remains to be seen.  OPIC's rate will 
likely be attractive, but for the loan proposal to be successful, 
the rate will have to be lower than prevailing market rates, after 
the intermediary lenders have taken their spreads. 
RICCIARDONE