The International Finance Corporation (IFC), the World Bank's private financial arm, yesterday struck a deal with two other overseas financial companies to launch a joint venture to develop the infant housing financing business in China.
Working together with the local banks, the new company will mainly concentrate on offering technological know-how and expertise in mortgage lending management, risk controls, and even the designing of security plans for the large pool of mortgage lending.
"We are going to provide services to our customers in areas of mortgage origination, contract underwriting and portfolio management," said Augustine Tan, executive director of the Advantage Service Holding Ltd, the parent company of the joint venture.
IFC is to take a 24.5 percent of the total stakes by investing US$370,000 in the new company-Advantage China Holdings Limited, making it the 48th projects the company has invested in China.
Starting from the mid 1980s, IFC, with a primary focus on private business, has already poured US$1.1 billion into China, which has, in turn, generated millions of returns for the company.
But the controlling 51 per cent stake will be in the hands of Advantage Services Holding Ltd, a Hong Kong-based mortgage service provider established in 1999, while the remaining 24.5 per cent go to the Netherlands Development Finance Company.
"Our company will help major commercial banks in China strengthen their credit assessment capabilities in residential mortgage lending and expand their lending in a financially prudent way," said Javed Hamid, director of the East Asia and Pacific Department of IFC, while attending the signing ceremony yesterday.
Despite having great growth potential, housing financing still remains a new business in China as many commercial banks still lack strong expertise in the area of risk control, credit guarantee and lending management.
Catering to business growth in Beijing, the joint venture said it will expand its business to other major cities in China in the coming years, with Shanghai, Shenzhen and Guangzhou first and other cities in line with the growth of the market.
China is due to develop 500 to 600 million square meters of residential housing in the coming 10 years.
"We have already teamed up with the Bank of China to develop the consulting business in Beijing, and we have also been in talks with the China Construction Bank and the Agricultural Bank of China," said Ivan Ko, chief executive officer of Advantage Services Holdings Ltd.
(China Daily March 1, 2002)
