19 December 2023

JSC "Mortgage Refinancing Company of Uzbekistan" is increasing its authorized capital

According to the Resolution of the President of the Republic of Uzbekistan No. PQ-394 of December 15, 2023, the authorized capital of JSC "Ozbekiston Mortgage Refinancing Company" (Company) was increased to 808 billion soums by June 1, 2024 and a total of 941 billion soms was set. It is planned to add additional shares to the charter capital at the expense of the existing shareholders of the Company and the investments of 2 new shareholders (commercial bank).

According to the Resolution of the President of the Republic of Uzbekistan No. PQ-394 of December 15, 2023, the authorized capital of JSC "Ozbekiston Mortgage Refinancing Company" (Company) was increased to 808 billion soums by June 1, 2024 and a total of 941 billion soms was set. It is planned to add additional shares to the charter capital at the expense of the existing shareholders of the Company and the investments of 2 new shareholders (commercial bank).

In order to expand the scope of reforms aimed at the development of the mortgage market, the Company is a joint-stock company with state participation (founded by the Ministry of Economy and Finance) based on Decree No. PF-5715 dated May 13, 2019 of the President of the Republic of Uzbekistan dated May 4, 2019 - established in November.

Regularly providing commercial banks with long-term resources for issuing mortgage loans, attracting financial resources by issuing bonds on local and international capital markets, and supporting the improvement of the mortgage credit system, including participation in the development of the methodological and regulatory legal framework achievement is defined as the main tasks of the Company.

The activity of the company is organized in a cooperative format based on public-private partnership, and commercial banks should join the ranks of the company's shareholders in order to use resources. This procedure was created in order to effectively manage the burden on the Company's capital as its activities expand.

Despite the presence of a state share in the charter capital, all lending activities of the Company are carried out independently of government decisions, in accordance with international practice and on the basis of procedures approved by the Asian Development Bank (ADB).

It is worth noting that there are about 50 organizations in the world community that perform tasks corresponding to the Company's activities, and most of them are fully owned by the state or the Central Bank. The presence of the state share allows organizations that provide liquidity for mortgages to fully use modern capital market instruments and attract the most affordable resources.

The company allocates all attracted funds to commercial banks in the form of credit resources, using a 1% margin to cover operating expenses. The net profit from the company's activities is directed to capitalization or dividend payment based on the decision of shareholders, including state and commercial banks. Commercial banks receive up to 5% margin on long-term resources from cooperation with the Company, in exchange for mortgage loans and as a shareholder, they receive income in the form of dividends.

To date, the Company has been financing its activities through two long-term loans of 150 million US dollars, totaling 300 million US dollars, attracted from ADB through the Ministry of Economy and Finance (IMF). As of December 1 of this year, 217.5 million US dollars of these loan funds have been disbursed.

In December 2022, after fully utilizing the first 150 million US dollars attracted from the ADB, the Company will return it within 3 years from the Ministry of Economy and Finance in order to prevent interruptions in the supply of resources in the mortgage market. A budget loan in the amount of 300 billion soums was attracted. Commercial banks allocated more than 1,000 mortgage loans to the population at the expense of these loans.

During three years of operation, the Company refinanced 15,744 mortgage loans worth 2.9 trillion soums. 90% of the allocated mortgage loans were directed to the secondary market, and 35% of them were given to female borrowers. Based on the terms of the loan, all ADB resources received through IMV for a period of up to 20 years can be directed only to the allocation of a mortgage loan, and will be fully returned based on the established payment schedule.

The company finances its activities mainly from resources attracted from international financial organizations and the capital market. For the first time in October 2023, the company was able to issue a corporate bond worth 140 billion soums as part of its equity capital and place it on the local market.

The fact that the main activity of the company is the refinancing of mortgage loans allocated in national currency, and to increase the potential of the local capital market, issuing its bonds on the local market is of strategic importance for the development of the company and the capital market.

This activity is the basis not only for attracting foreign investors to the local market, but also for introducing a benchmark for other corporate issuers by creating a corporate bond yield curve in the future.

Investors, among other criteria for purchasing a corporate bond or granting a loan, pay special attention to the fact that the Company's activities are provided with sufficient capital.

The main purpose of increasing the charter capital is to provide the mortgage market with regular resources by maximizing the resource attraction potential of the Company. It should be noted that within the current prudential requirements, the Company will be able to attract additional resources of 33 soums for each soum invested in the authorized capital.

The company acts as a means of ensuring liquidity in the financial market of Uzbekistan and directs all the resources it attracts within the framework of its activities to the mortgage market through shareholder commercial banks. Through this scheme, the Company forms long-term resources that are not available in the banking system based on the features of its activity related to refinancing and ensures the stability of the mortgage market.

In addition, in the near future, after the adoption of the Law on Capital Markets, the Company will be able to raise funds by issuing secured bonds within the formed loan portfolio without increasing its own capital. .