Sources of Funding:

  1. Initially IDA loan disbursed through BoT.
  2. Paid-Up Capital.
  3. Corporate Bonds. TMRC will start issuing corporate bonds in its later years of operations. The share of market funding through bonds will be progressively increased over time and the maturities of the bonds will be progressively extended as the market matures, making TMRC financially independent and sustainable in the long run.
  4. Lines of Credit from banks.
  5. Money market borrowings

Pricing of Loan from BoT:
BoT will initially make loans to TMRC to provide with its initial funding. The loans provided to TMRC from BoT will be from the IDA loan to BoT. It will do this on a market basis as closely aligned to market pricing as it can. As the project progresses, the pricing of the BoT loans will gradually become more expensive which is intended to provide an incentive for TMRC to move towards funding itself through the private bond market. During the first years of accessing the bond market a credit enhancement will be provided in the form of a spread reduction funded by BoT which will lower the cost of funds to TMRC.

Price of Loans to Mortgage Lenders
The final price to mortgage lenders will then see an additional 150 - 250 basis points added on to cover TMRC costs and its return on equity. It is expected that TMRC will initially provide loans ranging from 1 year to 5 years in maturity, which reflects the liquidity of the bond market at these levels. As the bond market develops, longer maturity bonds can be issued, and longer term financing can be envisaged.

Regulatory Treatment of TMRC Bonds
TMRC will address the long-term funding constraints hindering the growth of the mortgage market. TMRC will serve as a source of long-term funding at attractive rates whilst ensuring prudent lending practices by banks. This will reduce the maturity mismatch for banks and increase the loan terms.

This would in turn improve the affordability of mortgages and extend the range of qualifying borrowers and result in the expansion of the primary mortgage market and home ownership in Tanzania. In order to achieve its objectives, TMRC will need to make its bonds as an attractive investment instrument to potential institutional investors, particularly the banks, insurance companies and pension and provident funds. For this, TMRC will need some regulatory concessions and incentives for its bonds in the start-up years of its operations.

These concessions can be gradually removed once TMRC establishes its name in the market. The whole purpose of the regulatory concessions is to reduce the cost and time taken for bond issuance thereby enabling TMRC to pass on the low cost funds to primary lenders who will be able to originate mortgages at attractive mortgage rates.