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The African Development Bank has approved a Partial Credit Guarantee (PCG) of up to $4 million in local currency to the Tanzania Mortgage Refinance Company (TMRC), a statement by AfDB said on Friday.

The AfDB said that the partial credit guarantee will support the TMRC’s proposed medium term note programme to raise long-term funding from the Tanzanian local currency bond markets on the Dar es Salaam Stock Exchange (DSE). The TMRC plans to use the funding for on-lending to local banks for mortgage finance operations.

PCGs cover private lenders against all risks during a specific period of the financing term of debt for a public investment. PCGs are generally provided for privately funded public projects and are specially designed to extend maturity and improve market terms, according to the World Bank.

The AfDB said its PCG will enable TMRC’s bond to meet minimum requirements for listing on the DSE. This will enhance the company’s capacity to raise long-term funding required for the growth of Tanzania's housing finance markets as well as boost the construction of affordable housing.

“By extending this partial credit guarantee, the AfDB adds on its existing initiatives to support the development of local currency financial markets on the continent and the private sector,” said Stella Kilonzo, AfDB’s Division Chief, Financial Markets Division.

Aside from impacting the real estate sector, the AfDB said its PCG will also assist in deepening of Tanzania’s capital markets by increasing the number of listed corporate bonds in the local bond market as well as match assets and liabilities of the institution. The PCG will further complement the Tanzanian government’s efforts to develop a self-sustaining long-term mortgage market in Tanzania.

Founded in 2010, the TMRC is a non-deposit taking specialized financial services institution that provides refinancing to primary mortgage lenders in Tanzania. As at December 2014, the TMRC had totals assets of about $22 million.