IDB Approves $250m Guarantee to Expand Social Housing Finance in Ecuador

At the same time, increased housing demand is expected to stimulate the construction sector, generating jobs, supporting small and medium-sized suppliers, and contributing to overall economic activity.

The Executive Board of the Inter-American Development Bank (IDB) has approved a $250 million investment guarantee to support the program “Social Housing Financing in Ecuador II,” a major initiative aimed at reducing the country’s housing deficit and improving access to affordable homeownership for middle-income households.

The operation is designed to mobilize large-scale private and public financing through an innovative structure that combines sovereign debt issuance with mortgage securitization mechanisms. Under this model, the IDB guarantee will back a sovereign financial instrument issued by Ecuador, helping to attract investors by lowering risk and financing costs. The resources raised will be channeled into long-term mortgage loans through intermediary financial institutions using a dedicated execution mechanism developed for the program.

Through this blended financing approach, the initiative is expected to generate a mortgage portfolio of approximately $1 billion, enabling the construction of more than 11,000 affordable housing units nationwide. By expanding the availability of mortgage credit at more accessible terms, the program seeks to address structural barriers that have long constrained homeownership among Ecuador’s middle class.

Beyond its direct benefits to families, the program is expected to deliver broader economic and social impacts. It will strengthen Ecuador’s financial system by enhancing the capacity of banks and other intermediaries to originate, manage, and securitize mortgage portfolios. At the same time, increased housing demand is expected to stimulate the construction sector, generating jobs, supporting small and medium-sized suppliers, and contributing to overall economic activity.

The initiative also addresses pressing social challenges. According to a recent IDB study, more than 80% of Ecuadorian households are unable to access a standard single-family home in the formal housing market. For middle-income families, key constraints include limited access to affordable mortgage credit, underdeveloped capital markets, and insufficient savings to cover required down payments. These factors have contributed to overcrowding, informality, and substandard housing conditions in many urban and peri-urban areas.

By expanding mortgage financing options and leveraging capital market instruments, the program aims to reduce these gaps, improve living conditions, and promote more inclusive urban development. Reduced overcrowding and informality are expected to generate positive spillovers in health, education, and community wellbeing.

The IDB investment guarantee will have a maximum term of up to 25 years, with a weighted average life of up to 15 years and three months, aligning the financing structure with the long-term nature of housing investments. The operation underscores the IDB’s commitment to using innovative financial instruments to crowd in private capital and support sustainable, inclusive development in Latin America and the Caribbean.