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African Mortgage Market & Banks.

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Developing African Mortgage Market: How Banks Can Help Source Affordable Housing.

The demand for decent, affordable housing has been on the rise in Africa with the rise in population. Banks and various financial institutions are inundated with demand for mortgages and financial support to meet housing needs. Housing finance is needed in the housing delivery chain, seeing that finance is a requirement for facilitating housing supply and demand.

The availability of finance promotes housing demand as households acquire, rent, or build a house. Similarly, supply is boosted since developers also need finance to develop mass housing projects to correct Africa’s housing deficit. Housing finance in the continent forms part of its financial systems and helps deepen and develop the financial stability of various countries. Housing finance also contributes to the growth of the financial sector, facilitates easy access to finances, and promotes financial inclusion in the continent.

Africa is experiencing rapid economic growth and urbanization at an unprecedented rate, leading to a surge in mortgage demand. However, the continent’s housing development is still plagued by various challenges, such as lack of long-term finance, wobbly macroeconomic environment, weak credit market, and nonexistent or limited housing finance systems. One of the major obstacle banks face is providing affordable mortgages to low-income groups without leaving this role to government-oriented social, financial schemes.

An Overview of Africa’s Mortgage Market

Across Africa, the housing finance market has experienced exponential growth, with housing finance provision moving from a state-owned bank established in the 1980s to include private financial institutions of today. Though some strides have been taken to promote housing finance, only a few countries like Namibia, Morocco, and South Africa have improved their mortgage finance market. Today many governments in Africa are implementing policies that promote private lending while regulating the playing ground for all lenders. Governments such as Côte d’Ivoire, Kenya, South Africa, Algeria, Egypt, and Morocco have formulated state interventions to engender private lending.

For example, in South Africa, the government is partnering with private financial institutions to improve the accessibility and affordability of housing finance to low-income individuals through the Finance-Linked Individual Subsidy program (FLISP). In Morocco, the government supports private and public mortgage lenders through programs (FOGARIM), which encourages lending to informal sector workers and low-income earners. Today, several financial institutions, including private commercial banks, Saccos, and other microfinance in many African countries, provide affordable mortgage plans for the poor and middle class.

The World’s Banks Contribution.

In collaboration with several Central Banks of countries such as Tanzania, Egypt, and West Africa, the World Bank has enhanced the development of mortgage markets by creating liquidity facilities. The government and World Bank are creating standardized mortgages by encouraging lenders to partner with the state, thus reducing unknowns and help potential investors assess the risks.  Due to this support, the private financial institution can reduce the mortgage interest rates, thus making housing loans within reach for households with low-income.

For instance, the World Bank partnered with Kenya Mortgage Refinancing Company, focusing on the savings and credit cooperative (SACCO) because over 90% of Kenya’s housing credit comes from the SACCOs. Some of these SACCOs have a pool of developer expertise and a stable rapport with their members to help in delivering affordable housing. The World Bank has also supported Tanzania Mortgage Refinancing Company (TMRC), Egypt Mortgage Refinancing Company (EMRC), Nigeria Mortgage Refinancing Company (NMRC), and Caisse Régionale de Refinancement Hypothécaire of West Africa to stimulate the affordable housing sector and provide low-interest rate mortgages for the public.

South Africa’s banks face a major obstacle to mortgage lending, with only a small percentage of its urban population can afford the cheapest built houses. The country’s saving culture is low, making it hard for a household to take a mortgage. Banks in the country are now exploring the use of government subsidy programs to allow the majority of low-income earners the opportunity to have tinny mortgages (as little as $7,000).

Banking Innovation to Provide Mortgage to the Unbanked

Most people in Africa who need a decent home are unbanked or do not have an established credit record of qualifying for a regular mortgage. Banks are innovating to sell mortgages to this population through various programs. Africa’s labor market consists of potential borrowers with informal incomes. Though these individuals can repay a mortgage, their source of income and payment frequency do not fall within the underwriting requirements. Some countries, such as Nigeria through the NMRC, have created uniform underwriting standards that cover the informal sector’s needs. This standard covers self-employed professionals and non-professional and micro-businesses without records.  Lenders are now determining the creditworthiness of these borrowers by examining their school fees receipts, utility bills, and letters of reference. The rules allow the mortgage borrower to deposit 35% of the amount to qualify for a loan.

Sierra Leone’s housing finance market is facing an additional problem of the un-banked population. Studies show that only 20% of the country’s population is banked, making lending next to impossible- though there is a huge demand for housing that needs financing. The government is now using blockchain technology to propel financial inclusion through the national ID system.  This system helps capture credit histories, thus making more households targetable to banks and financial institutions ready to expand their mortgage facility.

Africa’s Contractual Savings for Housing Schemes

An Overview ofAfrica’s Housing Finance


Some financial institutions in Africa emulate their counterparts in Europe by providing a contractual agreement called contractual savings for housing (CSH) to their customers, allowing them to qualify for a mortgage of choice after a stated minimum saving period. Depending on the terms of the agreement, the acquired loans can be utilized in land acquisition, home improvement, housing construction, or acquisition of a new home. This program is helping lenders mitigate credit risks as borrowers show their ability to repay a loan by consistently saving a percentage of their income over a specified period.  CSH subscribers are now accessing mortgages from various member banks because the banks are confident of low default rates.

Households are also warming up for CSH products due to low interest rates on loans less affected by high inflation rates. Medium and low-income families can take advantage of low-interest rates and a pool of savings to apply for a mortgage. The governments are also mobilizing long-term financing for housing construction, thus increasing access to loans for low-income individuals and youths through CSH. Countries such as Ethiopia, Cameroon, Nigeria, Tunisia, Morocco, and Côte d’Ivoire have certain forms of CSH. Some of these countries allow potential borrowers to access mortgages from the National Housing Fund after saving for six months, while others provide tax exemption on housing saving plans.


Africa’s housing finance is still growing and expanding to include low-income earners and informal sectors. Over the years, the mortgage market has shifted from state-owned financial institutions to private banks and micro finance institutions. Governments are now partnering with the private market to provide subsidized credit with low-interest rates to promote loan intake among citizens. The World Bank should be applauded for partnering with various African countries to ensure credit is available for affordable housing programs. Interestingly, some lenders are also targeting the un-banked majority in the continent to expand their scope of operation and ensure all are accorded an opportunity for affordable housing.

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