Mortgage financing is vital to solving housing situation facing developing countries. The challenge is how to make the poor own a home irrespective of their small earnings. As a result of the housing deficit in West African cities, the region is likely to encounter housing crisis in a short while if adequate approaches are not taken to address it. Effective mortgage financing is the potential key to addressing the housing deficit.
In Nigeria mortgage financing has produced results in mass housing. In year 2000, the Federal Mortgage Bank of Nigeria gave the sum of 5.8 billion naira (now about 38m USD) to National Housing Fund. The National Housing Fund established by Decree No. 3 of 1992 is a major means of mortgage lending in Nigeria for building of houses.
In related development, the Real Estate Developers Association of Nigeria (REDAN) is set to put in place Special Purpose Vehicle (SPV) to enhance the expansion of mass housing. The President of the association, Chief Olabode Afolayan, disclosed that the SPV is money that will be given to assist developers in the massive buying of building materials and also offer them subsidy. On the same direction, Haggai Savings and Loans Limited (Mortgage Bankers) at Surulere, Lagos, provides financial support to its customers while Susu Microfinance Bank Ltd gives financial support to Nigerians that are in need of it, and Guaranty Nigerian Bank (Microfinance Obodoukwu) offers loans and encourages investment among the inhabitants of Obodoukwu community.
Nigeria is not the only country experiencing this trend. The French Development Agency has granted a credit of €8 million to the Housing Bank in Senegal for funding and developing mortgages. And the aim of this is to widen access to housing finance in Senegal. In Mali, Mortgage Financing Project loan makes it easy for Malians to own property. Fundamentally, this project aspires to arouse economic activities associated with the building sector and thus assist the poor. CIDA signed a contribution agreement of $4.7 million with a not-for-profit Canadian executing agency for the purpose of this project.
The story is the same in Ghana. Ghana Home Loans at the moment is the leading giver of home loans in the country and this is essentially creating access for the middle-class to own homes in Ghana. GHL makes it achievable for Ghanaians to purchase houses for their homes. In addition, International Finance Corporation has put in $25 million to assist three financial institutions, Ecobank Ghana, Merchant Bank and Fidelity Bank, to increase their mortgage business. On a similar trend, EcohomesLiberia project makes it easy for Liberians to afford a home
Professionals at a one-day seminar on mortgage finance held at the Golden Gate Restaurant, Ikoyi, Lagos, Nigeria pointed out that inadequate funding of the Federal Mortgage Bank and Primary Mortgage Institutions is a challenge to owning homes in Nigeria. The major resolution reached at the seminar is that better funding of institutions that engage in mortgage financing to make loans and mortgage available is central and fundamental to solving the housing problem in the whole of West Africa.
Though this is a project that is commendable, there is a need for serious government’s supervisory and regulatory authority to be put in place in all West African countries to monitor this process. In Ghana, thrift collectors known as susu, for instance, defrauded clients in the past have and made away with their savings, amounting to $65,000. The story is not different in Nigeria where some people operate illegal and unregistered micro mortgage finance banks, only for customers who kept their monies in those banks to wake up one day to discover that the bank and it agencies were nowhere to be found, leading to loss of several millions of money by the banks clients.
The greatest challenge to mortgage financing in West Africa is that the poor people whom the mortgage is targeted at cannot afford to access it either because of the high interest rates or conditions (such as collaterals) set before the loans can be accessed. In a worst case scenario, private developers who have the capacity to access the mortgage, build houses with it and price the houses out of reach for the poor who need the houses most. In Nigeria, for instance, one needs to provide 10% of 50 million naira (which comes to at least 30m USD) before they can access the mortgage. This is in a country where annual salaries of a minimum-wage earner is still less than 1000 USD. This makes it difficult for the mortgage scheme to achieve the outcome it is set to achieve.
Housing sector holds enormous prospect for job creation especially for the youth as vast unskilled youth can be employed in this sector. National Bureaus of Statistics (NBS) in Nigeria reports that real estate market brought 1.64% to the gross domestic product (GDP) in the first quarter of 2011, whereas the building and construction sub-sector brought 1.99% to the GDP in the fourth quarter of 2011.
Looking at the population of the sub-region, Accra with a population of approximately 4 million projected to grow at approximately 4% yearly and Nigeria with over 160 million and the rapid urbanization that follows, housing becomes an issue that is not negotiable. Lagos State alone needs more than 250,000 housing units yearly for the next 20 years for it to reduce the housing deficit it faces at the moment. Going by studies carried out by Ghana Real Estates Developers Association (GREDA), 500,000 houses are needed yearly to reduce housing deficit in Ghana.
Nevertheless, the participation of several financial institutions such as UBA, Ghana Home Loans and Federal Mortgage Bank in Nigeria, etc awakens the hope that housing deficit in West Africa can be tackled. However, with the rapid rural to urban migration going on in West Africa at the moment, housing is likely to remain a major challenge West African cities will have to face for a long period of time and the implication of this is that it will be a big challenge for urban development and sustainability in West Africa.
––Audu Liberty Oseni
FRENCH VERSION
