Long-Term Finance and Capital Markets Back

Housing Finance


UN Habitat expects 50 per cent of Sub-Saharan Africa to be living in towns and cities by 2030, and World Bank data shows that the region’s economic growth has been significantly higher than the world average for the last 10 years. Yet despite this economic growth, the housing situation in many African countries has rapidly deteriorated. There is a huge shortage of housing, in terms of both quantity and quality, contributing to a proliferation of slums and informal dwellings. The Centre for Affordable Housing Finance in Africa (CAHF) estimates for example the current housing shortage in Nigeria at 17 million units requiring funding of US$363 billion. In Ghana, the shortage is estimated at 1.7 million units with the funding requirement ranging from US$51.8 billion and US$52.5 billion. In Kenya the shortage is estimated at 2 million units per year.

The importance of Housing finance in the housing delivery value chain is critical. Indeed, finance is needed for both the demand and the supply of housing. On the demand side, the availability of and access to housing finance is a significant determinant in a household’s decision to acquire, build, or rent a house. Similarly, on the supply side, developers need financing to build the mass housing projects that are needed to address the continent’s housing deficit. Housing finance, being an essential part of financial systems, also contributes to the development and deepening of financial markets and the financial sector as a whole. A number of countries have successfully developed capital markets with significant volumes coming from the refinancing of mortgage debt. However, the development of housing finance on the continent has not kept pace with the backlog in housing demand.


The supply of housing to meet the demand in Africa faces numerous constraints, including poor targeting and insufficient scale. There are only a handful of developers on the continent capable of delivering more than 500 units at any one time. The difficulty to access long term affordable housing finance, both on the demand side and on the supply side is a major constraint. This lead the developers and investors to focus on the top end of the market, despite the demand being in the middle to lower end of the market. There are also constraints across the entire housing value chain, from institutional weaknesses, macroeconomic instabilities, to adverse legal and regulatory environments. The result of all this is an inefficient collateralization of housing assets and a significant shortage of long-term finance sources.

Functioning mortgage markets exist in only a few African countries, such as Morocco, Tunisia, Namibia and South Africa, where the mortgage loans as a percentage of the GDP is 18%, 9.2%, 19% and 34% respectively. In Nigeria, Cameroun, Egypt, Côte d’Ivoire, Ghana and Tanzania for instance, housing finance amounts to less than 1% of GDP. This is in comparison to a number of North American and European countries where mortgage loans are often over 40% of GDP. In the absence of well-developed mortgage markets, housing in Africa is either self-financed (by equity accrued through many years of savings or through incremental house building), or directly financed between individuals and community structures. In 2017, analysis by the World Bank suggests that only 5.2% of African households took out a formal loan to purchase a home. The African Development Bank estimates that only 6.7% of households can afford a house at an average starting price of USD 28,000.

The few banks that provide mortgaged have traditionally served the middle and high-income segment of the population. The perceived high credit risk, high transaction costs and the lack of competition in the banking sector in most African countries has resulted in extremely high interest rate and short tenures (less than 10 years) for mortgages in many African countries. CAHF estimated in 2016 that less than 10% of households in Africa could afford a mortgage on the cheapest newly built house. State-owned housing banks still play a prominent role in the housing finance market in Africa, but many have performed poorly and failed to meet housing policy objectives3. As a result, governments began to adopt policies that encourage private lending while maintaining a level playing field for all lenders.


Mortgage markets across Africa are only likely to grow if they are affordable, which will not only increase access to adequate shelter, but can have a significant impact on economic development. If 3 per cent of the African population was able to access mortgages, this would contribute US$300 billion to the African economy. African governments and lenders will need to place greater emphasis on domestic resource mobilisation by tapping into local sources of long-term finance, such as institutional investors.

Furthermore, the development and better capitalisation of Mortgage liquidity facilities (MLF), already present in Egypt, Algeria, Tanzania, Nigeria and in the West African Economic and Monetary Union (WAEMU) can play an important role. MLFs play a vital role in building domestic capital markets, especially in developing countries where mortgage markets are still small. MLFs serve as intermediaries between primary mortgage banks and the bond market. They have the capability and financial strength to raise medium- and long-term funds in capital markets through bonds issuance.

The demand for Housing Microfinance (HMF) is also important. HMF consists of financial services and loans to low-income households for home construction, home improvements, home expansion, and land acquisition which is well suited to the incremental housing development approach that is characteristic of Africa’s housing market. It is estimated that between 15 and 40 percent of microfinance loans are now diverted toward housing purposes. A characteristic feature of HMF loans is their short maturity, usually ranging from three months to three years. However, interest rates are high, sometimes above 30 percent on borrowed capital.  MFIs that add HMF to their suite of products could (1) increase their scale of operations and profitability, (2) reduce client dropout rates and decrease the overall risk portfolio, as housing loans tend to outperform other loans, (3) provide additional repayment incentives and resources to proven clients, and (4) gain access to affordable government funds that have been earmarked for housing (Goldberg and Motta 2003).

Residential Real Estate Investment Trusts (REITs) have emerged as an innovation in housing finance that has the potential to increase housing delivery as well as access to housing finance products. A REIT is a tax-efficient investment vehicle designed to aggregate diverse sources of funding (from international and institutional investors through to households), and target them into a real estate portfolio that extends beyond the limitations of individual projects.  REITs have been implemented since the early 90s in few African Countries (Ghana, Nigeria, Tanzania, and in a bigger scale in South Africa) and despite the limited capital available has shown promising results. In Tanzania, Watumishi Housing Company (WHC-REIT) was established in 2014 and was licensed by the Capital Market and Security Authority (CMSA) in 2015, thus becoming the first fully-fledged REIT to be established in Tanzania and East Africa. The WHC-REIT aims to mobilise funding for the development of low-middle income housing, both for sale and for rent. The target house price is between US$ 10 000 and US$ 40 000. 133 The first phase of development, launched in December 2015, consists of 1 500 units spread across 11 regions. WHC-REIT’s property portfolio currently sits at around US$ 40 million, with 100% of this in residential real estate.

Section 2: Highlights of our Activities

MFW4A’s objective is to support the expansion of housing finance in Africa. We will assist our members to identify and develop housing finance interventions, investments, and strategies that contribute to the development of the affordable housing sector on the continent. Our approach is to complement existing initiatives (i.e. Centre for Affordable Housing Finance) by linking & integrating housing finance to the broader financial sector ecosystem. Our focus is on : (i) identifying emerging challenges, opportunities and solutions through research and knowledge dissemination; (ii) partnerships and advocacy by drawing on our existing networks (i.e. African Pension Funds Network); (iii) facilitating investments, market intervention support by leveraging high-level forums; and (iv) strengthening capacities of housing finance actors.

Knowledge Management and Research

Webinars, Knowledge Briefs, Case Studies

Toolbox Description

MFW4A and CAHF Housing Finance Webinar Series

Toolbox Date
Toolbox Description

Webinar Report – Lowering the High Interest Rate Cost of Housing Finance

Toolbox Date
Toolbox Description

Webinar Report – Affordable Housing in Africa: Challenges and Opportunities

Networking and Advocacy Networks,

High-Level Conferences and Roundtables

Toolbox Date
Toolbox Description

Co-organized the 34th African Union for Housing Finance (AUHF) Conference around the theme "Building Africa’s Housing Financing Chain" in Abidjan, Côte d’Ivoire.

Project Support and Capacity Building

Trainings and Marketplaces

Toolbox Date
Toolbox Description

Workshop on "Mortgage Product Design and Portfolio Management Capacity Building" (MFW4A, IFC, CRRH-UEMOA & AfDB).


Jul 27, 2021
Credit extended by the monetary banking system to the private sector increased in the first quarter of 2021, with loans to househol
Jun 30, 2021
At the Finance in Common spring meeting sponsored by  AfDB , IDFC and  AADFI, preceding the Financing African Economies summit, in May 2021, Public and Natio
Apr 22, 2021
After the bad year 2020 marked by the covid-19 pandemic, 2021 seems to bring fresh air to the Nairobi Securities Exchange.
Apr 01, 2021
Between 2015 and 2020, West Africa has attracted $5.4 billion in private equity investment, according to a report recently issued by the African Private Equi
Jun 08, 2021 - Jun 10, 2021
Making Finance Work for Africa (MFW4A) are partnering with the Global Ethical Finance Initiative (GEFI) to host the West Africa focus on Day 1 of the Ethical…
Mar 25, 2021
Virtual (Online)
Date: 25 March 2021 @ 2pm GMT (Abidjan)  The long-term finance agenda has received increasing attention in recent years resulting in the establishment of the…
Sep 22, 2020
Dear Readers, I hope this message finds you well. It is an honour for me to assume the role of the Making Finance Work for Africa (MFW4A) Partnership…
Sep 21, 2020
The COVID-19 pandemic has greatly disrupted economic activity around the world and significantly affected global financial conditions. Experts predict that the…
Sep 07, 2021 - Sep 08, 2021
2nd Annual Banking Innovation Africa Forum is a unique conference that is put together annually to bring experts, professionals and enthusiast in the banking,…


Dear Readers, More than a year since Africa recorded its first confirmed case of the Covid-19 virus in Egypt on 14th February 2020, and there…
Dear Readers, I hope this message finds you well. It is an honour for me to assume the role of the Making Finance Work for Africa (MFW4A)…

Strategic Partners

We are a multi-donor initiative with a strong partnership and collaborative mindset. We work with a variety of local, regional, and international institutions, both public and private, in order to achieve our mission to develop the African financial systems. Below is a summary of the institutions we work with to support the development of Housing Finance in Africa.