By Audu Liberty Oseni
As a result of the housing deficit in West African cities, most low-income earners rely on mortgage financing to own their houses, believing that effective mortgage financing is key to addressing the housing deficit.
For instance, in Nigeria, mortgage financing has produced a result on mass housing. In the year 2000, Federal Mortgage Bank of Nigeria gave the sum of 5.8 billion naira to National Housing Fund established by Decree No. 3 of 1992 which is a major means of mortgage lending in Nigeria for the building of houses.
Haggai Savings and Loans Limited (Mortgage Bankers) at Surulere Lagos, provides financial support to its customers to either build or purchase a house. Also, Susu Microfinance Bank Ltd gives financial support to Nigerians that are in need of it to build their houses, while Guaranty Nigerian Bank (Microfinance Obodoukwu) offers loans and encourages investment in housing among the inhabitants of Obodoukwu community.
Nigeria is not the only country that explores this initiative, in Senegal, the French Development Agency has granted a credit of €8 million to Housing Bank in Senegal for funding and developing mortgages. And the aim is to widen access to housing finance in Senegal.
In Mali, Mortgage Financing Project loan makes it easy for Malians to own houses. Fundamentally, this project aspires to arouse economic activities associated with 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 trend continues in Ghana, Ghana Home Loans is lending home loans, and this essentially is creating access to the middle-class owning home in Ghana. Ghana Home Loans makes it possible 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 in Ghana.
On a similar trend, Ecohomes Liberia 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 a home 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, susu banking industry, for instance, have defrauded clients and taken away their savings, amounting to $65,000 in so many instances. The same is not different from Nigeria experience where some people operate illegal and unregistered Micro Mortgage finance bank only for customers who kept their monies in those banks to wake up one day to discover that the bank and its agencies are nowhere to be found leading to loss of several millions of money by the bank’s clients.
However, it is important to note that the greatest challenge to mortgage financing in West Africa is that the poor the mortgage is targeted at cannot afford to access it either because of the high-interest rate or conditions (collateral) set before it can be accessed.
In a worst case scenario, private developers who have the capacity to access the mortgage built houses with it and make the houses not affordable by the poor who need the houses more. In Nigeria for instance, one needs to provide 10% of 50 million Naira before he or she can access the mortgage. Thus, it becomes difficult for the poor to provide such amount of money before he or she can access the mortgage, and this makes it difficult for the mortgage to achieve the outcome it is set to achieve.
It is important to accentuate, 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 and is 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.
For instance, Lagos State alone needs more than 250,000 housing units yearly for the next 20 years, for it to reduce the housing deficit it is facing 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 be 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.
*Oseni is communication officer Rural Mobile Health Initiative