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Wagane Diouf, CEO Urbanis Africa – www.urbanisafrica.com
State of Housing
Microfinance In Africa
Urbanis delivered 330 houses and is yet to
finalize of end user financing.
Housing Microfinance is key to growth of
Affordable housing in Africa.
1Urbanis Africa Experience
Affordable housing is a $30 billion market in
Africa. The size of the market commands a huge
potential for housing related Microfinance
services.
2Opportunities in HMF
Africa is almost as urbanized as China and has as
many cities of 1 million people as Europe.
As a result 60% of Africa’s urban population lives
in inadequate housing.
3Rapid Urban population growth
Share of rural vs. urban population by region, 2010 (%. Million)
SOURCE: United Nations; McKingsey Global Institute
100% =
Rural
Urban
1,219 1,032 1,351 830 594 349
48 52 109 52 63 48
Cities with >1
million people
Africa is plagued with a chronic inability to meet
the widening gap between housing demand and
supply for low income groups. The gap is
approaching 10 to 1.
4Demand Supply Gap is 1 to 10
Region Demand Supply
Sub-
Saharan
Africa
 32 million households in Sub-Saharan Africa are
considered inadequate.
 Under current urbanisation rates , an additional 14
million housing units per annum are required
 308 million people; 191 million of which
live in inadequate housing.
Kenya  60% of households are considered ‘inadequate’
housing and are located in slums.
 150,000 units are required per year
 Less than 30 000 units per year
 The annual deficit is thus more than
120,000 housing units per year
Ghana  Ghana’s annual demand for housing currently
stands at 120,000 housing units per annum
 Current housing supply provides 42,000
units per annum which is only 35% of the
demand
Nigeria  33.6 million Nigerians living in urban areas (46% of
the urban population) are considered to be living in
inadequate housing
 The annual deficit is 16 million units
 720,000 units need to be created
annually to meet the demand
 Current supply is however meeting only
3% of this demand
Tanzania  80% of the entire population is living in unplanned,
informal settlements with poor shelter and few
basic services
 The housing deficit in urban areas is
estimated at 1.2 million units.
The overwhelming number of home buyers are
from the informal sector and do not qualify for
formal mortgages. HMF is the only option for
most Africa potential home buyers.
5Informal Sector is 80% of home buyers
Sub-Saharan Africa population
Informal sector
Informal working-age
labor force
Informal sector
households
800 million
650 million
250 million
50 million
UN Statistics Division
ILO; Finscope surveys
World Development Indicators
World Development Indicators
Depositing and
transacting market
Borrowing market
Source: 1Dr. Sher Verick, “The Impact of Globalization on the Informal Sector in Africa”
The affordable housing industry in Africa has
been held back by the lack of mortgage facilities.
With a a few notable exceptions, mortgages
represent less than 10% of GDP.
6Lack of financing is the culprit
Source: Africa Housing Finance Yearbook 2012
Product offering is focused on the end of the
Value chain and does not include small
contractors, suppliers and developers. A more
holistic approach is needed.
7HMF expanding product offering
Product Amounts Features Examples
Home Improvement Between $1,000 and
$15,000
3 – 5 years unsecured loan
toward additions to the
house. Flexible payment
terms
Select Africa – Procredit –
Akiba Bank
Micro Mortgage From $571 to $57,000 Up to 10 years. Requires
proof of salary or regular
income. Pension savings
more and more used as
collateral.
U Bank, National Building
Society Zambia
Microfinance Loan applied
toward a housing project
From $500 to $10,000 Up to 2 years. Usually
collaterized
Most Microfinance Banks
Private 2nd tier institution and missing in the list
of players. Real scale will not be achieved unless a
stable source of long term commercial capital is
available.
8Four key players drive change
2st Tier
1st Tier
Commercial Non Profit
MIFs
DTM
Banks
Housing
MFIs
Coop
Societies
MIFs
Non DTM
Housing
NGOs
SACCOS
Investment
Clubs
DFIs
Private
Equity
Housing
Funds
Apex
Institutions
Commercia
l Funds
Commercia
l Banks
Private 2nd tier institution and missing in the list
of players. Real scale will not be achieved unless a
stable source of long term commercial capital is
available
8Four key players drive change
2st Tier
1st Tier
Commercial Non Profit
Ugafode
AKIBA
Bank
Select
Africa
NACHU
MIFs
Non DTM
Habitat for
Humanity
SACCOS
Investment
Clubs
IFC/
KFW/OPIC
Kuyasa
Fund
Rooftops
Canada/CL
IFF
NACHUNUFF
IHS
The level of HMF loans compared to other MF
products is low. The performance of key players is
mixed at best. The opportunities still lie ahead
9Encouraging HMF performance
10Major HMF challenges
• Inappropriate government
policies
• Political & regulatory barriers
• Lack of replicable, scalable
models
• Poor understanding of HMF
Overall Environment
 Wholesale
Need for appropriate guarantee
mechanisms: to extend access,
deal with currency risk, and
facilitate wholesale lending,
etc.
 Retail
High interest rates; insufficient
providers: limited availability of
end user credit especially for
the very poor.
Finance
 Inability of the poor to access
serviced land
 In situ land servicing
 Security of tenure
 Bulk and connector infrastructure
Land
 Technical assistance required in a wide range of
areas
 Development and cost of appropriate, effective
technology
 Limitations with data collection, management,
analysis mechanisms and MIS systems
 Limited ability to articulate and support the
finance/ housing link
 Chicken-and-egg challenge of scale: limitations
with operational systems, capital and human
resources
HMFI Capacity
 Borrower education and
consumer/investor financial literacy
 Unstable incomes requires tailored
collection methods
 Limited affordability and lack of collateral
 Lack off housing support services to
support sound housing development
Borrowers
Many challenges related to
the broader value chain
affect the HMF industry
Challenges
The way forward is to intervene in the value chain
by financing contractors, suppliers as well as end
users. An integrated approach will reduce risk and
improve revenue generation.
11Innovation is the way forward
Urbanis is exploring ways to being the
conventional Banks into the Micro lending
business through securitization.
12Innovation is the way forward
Mortgage Bank
Jamii Bora Makao
Finance 80% of
Price of the House Security Fund
20 % Deposit
Home Buyer
Single Secured
Mortgage
Bundled
Instalments of 20
Deposits of 20%
Home Buyer
Home Buyer
Sell Houses to
Buyers
Monthly Instalment
www. Urbanisafrica.com
wagane@urbanisafrica.com

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URBANIS AFRICA ON THE STATE OF HOUSING MICRO-FINANCE IN AFRICA

  • 1. Wagane Diouf, CEO Urbanis Africa – www.urbanisafrica.com State of Housing Microfinance In Africa
  • 2. Urbanis delivered 330 houses and is yet to finalize of end user financing. Housing Microfinance is key to growth of Affordable housing in Africa. 1Urbanis Africa Experience
  • 3. Affordable housing is a $30 billion market in Africa. The size of the market commands a huge potential for housing related Microfinance services. 2Opportunities in HMF
  • 4. Africa is almost as urbanized as China and has as many cities of 1 million people as Europe. As a result 60% of Africa’s urban population lives in inadequate housing. 3Rapid Urban population growth Share of rural vs. urban population by region, 2010 (%. Million) SOURCE: United Nations; McKingsey Global Institute 100% = Rural Urban 1,219 1,032 1,351 830 594 349 48 52 109 52 63 48 Cities with >1 million people
  • 5. Africa is plagued with a chronic inability to meet the widening gap between housing demand and supply for low income groups. The gap is approaching 10 to 1. 4Demand Supply Gap is 1 to 10 Region Demand Supply Sub- Saharan Africa  32 million households in Sub-Saharan Africa are considered inadequate.  Under current urbanisation rates , an additional 14 million housing units per annum are required  308 million people; 191 million of which live in inadequate housing. Kenya  60% of households are considered ‘inadequate’ housing and are located in slums.  150,000 units are required per year  Less than 30 000 units per year  The annual deficit is thus more than 120,000 housing units per year Ghana  Ghana’s annual demand for housing currently stands at 120,000 housing units per annum  Current housing supply provides 42,000 units per annum which is only 35% of the demand Nigeria  33.6 million Nigerians living in urban areas (46% of the urban population) are considered to be living in inadequate housing  The annual deficit is 16 million units  720,000 units need to be created annually to meet the demand  Current supply is however meeting only 3% of this demand Tanzania  80% of the entire population is living in unplanned, informal settlements with poor shelter and few basic services  The housing deficit in urban areas is estimated at 1.2 million units.
  • 6. The overwhelming number of home buyers are from the informal sector and do not qualify for formal mortgages. HMF is the only option for most Africa potential home buyers. 5Informal Sector is 80% of home buyers Sub-Saharan Africa population Informal sector Informal working-age labor force Informal sector households 800 million 650 million 250 million 50 million UN Statistics Division ILO; Finscope surveys World Development Indicators World Development Indicators Depositing and transacting market Borrowing market Source: 1Dr. Sher Verick, “The Impact of Globalization on the Informal Sector in Africa”
  • 7. The affordable housing industry in Africa has been held back by the lack of mortgage facilities. With a a few notable exceptions, mortgages represent less than 10% of GDP. 6Lack of financing is the culprit Source: Africa Housing Finance Yearbook 2012
  • 8. Product offering is focused on the end of the Value chain and does not include small contractors, suppliers and developers. A more holistic approach is needed. 7HMF expanding product offering Product Amounts Features Examples Home Improvement Between $1,000 and $15,000 3 – 5 years unsecured loan toward additions to the house. Flexible payment terms Select Africa – Procredit – Akiba Bank Micro Mortgage From $571 to $57,000 Up to 10 years. Requires proof of salary or regular income. Pension savings more and more used as collateral. U Bank, National Building Society Zambia Microfinance Loan applied toward a housing project From $500 to $10,000 Up to 2 years. Usually collaterized Most Microfinance Banks
  • 9. Private 2nd tier institution and missing in the list of players. Real scale will not be achieved unless a stable source of long term commercial capital is available. 8Four key players drive change 2st Tier 1st Tier Commercial Non Profit MIFs DTM Banks Housing MFIs Coop Societies MIFs Non DTM Housing NGOs SACCOS Investment Clubs DFIs Private Equity Housing Funds Apex Institutions Commercia l Funds Commercia l Banks
  • 10. Private 2nd tier institution and missing in the list of players. Real scale will not be achieved unless a stable source of long term commercial capital is available 8Four key players drive change 2st Tier 1st Tier Commercial Non Profit Ugafode AKIBA Bank Select Africa NACHU MIFs Non DTM Habitat for Humanity SACCOS Investment Clubs IFC/ KFW/OPIC Kuyasa Fund Rooftops Canada/CL IFF NACHUNUFF IHS
  • 11. The level of HMF loans compared to other MF products is low. The performance of key players is mixed at best. The opportunities still lie ahead 9Encouraging HMF performance
  • 12. 10Major HMF challenges • Inappropriate government policies • Political & regulatory barriers • Lack of replicable, scalable models • Poor understanding of HMF Overall Environment  Wholesale Need for appropriate guarantee mechanisms: to extend access, deal with currency risk, and facilitate wholesale lending, etc.  Retail High interest rates; insufficient providers: limited availability of end user credit especially for the very poor. Finance  Inability of the poor to access serviced land  In situ land servicing  Security of tenure  Bulk and connector infrastructure Land  Technical assistance required in a wide range of areas  Development and cost of appropriate, effective technology  Limitations with data collection, management, analysis mechanisms and MIS systems  Limited ability to articulate and support the finance/ housing link  Chicken-and-egg challenge of scale: limitations with operational systems, capital and human resources HMFI Capacity  Borrower education and consumer/investor financial literacy  Unstable incomes requires tailored collection methods  Limited affordability and lack of collateral  Lack off housing support services to support sound housing development Borrowers Many challenges related to the broader value chain affect the HMF industry Challenges
  • 13. The way forward is to intervene in the value chain by financing contractors, suppliers as well as end users. An integrated approach will reduce risk and improve revenue generation. 11Innovation is the way forward
  • 14. Urbanis is exploring ways to being the conventional Banks into the Micro lending business through securitization. 12Innovation is the way forward Mortgage Bank Jamii Bora Makao Finance 80% of Price of the House Security Fund 20 % Deposit Home Buyer Single Secured Mortgage Bundled Instalments of 20 Deposits of 20% Home Buyer Home Buyer Sell Houses to Buyers Monthly Instalment