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HOUSING FINANCING
-A PUBLIC-PRIVATE PARTNERSHIP –
DEVELOPING HOUSING FINANCE IN
AFRICA
BY: SIMON WALLEY
HOUSING FINANCE SPECIALIST
WORLD BANK
Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Center
8th to 10th of September 2009, Maputo - Mozambique
Outline
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•
•
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Why Housing Finance ?
How to Expand Housing Finance
World Bank activities
Challenges
Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Challenges to provision of housing
Demand for Housing
• Availability of financing for
end user
•High interest rates
•Lack of long term funds
•Low levels of income
•Lack of affordable housing
Lack of effective
demand
Supply of Housing
• Availability of financing for
developers
•Cost of building materials
•Planning/building regulations
•Cost of infrastructure
•Lack of skills/capacity
Lack of affordable
supply
Incremental Construction
…expanding access to housing finance down-market and
increasing the effective demand for housing
Cash Purchase
High
Income
Cash Purchase
Mortgage
Housing
Microfinance
Micro-credit/savings
Current Situation
Low
Income
Micro-credit/savings
Objective
Why Housing Finance?
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Urban development strategy: cities are also built the way they are
financed (avoid slum proliferation)
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Poverty reduction & social stability: empowerment, retirement,
asset building, community strengthening
•
Integral part of the global financial sector liberalization (banks, non
banks, bond markets, pension funds, etc.)
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Housing is a sizeable and durable investment: needed market debt
leverage
Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
How to build inclusive and sustainable HF system?
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Sound foundations
– Macroeconomic stability
– Workable legal system (property titles, foreclosure)
– Risk management and funding tools
– Sound financial sector regulations
– Competing and innovating private lenders
•
Affordable housing (multiple supply constraints)
•
Enabling role of the State
– Less of direct lender/builder, rather build conducive market
Conference and General Meeting of African Union for Housing Finance
environment,Annual
catalyst
roleChissano
to expand
accessibility
Joaquim
International Conference
Center
8th to 10th of September 2009, Maputo - Mozambique
World Bank’s housing finance program
– Growing scope 30+ countries & ambitious reforms
– Broad range of policy reforms, new legislation, pilot programs, studies
– Financed using IBRD loans, IDA credit or grants and trust funds
– Global, regional, country conferences & training programs
– HF flagship book published
– Collaboration with Urban/Slum upgrading/Land projects
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
8
Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Case Study - Tanzania
– Has had stability in its banking sector and macroeconomy
– Undertaken legal reforms with new mortgage law, condominium law,
program to formalise land ownership
– World Bank providing support starting in 2010 by:
• Creation of a liquidity facility, mortgage market development
• Housing Microfinance Fund , capacity building for SACCOs
• Several steps to expand supply of housing
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Mortgage Liquidity Facilities
– Operating already in Egypt and Jordan
– under discussion in Nigeria, Uganda and WAMU
– Provides a solution to maturity mismatch issue and shortage of long
term funds
– First step onto secondary mortgage market without the risks associated
with securitisation
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Mortgage Liquidity Facility
A low risk institution acting as an intermediary between capital markets and
primary mortgage lenders.
Funding
Grant Loan
Borrowers
Mortgage
Collateral &
Payments
Lender
Funding
TMRC
Sell with recourse or
assign loan &
Payments
Investors
Bonds &
Payments
Lessons for emerging market from US mortgage ‘meltdown’
• Focus on credit quality of borrower first then on collateral – not asset
based lending
• Government guarantees are real money and can be expensive
• Importance of consumer protection – provision of information and
prevention of predatory lending
• Market transparency and accountability – originators should have some
‘skin in the game’
• Property markets never grow forever!
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Challenges
– Further Urbanisation to come  Cultural change  adapt to city living,
smaller houses/multi-family
– Offering solutions across the income spectrum
– Developing rental finance, housing microfinance, developer finance
– Integrating urban policy with financial sector reform
– Creating capital markets and a source of long term funds
– Making Progress on Land issues
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
International Housing Finance Course
– Run by Witwatersrand Business School with support from Wharton
School, University of Pennsylvania
– 2-7 November in Johannesburg
– Aim to build an annual event for sub-Saharan Africa
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
HOFINET
– Housing Finance Information Network
– A portal website for sharing information on housing finance
– Started a data collection exercise
– Hosted and run by Wharton School, University of Pennsylvania with
support from World Bank, IFC, FMO
– Aim to have contributors/editors to the site from all over the world
sharing knowledge and best practice
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique
Housing Finance Policy in Emerging Markets
– Published in June 2009, after 4 years in preparation
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Annual Conference and General Meeting of African Union for Housing Finance
Joaquim Chissano International Conference Center
8th to 10th of September 2009, Maputo - Mozambique