IFC is supporting the development of the mortgage market in Ghana and in other African countries, making it easier for people to get hold of the capital they need to swap rental payments for their own piece of property.
Through its Africa housing program, IFC supports comprehensive legal and regulatory reform while delivering long-term capital for mortgage lending. The overall goal is to put houses in the hands of lower and middle income earners previously shut out of the market because no long-term financing was available to them.
IFC backs increased home and property ownership in part because it can significantly contribute to the health of financial institutions, reduce poverty and promote social stability.
"IFC is supporting the work of governments that encourage home and property ownership,” said IFC Director Thierry Tanoh. ”A market-orientated mortgage system will help improve the lives of many African families, while also stimulating growth and employment in related industries, including construction and building materials."
RESERVED FOR THE RICH?
Home ownership in Africa has traditionally been the domain of only the very rich, largely reserved for those with the savings to purchase a home outright. Without a significant mortgage market, even African families with rising incomes have found it difficult to buy a home.
High interest rates, persistent inflation and currency fluctuation have for decades put the brakes on long-term lending in Africa, with wary banks mostly ignoring the mortgage market.
Problems include issues of house registration, transfer, appraisal and ownership, and cumbersome foreclosure and tax regulations. The tradition of ‘tribal’ or communally owned land has further complicated the already tangled process of mortgage lending.
In Ghana, for example, the country’s only mortgage originator at the time issued a mere 85 new mortgages in 2004.
The country’s opaque land titling and registration process also posed a challenge to banks wishing to increase mortgage lending. Many potential homeowners were discouraged by a minimum 10-month wait for land registration.
A New Home Owner in Ghana |
Afor Kojo Asmah, a 38-year-old Ghanaian, recently purchased his first home.
"I’m relieved to finally own my own house," said Asmah, a graphic designer and married father of two. "I lived in a small rental apartment for years and the rent kept doubling and doubling and all my salary was going to my landlord. I wondered why I was doing this and finally decided it was time to buy."
"The process of buying my house was very swift. I wonder why I didn’t do it before,” said Asmah. "There is much better education about mortgages today and many of my friends are deciding to buy. The best thing is nobody can increase my rent anymore," he added. |
IFC is supporting Ghana’s efforts to address these and other problems. IFC is advising a number of the country’s banks, helping them increase the number of home loans they make. In August 2007, IFC invested $25 million to support three financial institutions boost their mortgage operations in Ghana.
These banks will be the first institutions globally to use an innovative IFC mortgage toolkit. It provides guidance on introducing mortgage products and helps lenders establish standard loan documents and implement key steps for originating and servicing mortgage loans.
ADVISORY SERVICES
An IFC advisory services program has developed and strengthened institutions and processes that support Ghana’s mortgage market while improving the legal, tax and regulatory framework for mortgage finance.
Ghana’s mortgage market is already showing signs of growth. In 2007, IFC partner banks funded 310 mortgages in Ghana with a value of $16.29 million. These are small numbers by international standards, but a solid foundation from which Ghana’s mortgage market is expected to grow rapidly.
IFC’s housing program is also working in Uganda, providing input on a draft government mortgage law. It will soon be active in Nigeria, with plans to support reforms and encourage international mortgage lending standards in Burkina Faso, Madagascar, Rwanda and Tanzania.
Click
here for more information about the Ghana Primary Mortgage Market Initiative
For More Information Contact:
Jason Hopps
Communications Officer
Johannesburg, South Africa
JHopps@ifc.org
