Mortgage loans provide access to affordable housing in West Africa

Kafui C., a 40-something-year-old human resources assistant at an institution in Lomé, Togo, lives with her children in a house that she owns. “It’s always a great feeling to have your own home,” she said, adding, “We are happy!”

Finding housing: a headache when funds are scarce

From Burkina Faso to Niger and Mali, from Senegal to Benin and Guinea-Bissau, Côte d’Ivoire, and Togo in between, finding a place to call one’s own is a dream for millions like Kafui. And yet, this is a lifelong journey for many low- and irregular-income households that grapple with high costs and a lack of money.

Take Oumar D., a teacher living in rental accommodation in Bamako, Mali with six mouths to feed. He had no hope that he could finish building his house before retiring. “My first loan could only buy me a 500 m2 plot of land, and it took me seven years to pay it off. With the second loan, I laid the foundation and got some of the structural works done. In the meantime, household expenses and the children’s school fees went up. I had a choice to make.”

Despite his circumstances, Oumar is considered a creditworthy borrower in a region where mortgage loans are very hard to come by. Self-employed persons and low- and irregular-income workers in the informal sector are even worse off. Kouamba K., a Togolese businesswoman, said: “I had my own land, but I couldn’t build on it because I couldn’t get any bank loans. I was a renter for almost 20 years, and I was living in difficult conditions.” 

Affordable housing for all

It is difficult for low-income earners to secure affordable housing in the eight member countries of the West African Economic and Monetary Union (WAEMU). Demand is booming, driving up costs. The WAEMU space is facing a deficit of decent housing of roughly 3.5 million units. An additional 250,000 houses would have to be built each year to address the combined impact of rapid urbanization and population growth.

At 60 years old, Oumar finally moving into his own home in Bamako and has a land title that bears his name. On the eve of his retirement, his dream has finally come true. Like Oumar, 12,000 other persons have become homeowners under the $155 million regional WAEMU Affordable Housing Finance Project financed by the World Bank through the International Development Association (IDA). This financing enabled WAEMU’s regional mortgage refinancing company (CRRH-UEMOA) to promote access to affordable housing in the subregion.

“The main obstacle to the development of mortgage loans is the difficulty that commercial banks face in accessing long-term financing. World Bank financing made it possible to provide these resources to them at extremely competitive rates and to enable them to offer their customers affordable mortgage loans that are capped at around $30,000 and are repayable over 10 to 15 years,” noted Yedau Ogoundele, CEO of CRRH-UEMOA.

A historical partnership to strengthen financial inclusion

The project also targeted decentralized financial systems (microfinance) that are often deemed too high risk, with a view to strengthening financial inclusion and enabling low-income earners to own a home.

According to Yombo Odanou, CEO of the Togo Savings and Loan Cooperative for Artisans (CECA-Togo): “Thanks to this historic partnership with CRRH-UEMOA, we now have the tools we need to manage risks associated with housing loans. The 10-year term on our housing loans is an incentive our customers find attractive.”

Kouamba, the Togolese businesswoman, used a mortgage loan to renovate and expand her family home in Lomé. “I am now living in my own home! I cannot begin to describe how overjoyed I am ...” she said, beaming with pride. She already has plans to build another house.

In Bamako, 35-year-old Dembele I., a marketing specialist, lives in his own house with his family. He stated that “After the difficulties we experienced while renting, my wife and I decided to build our own home. Today, we are pleased with what we were able to accomplish with the loan we got.”

More than 12,000 new homeowners, and greater resource mobilization thanks to IDA funding

Almost 100 banks and microfinance institutions in the WAEMU area have received support to provide mortgage loans, thereby paving the way for more than 12,000 persons to own at least one home. For 86 percent of the beneficiaries—three quarters of whom are middle- or low-income earners—this was the first time that they had applied for a mortgage loan. Now more than 50,000 persons have discovered the joys of living in their own home. The new homes financed generated around 40,000 jobs.

Furthermore, the regional WAEMU Affordable Housing Finance Project helped CRRH-UEMOA raise $385 million in additional financing (more than double the IDA amount) through regional and international bond issues. This has attracted new investors and is contributing to the development of the regional capital market thanks to the long duration of the bonds, thus ensuring the continuation of the project's actions to finance decent housing. “This is a key impact of the project. This is CRRH’s very first regional bond issue since it was established in 2010. We have been able to increase and supplement concessional resources to allow our partner financial institutions to offer their customers more flexible terms and conditions”, said Ms. Ogoundele.

A new era of access to decent housing in the subregion has come, that will lead to the creation of thousands of jobs for small construction firms. As Boutheina Guermazi, director of regional integration for Africa and the Middle East, put it, “Decent housing should not be a luxury, but a right for all. By investing in this project, we wanted to help build a future where everyone can have decent housing in this WAEMU community, a successful model of regional integration in Africa.”