1. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique DEVELOPING HOUSING FINANCE IN AFRICA BY: SIMON WALLEY HOUSING FINANCE SPECIALIST WORLD BANK HOUSING FINANCING -A PUBLIC-PRIVATE PARTNERSHIP –

2. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 2 Outline Why Housing Finance ? How to Expand Housing Finance World Bank activities Challenges

3. 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 Availability of financing for developers Cost of building materials Planning/building regulations Cost of infrastructure Lack of skills/capacity Lack of affordable supply Supply of Housing

4. …expanding access to housing finance down-market and increasing the effective demand for housing Micro-credit/savings Cash Purchase Mortgage Housing Microfinance High Income Low Income Current SituationObjective Micro-credit/savings Incremental Construction

5. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 5 Why Housing Finance? Urban development strategy: cities are also built the way they are financed (avoid slum proliferation) 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.) Housing is a sizeable and durable investment: needed market debt leverage

6. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 6 How to build inclusive and sustainable HF system? 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 environment, catalyst role to expand accessibility

7. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 7 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

8. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 8

9. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 9 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

10. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 10 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

11. Mortgage Liquidity Facility A low risk institution acting as an intermediary between capital markets and primary mortgage lenders. Grant Loan Borrowers Lender TMRC Investors Mortgage Collateral & Payments Sell with recourse or assign loan & Payments Funding Bonds & Payments Funding

12. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 12 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!

13. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 13 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

14. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 14 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

15. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 15 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

16. Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8 th to 10 th of September 2009, Maputo - Mozambique 16 Housing Finance Policy in Emerging Markets – Published in June 2009, after 4 years in preparation