For people in the developed world, a mortgage is a step toward owning a home. In developing countries, that dream is often elusive—especially for women.
Female home ownership in the developing world is a critical issue: it not only has ramifications on living conditions, but in women’s ability to build and grow their own businesses. Accessing formal credit relies heavily on collateral, namely large assets—a house or an apartment—that women often lack but which are essential to building their credit history. In many cases, women also use their homes as the base for their business.
Central America presents a clear example of this challenge. Less than 40% of women in this region have access to a bank account, and only 6% have taken out a mortgage . In comparison, 16% of women in Colombia and 13% of women in India used formal loans to purchase housing, according to a recent IFC study, Her Home—Housing Finance for Women.
These gender disparities limit women’s financial capacity and business growth opportunities. Women demonstrate greater educational performance and positive traits (such as lower default rates on their bank loans) as banking clients, but they remain woefully underserved by the financial sector. Women-owned businesses have less access to commercial loans because they tend to be part of the informal sector and therefore lack the proper documentation—for example, proof of income or real estate collateral—required to access financial services. Central America needs to break down this barrier to make its growth more inclusive and to continue reducing inequality.
With this in mind, IFC (the private sector arm of the World Bank Group), recently pioneered a new partnership with Global Bank in Panama to launch the first ever mortgage product targeted specifically toward women . The aim is to create opportunities that will tackle the two interconnected issues of housing finance for women and supporting women-owned businesses. The initiative will address the fact that women-owned businesses in Panama currently have less access to loans because they lack the real estate collateral that financial institutions require.
With one of the largest and most stable financial sectors in the region, this initiative in Panama will show the commercial viability of promoting financial products and services for women to become homeowners and use this as a gateway to receive loans to finance their businesses. This could potentially be a solution that developing economies in Latin America and other regions could replicate to expand access to capital for women entrepreneurs.
The financial sector could also stand to benefit as female homeownership is an untapped business opportunity. Despite the hurdles that women face, there is a large unmet demand for housing finance for women-headed households, particularly in developing countries . IFC’s latest study on women’s access to home ownership—covering Colombia, India, and Kenya— confirms that the women’s housing finance market is more than $70 billion in these three countries alone.
In the one of Panama’s neighboring countries, Colombia, the estimated market size for women’s housing loans is $23 billion, and 49% of women who participated in a survey planned to purchase a home or make home improvements in the next five years. While women make up half of the population, only a small fraction of them are property owners. In fact, only 8% of female-headed households in Colombia applied for a housing loan in the last five years.
Colombia is trying to address this challenge. The country started putting in place initiatives to offer subsidized interest rates for a lower income segment of the population, which includes female-headed households. In another example, India’s “Housing for All,” a Credit Link Subsidy program, provides a subsidy if a woman is on the registered title.
Latin America is also well positioned to start adopting innovative housing finance products and services geared toward women . This way, the banking sector can tap into a large underserved market and add value to their bottom line while contributing to the growth of the housing sector. The positive impacts could be widespread: for the banks, these initiatives help to attract and retain women as retail customers, while also supports women-owned businesses and thus promoting and inclusive economic growth .It’s time for women to own a home and turn their dream into a reality.
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