High urbanization rates are increasing the pressure on Africa’s cities to build capacity for more adequate, affordable housing and to provide additional services. This influx poses challenges as the private and public sector struggle to deliver new housing at a pace and cost that will meet demand. Mortgage markets are nascent, reaching a small share of the population who are mostly high-income earners. Unsecured housing finance – whether formally structured as housing microfinance or implemented through personal savings or loans – is haphazard and poorly connected to most housing delivery systems. As a result, most households build their homes incrementally, using small scale, informal builders. Even though these constraints are not particular to gender, the challenges are particularly acute for women.
Female-led households typically earn less income, and are engaged in the informal sector, thus lacking steady income and documentation that formal financial institutions require to provide credit. Furthermore, the policies, procedures and credit evaluation criteria of formal financial institutions are typically gender-neutral, and thus do not recognize the specific needs and constraints of women as a distinct customer segment. As a result, formal financial institutions currently do not serve them adequately. Women are also constrained by social and cultural norms as well as the legal framework which can limit their ownership and inheritance rights.
Despite these challenges, there is a substantial opportunity to extend and deepen the housing and housing finance markets for women in Africa. Female borrowers are a specific sub-segment with particular needs and financial habits, and who play a variety of household roles. If those specific traits, constraints, and roles are properly understood and addressed, then tailored products and services can be developed for this untapped market.
For example, the potential demand for housing finance among women can be segmented into three broad categories.
- Consumers, seeking to improve their housing situations through the purchase, renovation or construction of their home.
- Suppliers, participating in the housing delivery ecosystem as micro-builders or developers, operating as landlords, providing rental accommodation on their own properties, or with an additional property over which they have some rights.
- Entrepreneurs, running all or part of their WSME operations from their home, or using the home as a place of storage for their business.
This segmentation creates a useful basis for understanding the capacity of women as borrowers. For example, while repayment is based on the borrower’s existing income when women operate as consumers, they can rely on their future income stream when they operate as a supplier or entrepreneur. In addition, potential product opportunities can be developed for each sub-market, such as savings-linked products, phased-out mortgages, as well as non-financial services such as title insurance, legal or accounting services.
Underwriting innovations also matter. As most of the women in Ghana and Senegal earn their incomes informally, and the credit they secure, is likely also, informal –there is hardly any footprint of their financial activities, and therefore current mechanisms to establish payment risk are not adequate. Given that digital financial services are already popular in both countries, these services are creating a digital footprint (transaction history, loan repayments) that can serve as alternative sources of data to be used to assess women’s credit worthiness.
The lack of data, disaggregated by gender, creates a profound information asymmetry challenge both for the suppliers of finance and for women as borrowers. The collection of supply side data disaggregated by gender allows financial institutions (FIs) to develop data-driven evidence of the market opportunity, and to design housing finance products and services tailored to women’s preferences and needs. Regulators would need to collaboratively work with FIs to identify existing data that can be collected, as well as data gaps and mechanisms to address them.
A forthcoming report prepared by IFC and based on research done by the Centre for Affordable Housing Finance in Africa will further the analysis on the Housing Finance Market for women in Africa. It is key to advancing innovation and collaboration among the leading stakeholders to implement solutions to better serve women customers in the housing sector and support women’s economic empowerment and sustainable economic growth in Africa and around the world.
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