WB approves new funds for more affordable housing in Tanzania

The World Bank Group’s Board of Executive Directors has approved USD60 million in new financing from the highly-concessional International Development Association (IDA) to help Tanzania develop a viable mortgage finance market for affordable housing.

World Bank Group

The new financing will build on the achievements of the ongoing 2010 Housing Finance Project (HFP) and brings the total IDA investment in the project to USD100 million.

The HFP has overseen the establishment of the Tanzania Mortgage Refinancing Company (TMRC) which is playing a key role in developing the mortgage market. The Company provides long term financing to mortgage lenders which has encouraged an increasing number of banks to offer mortgages. Improved access to financing has also contributed to the growing supply of affordable housing coming onto the market.

The project, which is being implemented by the Bank of Tanzania, is also delivering a comprehensive capacity building programme on the mortgage market targeting service providers, financial intermediaries, market professionals, policy makers, regulators, government authorities, the judiciary and the general public.

“Tanzania’s rapid urbanisation in recent years has underscored the urgency to improve access to finance for affordable housing,” says Philippe Dongier, World Bank Country Director for Tanzania, Burundi and Uganda.

“Developing mortgage markets will make it possible for ordinary families (including those that have low incomes) to invest in their own housing as opposed to renting or building slowly over many years as and when they set aside some savings.

The mortgage market will go a long way in addressing the constraints to accessing housing credit which many working urban residents face and it will further expand the construction industry and associated jobs.”

The TMRC provides a critical link between investors and housing markets, ensuring the needed capital is invested in growing Tanzania’s housing resources. The company is now fully capitalized and profitable with paid-in share capital amounting to $8.8 million from its shareholders, currently consisting of 12 commercial banks and 2 non-bank institutions.

“TMRC has been operating for three years and already has made a large impact. The number of banks now offering mortgage loans has grown from only eight banks in 2010 to 19 in 2014 and mortgage repayment periods increased from the maximum of seven years that was previously offered to 20 years that banks offer now,” says Yoko Doi, World Bank Senior Financial Sector Specialist, who is the Task Team Leader for the HFP.

“The additional IDA funds will put TMRC on a stronger path to sustainability by raising its own funding through other means, such as local bond issuance.”

Another initiative set up under the project is the Housing Microfinance Fund (HMFF). Launching during 2015, the HMFF will provide long-term loans for lower income earners who currently lack access to housing finance either for the purchase of a home or for home improvements.

The additional IDA financing will allow the HMFF to be in a position to start building microfinance institutions’ capacities to develop and administer housing microfinance products.

The HFP is aligned with Tanzania’s five-year National Strategy for Growth and Poverty Reduction (MKUKUTA) and the Tanzania Development Vision 2025, which highlight the importance of affordable housing, access to finance, and capital market development.

The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programmes that boost economic growth, reduce poverty and improve poor people’s lives.

IDA is one of the largest sources of assistance for the world’s 77 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change for 2.8 billion people living on less than US$2 a day.
Since 1960, IDA has supported development work in 112 countries. Annual commitments have averaged about US$18 billion over the last three years, with about 50 percent going to Africa.

For his part, the Chief Executive Officer (CEO) for Tanzania Mortgage Refinance Company (TMRC), Oscar Mgaya says “indeed this is good news and it was only possible because both the World Bank and the Government of Tanzania are satisfied with the progress we have made so far.”

Mgaya further noted that “while we are still a long way from having a fully fledged mortgage market in Tanzania, we have made some significant progress towards that direction over the last couple of years.”
To that effect, Mgaya, says that TMRC are grateful to both the World Bank and the Government of Tanzania for their continued support.

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