MAKING HOUSING AFFORDABLE AND ACCESSIBLE WITH MARKET-BASED SOLUTIONS: INNOVATIVE FINANCING TO ADDRESS HOUSING IN TANZANIA

In Tanzania, a seven-fold expansion of the housing finance market was achieved through International Development Association (IDA) financing and an innovative solution to address housing, a critical development challenge in the country. Five thousand mortgages and two thousand housing micro-finance loans were provided. Nearly 34 percent of the beneficiaries were women. Long-term sustainability of the mortgage market was ensured through market-based solutions.

Challenge

One of Tanzania’s greatest long-term developmental challenges has been providing citizens with access to decent and affordable housing. While it’s been a government priority, interventions had limited success before 2010, even with a rapid urbanization and an increased demand for affordable housing and housing finance, especially by the lower and middle-income segments of the population. The lack of access to affordable housing impacted people’s well-being, including: safety, hygiene and health issues (lack of access to clean water, safe toilets, dust in the house and extreme heat); preventable illness (malaria or dengue); and access to basic needs of living, such as electricity which also impacted education and access to information. Often, the lower and middle-income population had no option but to save money to gradually build their own houses over several years, sometimes decades, while they rented or lived in poor or unfinished houses.

Approach

The Tanzania Housing Finance Project demonstrates the best of the World Bank’s innovation and risk-taking during project design and implementation, reflecting principles of Maximizing Finance for Development. To expand the housing finance market, the Tanzania Mortgage Refinance Company (TMRC) was created to provide medium-and-long-term liquidity to mortgage lenders. A Housing Microfinance Fund was also created to provide medium-term liquidity to microfinance institutions, offering housing microfinance loans to the low-income population. To ensure financial viability and sustainability of the TMRC beyond the project period, the World Bank helped design its access to capital markets through bond issuances. The project showed that private capital, even in less-developed financial markets, can be mobilized successfully through judicious public investments in relatively large volumes, compared to overall credit market size. Through two extensions, two restructurings, and additional financing, the World Bank stayed with the project for nearly 10 years.

Continue Reading > > >