In late 2006, Fin Mark Trust commissioned consultant David Gardner to visit Zambia and update the findings of a more extensive study into Zambia’s housing finance sector that he had undertaken in 2004. His visit included meetings with key practitioners in the housing finance sector. Following closely on the heels of the launch of “Fin Scope”, in Zambia, the intent of this report is to provide a general overview of the housing finance sector in Zambia. Significant improvements in the sentiments of the banking sector towards housing finance have occurred over the last two years. In 2005, only one bank was considering entering the home loan market, two specialist building societies had limited (problematic) home loan portfolios and previous home loan portfolios of the state-owned banks were in disarray. Currently, three of the largest banks have actively commenced housing finance portfolios, two Building Societies are growing their lending portfolios and a number of other players are considering entering the home loan market. The level of financial intermediation in Zambia is currently low but growing. Up until recently, a major proportion of banks’ earnings were via forex trading and returns on government securities. The decreasing returns on these instruments and the growing competition, along with increasing sources of capital, is now increasing the volume of intermediation substantially.

Zambia’s housing finance sector includes development banks, pension & provident funds, commercial banks and building societies, microfinance institutions and the insurance industry. Most recently, particular housing development has also seen the establishment of a Special Purpose Vehicle to facilitate the complex financing arrangements necessary. The demand for housing finance is extremely limited by the low levels of affordability and eligibility for bank credit. Until recently the demand for housing finance (at prevailing parameters) was effectively nullified. High inflation (and hence eroding real incomes), very high-interest rates and the inability to secure financing at a term beyond a year were major constraints on the growth of housing finance. With the slowdown in inflation, improvement in exchange rates drops in bank lending rates and increasing availability of longer-term financing, a more viable market for housing finance is now developing, integrally linked with the housing developments underway.