Housing finance has traditionally been secured by mortgages on the property concerned. This requires a system in which titles can be mortgaged, a legal system that allows the lender to take possession of the property in the event of default, and lenders which have access to sufficient capital, whether through savings or the capital markets. In many countries, one or more of these conditions do not apply, and the majority of people in Africa are excluded because they do not have title to their property. In retrospect, it is remarkable that it has taken so long for this fact to be recognized, and for new approaches to be sought. The field in which the most promising advances have been made are in micro-finance, the concept that started with the Grameen bank which used group solidarity as a guarantee against default by rural women who had hitherto been considered unbackable. The concept revolutionized attitudes to lending, as it demonstrated the level of commitment which the poor represent to loan repayment. The Grameen model has been replicated in a wide variety of countries and for a variety of different target groups, but until comparatively recently was used primarily for loans for business. In such loans, the increased profits which result from the borrowing may be used to repay the loan.

Housing is typically seen as a social good, and far from yielding money can consume it, in terms of maintenance, taxes and utility costs. Thus funding of housing for the poor was often seen as the responsibility of the government rather than the private sector. Loans for house construction were typically packaged as part of an upgrading or site and service package administered by central or local government. However, the last two decades have seen a huge decline in the level of government funding for housing. As a result, the focus has increasingly changed to the private sector, or, especially in the case of the poor, to NGOs. NGOs have typically played two roles. The first has been the role of the financial NGO as either a retailer of wholesaler of finance. Where it is a wholesaler, the funds are on-lent through community-based savings and credit organizations. In both cases the group security system is often used. The second role, pioneered by the British NGO, Homeless International, has been to offer guarantees to local borrowing, thus encouraging banks to lend to the poor.