Financing Housing in Ghana

Although the factors that influence the development of financing housing in Ghana have been identified in the literature, the interconnectedness of these factors has not been adequately examined.

This paper employs systems theory to examine the interrelated factors that influence the demand and supply of mortgage products and the overall financing housing in Ghana.

The paper shows that due to supply and demand constraints, housing finance in Ghana is still largely underdeveloped.

Supply constraints include capital inadequacy of the banks, the inability of the financial institutions to establish the credit worthiness of potential borrowers and unfavorable macro-economic conditions which make investment in long-term loans unattractive to the banks.

Demand side constraints include high house prices, high interest rates, unfavorable terms of loan repayments, low income levels and the cultural belief that it is not good to be in debt.

We conclude that given the interconnectedness of these factors, a holistic program that resonates with systems thinking will be required to develop a well-functioning housing finance system in Ghana.

Also read: Ghana – Provision of Affordable Housing for Low Income Groups