IFC’s Innovative Tool to Help Housing Finance in West Africa

Housing finance is a critical component in addressing the global affordable housing crisis, especially in emerging markets and developing countries. According to the World Bank, more than one billion people currently live in slums globally, and this number is expected to double by 2030. In West Africa, the situation is particularly dire, with a massive housing deficit estimated at 11.5 million housing units. The International Finance Corporation (IFC) is at the forefront of efforts to create a market for affordable housing in this region, and its recent investment in Caisse Régionale de Refinancement Hypothécaire (CRRH) is a significant step in this direction.

IFC has been a leading international investor in housing finance for over three decades, committing more than $12 billion to the sector since 2000. Its approach involves investing in financial institutions, mobilizing capital, and providing advisory services to strengthen housing finance markets. In West Africa, IFC’s work is particularly focused on supporting mortgage refinancing companies like CRRH, which serves the West Africa Economic and Monetary Union (WAEMU) countries of Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

In December 2017, IFC purchased $9 million in 12-year local-currency bonds issued by CRRH. This investment was pivotal in supporting CRRH’s goal to increase its housing portfolio to $500 million by 2021. The funds allowed CRRH to extend the local bond market yield curve beyond the current 10-year limit, enabling lenders to offer mortgages longer than the region’s 8-year average. This extension is crucial for making homeownership more affordable for a larger number of people in West Africa.

For many families in West Africa, homeownership is not only their most valuable asset but also a significant means of improving their standard of living. By extending mortgage terms and increasing the availability of housing finance, IFC’s investment in CRRH is expected to help 50,000 families and businesses obtain new mortgage loans. This will result in 200,000 people having access to new housing and the creation of approximately 250,000 new jobs in the housing sector. The housing sector, in turn, supports jobs in construction and related goods and services, contributing to economic growth.

The success of the CRRH project has led IFC to consider replicating this model in other regions facing similar housing challenges. For instance, IFC is exploring opportunities in Bangladesh, Rwanda, and Tanzania, where homeowners often struggle to find mortgages beyond three-year terms. By leveraging blended finance and innovative financial instruments, IFC aims to unlock private investment in these regions and create sustainable housing finance markets.

Innovative financial solutions are essential for addressing the affordable housing crisis. The Housing Finance Policy Center, for example, is committed to shaping a more accessible and sustainable housing finance system through data-driven evidence and solutions. This includes increasing the supply of housing, expanding access to homeownership, helping families sustain homeownership, and rapidly responding to emerging issues. Similarly, Shelter Afrique and the Bourse Régionale des Valeurs Mobilières (BRVM) are tapping into green bonds to finance affordable housing projects in West Africa.

The financial ecosystem is evolving rapidly with the advent of tech-enabled and branchless banking models. Digital platforms and digital banks are getting active in the housing finance space. Fintech companies are providing financial services to the retail segment, such as peer-to-peer lending platforms and fintechs focusing on consumer finance. These emerging tech-based models hold the potential for furthering the cause of safe, secure, and affordable housing.

IFC’s investment in CRRH is a testament to the power of housing finance in transforming lives and economies. By supporting mortgage refinancing companies and extending local bond markets, IFC is not only making homeownership more accessible but also driving economic growth and job creation in West Africa. As the world continues to urbanize rapidly, the need for innovative and sustainable housing finance solutions will only grow. IFC’s work in this area is a crucial step towards addressing the global housing crisis and ensuring that everyone has access to safe, affordable, and resilient housing.

For more information on IFC’s work in housing finance, you can visit their official website at IFC Housing Finance.