The African continent is facing a visceral social crisis due to a lack of adequate housing. Indeed, the total gap between the demand for and supply of housing is considerable, and continues to grow, which creates a snowball effect.
One of the barriers to housing delivery is the lack of adequate financing for homebuyers and the absence of a structured rental housing market. According to the Center for Affordable Housing in Africa (CAHF), the PlB/mortgage rate in 29 African countries was 4.16% compared to 45.7% in Europe in 2018 (Hypostat 2020, a review of the mortgage and housing markets in Europe).
According to our study of the real estate market in Africa, the main cause of the mortgage shortage is the mismatch of maturities between bank resources and residential mortgages. There is therefore an urgent need to create mechanisms to stimulate the growth of mortgages and the rental stock. Securitization is an effective tool for refinancing mortgage and lease wallet resources.
Kenya, Tanzania, Nigeria and the West African community have set up mortgage refinancing facilities that have had some success. However, the refinancing facilities are limited in size and do not include rental housing at this stage.
We believe that securitization is the missing link in Africa’s housing economy.
Securitization is the process of pooling assets, conditioning them and issuing them in the form of securities known asAsset Backed Securities (ABS). In general, back-to-back securities include securitized assets in the non-mortgage category, such as credit card receivables, student loans, and auto loans. Mortgage backed securities include residential mortgages. ABS have become increasingly important in the fixed income market since their introduction in the 1980s in the United States.
Figure 1: Structure of securitisation