Housing Finance in Cameroon

Macroeconomic Overview

Cameroon is a lower middle income country with a population of close to 25 million covering 475 440 km². Located along the Atlantic Ocean, it shares its borders with Chad, the Central African Republic (CAR), Equatorial Guinea, Gabon, and Nigeria. Two of its border regions with Nigeria (northwest and southwest) are English-speaking, while the rest of the country is French speaking. Cameroon has rich natural resources, including oil and gas, minerals, high-value species of timber, and agricultural products such as coffee, cotton, cocoa, maize and cassava. With a population growth rate of 2.5 percent a year and an urbanisation growth rate of 3.6 percent a year in 2018, Cameroon is now 55.8 percent urbanised. Cameroon is classified as one of the world’s least developed countries, with an estimated annual per capita income of US$1 446.70.

Cameroon is the largest economy in the Central African Economic and Monetary Community (CEMAC), a region experiencing an economic crisis triggered by the steep fall in oil prices. Along with its CEMAC partners, Cameroon has therefore had to put fiscal adjustment measures in place to adjust to the terms of trade shock and restore macro-stability and confidence in the common currency.

On a more positive note, gross domestic product (GDP) growth in Cameroon accelerated in 2018 and is expected to reach 3.8 percent for 2019. The rebound is driven by an increase in natural gas, with a new liquefied natural gas offshore terminal coming online; an uptick in agriculture, boosted by stronger demand from neighbouring Chad, CAR, and Nigeria; and public works preparations for the 2019 Africa football cup.

Cameroon suffers from weak governance, hindering its development and ability to attract investment. It ranks 152 out of 180 countries in the 2018 Transparency International Corruption Perceptions Index, and 163 out of 190 economies in the World Bank’s Doing Business 2019 report. In addition, the terrorist group Boko Haram, which aims to establish an Islamic caliphate across Africa, conducts lethal bombing attacks and assaults, displacing thousands of people, especially in the Far North Region of Cameroon. This has worsened the housing crisis with a lot of people from the far north, the northwest and the southwest regions relocating to other regions along with the destruction of existing housing, putting further strain on the housing market and the government.

Though Cameroon’s financial system is the largest in the CEMAC region, it is still in its infancy. There are 14 commercial banks and 412 licensed microfinance institutions (MFIs), as well as non-banking financial establishments. From July 2019, Douala (the economic capital of Cameroon) now officially hosts the unified standard exchange of CEMAC, combining what was previously two exchanges into one. The banking sector is highly concentrated in the main urban areas and dominated by foreign commercial banks. Banks readily lend to government, multinationals and businesses but neglect retail and small businesses. Some commercial banks provide some housing-related finance in the way of mortgage loans.

Access to Finance

The domination of Cameroon’s financial system by foreign commercial banks is not helpful for access to finance as these banks prefer lending to government, multinationals and businesses. Only 39.6 percent of Cameroon’s population has bank accounts.[1] Cameroon’s long-term housing finance market remains underdeveloped as only about five percent of Cameroonians have access to mortgage finance from the formal private banking system.

The Bank of Central African States (BEAC) regulates the banking and MFI sectors through the Central African Banking Commission (COBAC). Both COBAC and the Ministry of Finance and Budget licenses banks, and there are special regulations for small-scale credit cooperatives. The system is bank-centred, and the commercial banks in the country mainly fulfil traditional banking functions, with a tendency to prefer dealing with large, established companies, government and medium to high net-worth individuals. The geographic distribution of bank branches is heavily skewed towards the main urban and semi-urban centres, with most of the semi-urban and rural areas having limited access to formal banking facilities. This is a gap that MFIs are exploiting.

According to the Doing Business 2019 report, Cameroon is ranked 73 in the ease of getting credit out of 180. Mobile money is increasing financial accessibility with companies such as MTN and Orange offering this  service.[2] The percentage of the population who report having an account at a financial institution or using a mobile money service has increased from 15.8 percent (2014) to 39.6 percent (2017). However, the percentage of population who report borrowing any money has decreased from 56.7 percent (2014) to 52.7 percent (2017).[3]

Access to housing finance is low. It is available mainly to government employees through the government agency Crédit Foncier du Cameroun. The government continues injecting more funds into Crédit Foncier du Cameroun and has instituted reforms, such as providing financial guarantees and broadening the types of assets that can be used as collateral, to make it easier to access housing finance.

Property developers and private equity funds are getting into local partnerships to provide end-user financing for housing. A few partnerships are already in place. These include Ecobank and Credit Foncier du Cameroun, and China Development Bank and Afriland First Bank. Both these partnerships help provide end-user financing to individuals to buy or build houses.

Title deeds are attached to only a small percentage of land because implementing the legal provisions on land ownership has been impeded by inter-governmental disputes as well as the high cost of title deeds. The low level of title deeds also results in low level of mortgages.

Microfinance is mainly managed by associations, savings and credit institutions and cooperatives. The licensed MFIs have many branches across the country, a growing client base, and total deposit of more than US$1 billion. About half the MFIs belong to the Cameroon Cooperative Credit Union League, the largest network of MFIs. While MFIs have become increasingly important, their development has been hampered by a loose regulatory and supervisory framework.

Liquidity is a problem, and many MFIs are only able to satisfy a third of their customers at any time, depending on their credit requirements. This is mainly due to credit rationing imposed by the central bank (BEAC) and the banking commission (COBAC). To make more funds available for lending activities, including housing finance, the government has established a wholesale fund, financed by the African Development Bank. The fund is CFA21 billion (US$40 million).[4]

The most popular Cameroonian credit institution is called njangi in English and tontines in French. This rotating savings model is usually made up of people of the same social class, same community or same cultural affiliation who have similar incomes or who engage in similar activities. Two types are commonly used for housing purposes: rotating funds, and savings and loans funds.

Rotating funds, which are popular in the country, allow members to have an alternative housing finance source. Rotating funds involve groups of individuals who come together regularly with agreed fixed sums of money that are interest free. At each meeting, a lump sum is given to one of the group members. The member who receives the money is agreed in advance by consensus among the group, and the number of members determines the loan period. A slightly different rotating savings model, made up of individuals with different income brackets, is more flexible. The money collected is auctioned and those who have not yet received a loan may bid for it. The person with the highest bid gets the loan.

Savings and loan funds allow members to contribute more than the agreed regular sum of money into a savings fund that is then loaned to other members in need with interest of 10 percent to 15 percent per annum. The saver may withdraw the money but only after sufficient notification has been given to the association. This money earns interest for the saver.

[1] Reuters (2018). IMF says Cameroon’s economic growth to rise to 4 percent in 2018. 7 July 2018. (Accessed 4 September 2019).

[2] World Bank (2019). Doing Business: Reforming to create jobs. https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2018-Full-Report.pdf  (Accessed 4 October 2019).

[3] Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S. and Hess, J. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. World Bank: Washington, DC.

[4] Reuters (2018). IMF says Cameroon’s economic growth to rise to 4 percent in 2018. 7 July 2018.

Affordability

The unemployment rate in Cameroon is 4.3 percent as of 2018, with a projection of 3.9 percent in 2020 and underemployment reported to be about 76 percent of the workforce, which may worsen given the current socio-economic and political situation in the country. The population below the poverty line was 37.5 percent in 2014 and 40 percent in 2018. The national Gini-index was 46.5 in 2017, suggesting relatively high levels of inequality. Between 1990 and 2017, Cameroon’s Human Development Index value increased from 0.440 to 0.556, an increase of 26.3 percent. This puts the country in the Medium Human Development category. Most people (70 percent) earn an income or survive in the informal economy through subsistence agriculture and small, micro and medium-scale businesses. The formal private sector is not well developed, employing only a small percentage of the labour force. The government, through its agencies and parastatals, is the largest formal sector employer.

The average monthly household income in the formal public sector is CFA150 000 (US$270); the average household income in the private sector is slightly higher at CFA175 000 (US$315).[1] Most families receive monthly remittances from the growing diaspora population and remittance inflows from the diaspora continue to increase. In 2017, the value of personal remittances received was estimated at CFA152 billion (US$262 million). These remittances are used primarily for the basic needs of families and to fund projects for those in the diaspora; for the latter this often includes housing construction.

Building costs are high compared to other countries in the sub-regions. It is difficult to build houses with uniform standards at a cost affordable to lower and middle income households; there is a discrepancy between construction costs and purchasing power. Government has helped to reduce housing production costs to make housing more affordable by setting up government agencies to encourage the use of local materials and to reduce the price of land and inputs such as cement and sand. It has also stepped up funding for government agencies in this sector.

Companies such as Quality Habitat Corp have set up factories to manufacture building materials, which should reduce cost of inputs. The government is also rolling out affordable housing projects across the country. Individuals provide 20 percent as their equity investment upfront and take a loan for the remaining 80 percent, which the government guarantees. Though at a slow pace, this is helping to improve access to quality housing as individuals in the private and informal sectors are also beneficiaries.

[1] Reuters (2018). IMF says Cameroon’s economic growth to rise to 4 percent in 2018. 7 July 2018. (Accessed 4 September 2019).

Housing Supply

The country has a big housing supply problem. Most of the supply available is too expensive for most of the population. The challenge is to provide housing for the growing and urbanising population, almost half of which live in informal dwellings and settlements.

Average rental prices for three-bedroom homes range from CFA 60 000 (US$102) to CFA 125 000 (US$215)[1] in urban and semi-urban areas, respectively. As the middle class grows and the rate of urbanisation increases, there is a shift from ownership towards rentals, especially for new households in the urban and semi-urban areas. Despite ongoing efforts towards increasing housing supply, Cameroon’s housing backlog is still large and significant. Government, private companies and individual investors (both local and in the diaspora) are looking to supply the housing demand of more than 100 000 units a year through ongoing investments in housing.

A government programme to build 10 000 social housing units was launched in 2010 and is almost complete in the cities of Douala and Yaoundé. The purchase price of housing varies from CFA19 587 750 (US$33 750 for a two-bedroom, two-bath home) to CFA22 314 250 (US$38 400 for a three-bedroom, two-bath home), which is largely out of reach of the average Cameroonian.

Since 2010, Cameroon has a government plan for social housing. The Olembe project in the north of Yaoundé supports the construction of 33 buildings combined with 660 social housing units, spread over approximately 12 hectares including community facilities.

The Ministry of Urban Development and Housing (MINDUH) also received provisional acceptance on 25 April 2017 for the Douala-Mbanga Bakoko project, covering 660 dwellings. In addition to these two flagship projects in Cameroon’s two largest cities, the cities of Limbe, Bafoussam, Bamenda and Sangmélima will each benefit from 50 housing units as part of the project to build 1 500 social housing units. This vast global programme of the government aims at constructing a total of 10 000 social housing units.

[1] Indexmundi (2017). https://www.indexmundi.com/facts/cameroon/indicator/BX.TRF.PWKR.CD.DT

Trading Economics (2018). https://tradingeconomics.com/cameroon/indicators

Property Markets

All untitled land in Cameroon rests with the state. Obtaining ownership rights over land in the private domain of the state is possible. This requires, however, that land be registered (and in most cases developed). Nonetheless, most land is still managed informally through local arrangements, whose malleable rules create uncertainty, foster land conflicts, and hamper local development. Formally, most land today is considered National Land, administered by the state for the “public good”.  National Lands include untitled lands occupied or used by rural communities. The state can evict communities from these lands and reallocate them to guarantee the lands’ “effective exploitation”.

Rural communities can title their customary land, and titles are the only protection against such evictions.  But communities can only title land that was used and occupied prior to 1974.  Neither land occupied after 1974 nor unoccupied non-farmland can be titled, even if it is vital to the community.  Despite the law’s intent to encourage land titling, by the early 2000s, less than two percent of Cameroon’s land was registered or titled.

Land reform in 2005 simplified land titling by reducing the number of steps and departments involved, and cut the time needed to obtain a land title from several years to less than one. Yet, it did not address significant hurdles including contradictory laws, poor record keeping, and reliance on traditional authorities to allocate land rights. In addition, titles still could not be granted for land occupied after 1974 or deemed vacant or ineffectively used. Today, as the government, urban elites, agricultural-industrial companies, and powerful traditional leaders acquire more land, neither legal processes nor customary tenure systems provide ordinary people with adequate security over their land.

The process for registering private property, culminating in the attainment of a title deed, is considered costly and time-consuming. According to the Doing Business 2019 report, it takes 81 days and five procedures, and costs on average 15 percent of the property value to register a property, resulting in a ranking of 176 out of 190 countries for registry of property. There is a deeds registry but accurate figures on the number of deeds is not available. Property tax is also growing in important in Cameroon, which stems from the taxable potential of the land sector and the real estate boom, especially in metropolitan areas.

The formal real estate market is concentrated in urban and peri-urban areas such as Yaoundé, Douala and Limbe, and trading is concentrated in the middle-to-higher value market. Fifty-three percent of people own their own homes, which are mostly self-built, while 30 percent are tenants. Both housing for ownership and rental is in high demand.

Despite the focus on ownership, opportunities for rental accommodation are increasing. Because supply increasingly lags demand, there has been at least a 10 percent year-on-year increase in rentals. On average, it takes up to one month to find quality accommodation in Douala, Yaoundé and other main cities. This time has not decreased even with the increasing number of new housing units on the market.

A growing number of real estate companies are providing buying, rental, and management services to clients. On average, it can cost up to CFA125 000 (US$225) a month to rent a standard three-bedroom house in Douala and Yaoundé. This amount is about 20 percent lower in the provincial cities such as Buea, Limbe, and Bamenda. It costs up to CFA10 million (US$17 885) to build a standard three-bedroom house, excluding the cost of land in the main cities like Douala and Yaoundé. Construction costs are about the same or higher in the smaller cities as the cost of standard inputs increases the further away the city is from Douala; most of the standard inputs are imported to, or manufactured around, the main cities. The average size of a standard three-bedroom house is 120m².The cost of a serviced 500m² piece of land in the urban areas is CFA5 million (US$9 000). Land prices are generally increasing.

Policy and Regulation

Given the bilingualism character of the country, Cameroon has a dual legal system consisting of both the French civil law system and the English common law system. In 1959, just prior to independence, the Territorial Assembly of Cameroon legally recognised customary tenure systems, potentially increasing rural people’s secure rights to land. However, in 1963, the new government of Cameroon repealed this measure. Perceiving land titles as more modern than traditional undocumented systems, it made land titles and leases the only legal means of holding property rights to land.

In 2012, Cameroon made amendments to the Organization for the Harmonization of Business Law in Africa (OHADA) Uniform Act on Secured Transactions that broadened the range of assets that can be used as collateral, making it easier for people to access finance.

Opportunities

Cameroon’s housing sector continues to attract investment as there is a huge need for housing in all segments of the market and housing value chain. The housing market is destined for sustainable growth, building on economic growth, a huge and increasing housing backlog in all segments of the housing market, growing middle and upper classes, increasing capital inflows from Cameroonians in the diaspora and other international investors, increased local investment, and better legislation and reforms.

The challenge is to provide housing for the growing and urbanising population, almost half of which live in informal dwellings and settlements. This could be an opportunity for developers, rental housing, sale housing and housing finance providers.

Availability of data on housing finance

Most of the data for Cameroon was obtained from the World Bank. The collection and preservation of statistical data has not been prioritised by the Cameroonian administration.

Mortgage data and land transaction statistics are virtually non-existent or, when they exist, are not categorised, processed or analysed rigorously enough to be reliable.

The National Institute of Statistics is mandated to collect, process and publish all socio-economic and financial data. However, it does not have data on the financing and promotion of social housing. At the bank level, the BEAC collects and keeps the data, but access is difficult for the public.

Several other technical services (Domains, Town Halls, Town Planning, Housing and Cadastre) hold registers of various federal acts but the data are disparate and poorly archived. The activity reports of MINDUH services are partial and unpublished. Apart from the published results of externally funded censuses and government studies, it is difficult to obtain reliable data from public administrations except for primary data extracted directly from official registers. Sometimes, some institutions simply refuse to provide data in their possession.