Comoros has a growing housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Comoros is 10.5 percent, as of September 2016, and requires at least a 25 percent down payment. Cement prices are slightly lower than the continental average, at US$ 9.15 for a 50-kilogram bag.
Demand for affordable housing will remain strong, both for rental and purchase. Housing microfinance will play an important role in increasing the supply of housing, and efforts to increase access should be undertaken. The country lacks a deeds registry, while remittances are an important source of funds for housing. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Comoros can afford.
Find out more information on the housing finance sector of Comoros, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2016 edition, which has up-to-date profiles for 51 African countries.Download yearbook
The Comoros Islands are an archipelago of four islands and several islets located in the western Indian Ocean, just south of the Equator and less than 200 miles off the East African coast. They lie approximately halfway between the island of Madagascar and northern Mozambique at the northern end of the Mozambique Channel. The total area of the four islands is 2 034 km². The population of Comoros was estimated at 795 601 in 2016 (an increase of 2.34 percent over 2015). The UN estimated that 33% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 4.36%. The capital city, Moroni, had a population of 53,000 in that year. Grande Comore, the largest island, has the largest populace, followed by Anjouan and then Mohéli.
Formerly a French colony, Comoros became independent in 1975 comprising three islands (Anjouan, Moheli and Grande Comore), while a fourth island (Mayotte) in the archipelago is still a French territory. Under the federal system, each of the main islands has its own president and elected legislature. The governors, formerly elected, were appointed by the president after the constitution was amended in 1982. There are also four municipalities: Domoni, Fomboni, Moroni, and Mutsamudu. “The economy of the Comoros is agriculture-based, and dependent on trade and foreign assistance. Foreign aid accounts for about half of GDP. Mineral resources are few; there is little industry. Agriculture accounts for 40% of GDP, and employs 80% of the population. Cassava, sweet potatoes, rice, and bananas are the staple crops along with yams, coconuts, and maize. Meat, rice, and vegetables are leading imports. Comoros is the world’s second-largest producer of vanilla, with one-third of exports going to France, and the world’s leading producer of ylang-ylang, a perfume oil. Cloves and copra are also exported. Land access is a problem, as is overpopulation. The fishing industry has potential but is still largely undeveloped.”
More than 20 coups or attempted coups and a long period of political and institutional instability characterise the political history of the Comoros. In 2001, the Fomboni Accord led to the adoption of the new constitution, establishing the Union of the Comoros with broad autonomy for the islands. A secession attempt in 2008 requiring military intervention by the international community resulted in an amendment to the Constitution in 2009 for the presidential terms to be five years non-renewable. The President is assisted by three vice presidents, one from each of the three islands and the number of ministers is set constitutionally at 10.
Besides weak political and institutional arrangements, the Comoros faces economic and social challenges such as a narrow economic base, poor economic diversification and vulnerability to external shocks. The level of poverty and unemployment, especially among the youth, are considerably high. The economy is heavily dependent on subsistence agriculture, fishing and imports and is inward-looking towards satisfying internal demand. Lack of basic infrastructure such as roads and energy, is considered as main constraints to structural transformation of the economy hampering the development of sectors such as tourism. As of 2006, “nearly 80% of the population was employed in agriculture, primarily subsistence farming. However, most of the farmland is owned by foreign investors and the majority of the nation’s food products are imported. An underdeveloped transportation system limits domestic trade. The government is attempting to privatize commercial and industrial enterprises.”
The African Economic Outlook 2017 states the need for further reform in the face of an ongoing electricity crisis. Economic growth was 2.1 percent in 2016 up from one percent in 2015 and the rate of inflation evolves around two percent. The per capita income was estimated at US$1 520 for 2016. The country lacks the infrastructure necessary for sustained development. The rate of unemployment, especially among the youth remains high. With the new government’s efforts to resolve and clean up public finances, economic prospects look brighter. The country is looking to adopt a regional strategy to address its under-industrialisation issue (10 percent of GDP) especially its narrow economic base and predominantly informal economy. Towards the promotion of private investment, efforts have been made to improve the business environment by strengthening the rights and remedies of investors and creditors, creating structured public-private dialogue and training entrepreneurs in management software etc. Obstacles include high cost of production factors, difficult market access, weak economic governance and the state’s role in economic activity.
In its last Annual Report 2015, the Central Bank of Comoros reported on the poor economic performance in 2015 due to the energy crisis. The primary deficit was reduced from 2.1 percent to 1.4 percent of GDP, mainly through international assistance. Moreover, the balance of payments improved from deficit of 9.1 per of GDP to a surplus of 0.6 percent of GDP in 2015.
The World Bank’s 2016 Doing Business Report ranks Comoros as 153rd out of 190 countries surveyed in terms of ease of doing business. Improvements were noted in terms of registering property but it fared poorly in terms of starting business, getting credit, paying taxes and enforcing contracts etc. Comoros ranked 160th in the UN Human Development Index for 2016.
Access to Finance
Comoros has a relatively small and underdeveloped financial sector. Financial intermediation and credit to the private sector, while still low, have been expanding in recent years following the entry of two foreign commercial banks. However, the further development of credit markets remains constrained by poorly defined land ownership rights and weak enforcement of collateral guarantees, though some efforts have been made in terms of registering property as per the Ease of Doing Business report 2017.
Finance represents around 60 percent of the economy. The Central Bank of Comoros reports in its Annual Report for 2015 that deposits increased from FC75.7 billion in 2014 to FC86 billion in 2015 and credit increased from FC59.1 billion in 2014 to FC68.8 billion in 2015. More than 90 percent of its credit granted goes to the private sector and individuals. 51.1 percent of credit for 2015 was to the private sector enterprises compared to 52 percent in 2014 while 47.5 percent was towards individuals up from 46.2 percent in 2014. While short and medium term loans increased by 15 percent and 7 percent respectively in 2015, long term loans almost doubled for the same period.
At present, the country’s financial system comprises seven lending institutions, of which the four commercial banks, including a development bank, and three financial intermediaries. A National Savings Fund, a postal savings bank, and two networks of microfinance institutions (MFIs) also operate, together with three foreign currency exchange/money transfer agencies. Under current regulatory frameworks, financial institutions can independently set their own credit and lending policies, though commercial bank interest rates and loans to consumers and businesses are partly regulated, with upper and lower limits set at fourteen percent and seven percent respectively.
In addition to these traditional banking institutions, networks of mutual savings banks (Meck) and credit (Sanduk) have been developed. These funds provide local banking services for rural and urban unbanked population. The Meck (Mutual Savings and Credit of the Comoros) are the Savings and Credit component of the Project Support to Economic Grass Roots Initiatives, and are funded by the State and the International Fund for Agricultural Development. The Sanduk were initially funded by the French Development Agency.
According to the Central Bank of Comoros, the number of bank accounts increased from 293 980 in 2014 to 318 659 in 2015. The number of clients who had a credit with the banks increased by 29.2 percent over the same period from 38 222 to 49 368. NPLs as a ratio of total loans granted increased from 18.8 percent in 2014 to 19.1 percent in 2015.
The IMF reports that Comoros’s banking system is generally sound. Liquidity and solvency ratios remain high. The government has two priorities for strengthening the financial sector: the privatization of the Development Bank of the Comoros; and the restructuring of the National Post and Financial Services Institution (SNPSF), which is likely to include the separation of banking activity from the postal office and foreign direct investment in the creation of a new fully-fledged commercial bank.
Financial inclusion remains an issue with very low penetration rates. Compared to the regional average, while the mobile phone subscription is still low, it has nevertheless increased from 35 730 in 2014 to 154 898 in 2015 representing an increase from 14 percent to 22 percent of the population.
The Central Bank of Comoros continues implementing recommendations from the 2010 safeguards report and strengthening banking supervision with IMF and “Banque de France” assistance. The Central Bank of Comoros (BCC) conducted ten on-site inspections on two financial institutions through 2015, and is working towards the establishment of a credit bureau too.
In 2015, the BCC has, in collaboration with the IMF, brought new laws aiming at improving the regulation and performance of the banking system. It is also working towards compiling solvency indicators in line with international standards. The World Bank’s 2017 Doing Business Report ranks Comoros as 118th for accessing credit (down from 109 in 2016), and 169th in respect of resolving insolvency.
There is currently no stock market present in the country, nor are there primary or secondary fixed income markets for government or commercial debt. Government financing is mostly undertaken in the form of direct credit from domestic commercial banks, and liquidity levels are controlled through the modification of reserve requirements only. The main source of inflow for the Comorian economy is remittances which totalled 70.4 billion in 2015.
According to the World Bank’s Worldwide Governance Indicators, the Comoros is regularly ranked in the group of countries whose performance is inadequate in terms accountability, political stability, absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption.
The Comorian economy is structurally dominated by the public sector. This is reflected in the size of the wage bill of the civil service or similar services, which annually absorbs most of the central government budget and leaves little leeway for public investment. The main feature of the public sector in the economy is the predominance of government shareholding in the country’s main strategic enterprises such as the communications, water and electricity, and the Hydrocarbons Company of Comoros as well as financial institutions. Thus, government spending for social housing is quite limited. Moreover, given that the banking sector lacks dynamism, private lending for private construction for the middle and low income groups is also limited, though there are signs of improvement in the recent years.
Approximately 65 percent of all housing units in the Comoros are made of straw with roofs made from cocoa leaves and are privately owned; about 25 percent were made of durable materials including stone, brick, or concrete. Of all housing units, nearly 90 percent were owned, three percent rented, and three percent occupied rent free. Around 98 percent of the population had access to improved sanitation systems and safe water.
Housing in Comoros varies from two-room structures covered with palm leaves to multilevel buildings made of stone and coral. The part of the house at street level often serves as a shop or warehouse, but in earlier times that level housed slaves or servants. Some Western-style houses, with indoor bathrooms and kitchens, also exist. Because of the practice of “matrilocality”—a societal custom where the offspring of a family reside with their mother—females often remain part of their mother’s household, even after marriage. This is owing in part to the practice of polygamy, as well as the traditional need for Comorian men to travel away from their communities in search of work. The family home can be expanded, or a separate structure can be built for a woman to inhabit with her children.
There is a big scope for eventual further credit facilities from private banks/financial institutions to improve on those houses. In the absence of affordable dwellings supplied by the market, a consortium from Iran has proposed to construct 5 000 housing units throughout the three islands over a period of four years as a follow up of the Habitat programme.
While poverty remains pervasive in Comoros and the housing standard is basic, on the other hand, the market for Comoros up-market properties has been growing in recent years.
The growth in residential and commercial property ownership is the result of several trends including international aid, increased tourism and the nation’s relationship with France. The purchase price of a three bedroom semi-detached house in Comoros can range from US$131 000 to US$700 000. Rental of a three-bedroom apartment, if available, is between US$1 000 and US$1 500 per month. The Comoros’s Economic Citizenship Act, passed in 2008 allows the country to grant nationality to foreigners who make a substantial amount of investment in the country. This adds to the speculative strategies on the part of the few property developers who operate on the market. Although most of the housing units in Comoros are rudimentary, they are privately owned.
The World Bank’s 2016 Doing Business Report ranks Comoros at the 90th position for registering property up from 120th in 2016 showing a marked improvement.
Housing Policy and Regulations
The Ministry of Territorial Management, Urbanization, Housing & Energy has the responsibility of overall administration of housing and related issues. However, given the shortage of affordable houses and the high demand, the market is quite ineffective.
Despite the fact that the credit market is at a basic stage, the Central Bank of Comoros has put in place prudential norms. In its report of 2015, the Central Bank of Comoros reports that, following its on-site inspection, it is noted that compliance with Bank Prudential Ratios were well respected by the financial institutions though the internal audit function requires to be reinforced.
In recent years, authorities have undertaken several measures to enhance financial intermediation and strengthen the country’s banking and financial sectors. Such efforts include the facilitation of entry for foreign banks, reforms to the investment code in 2007 and the establishment of a National Agency for Investment Promotion. The country’s authorities have, in collaboration with the Central Bank of Tanzania, the Central African Banking Commission (COBAC), the French Prudential supervisory authority and IMF strengthened regulatory and supervisory frameworks so as to expand the scope of prudential regulations, and increase the effectiveness of control procedures.
Housing Sector Opportunities
The IMF indicates that the political context of the Comoros has continued to improve and program ownership has further strengthened since 2012. Since May 2011, the government has shown unwavering commitment to IMF-supported policies; and programme ownership is strong not only in government, but also among trade unions, the private sector, and wider civil society. There is a broad national consensus on the need to stay the course for achieving the completion point and continuing satisfactory implementation of the IMF-supported programme over the medium term.
There is huge potential for development of infrastructure and other services. The government is attending to the energy crisis as well as on the infrastructure with the assistance from international stakeholders. Accordingly, as the economy progresses, there might be enormous scope for housing and housing financing with a particular emphasis on social housing.