Housing Finance in Ethiopia


This profile is also available in French here.

To download a pdf version of the full 2019 Ethiopia country profile, click here.

With a population of over 100 million people, Ethiopia is Africa’s second most populous country. The country’s economy has been rapidly growing, driven largely by the construction industry and the services sector. There have been efforts aimed at improving role of the private sector in the economy, driven through national initiatives led by the Prime Minister’s office. These include improving the ease of doing business in the country, opening up telecommunications to the private sector, and opening up the financial sector for foreign investment.

The country has also been experiencing increased urbanization, with the cities of Addis Ababa, Adama, and Hawassa recording growth rates of 4.5 percent, 8.3 percent, and 8.9 percent, respectively. The country’s urbanization rate is projected to grow from 22% in 2017 to nearly 38% in 2017.

Ethiopia’s financial sector has been State controlled, limiting foreign investment. There is no capital market, and bonds are not widely traded. The main types of financial institutions in the country are banks and micro-finance institutions. Although these have increased their reach within the country, majority of the population still relies on informal sources of credit. As part of the ongoing financial sector reforms, the Ethiopian government allowed people living in the diaspora to invest in the finance sector, buy shares, and set up lending businesses.

Ethiopia’s housing backlog is estimated at 1.2 million houses. This and future projected demand far outstrip the annual housing supply. Majority of housing supplied in the country’s main cities has been through the IHDP, closely followed by individual, self-built housing, private sector, and municipalities. Private sector real estate developers have so far played a limited role in the housing sector. There is also a relatively substantial rental housing market, particularly in the inner cities of urban areas.

Affordability is a major issue in the housing market in Ethiopia. Most household incomes are too low to afford formal housing solutions – public or private. The problem of the generally low income of urban residents is exacerbated by costly construction material and unreasonably high land prices.

Ethiopia’s large population and rapid urbanization presents an opportunity for investing in housing, particularly in the urban areas. Ongoing policy reforms aimed at liberalizing the financial sector, coupled with those seeking to improve the ease of doing business within the country will also improve the investment climate in the country.

Find out more information on the housing finance sector of Ethiopia, including key stakeholders, important policies and housing affordability:

Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2019 edition, which has up-to-date profiles for 55 African countries.

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