Housing Finance in Ethiopia


For the French version of this country profile, click here.

To download a pdf version of the full 2018 Ethiopia country profile, click  here.

As the second largest country in Africa, Ethiopia has a population of 105 million, with a GDP growth rate of 8.2 percent. This growth is driven by public investments in the agricultural and infrastructural sectors. Majority of Ethiopia’s population is still employed in the agricultural sector, although the services sector has increased as the principal contributor to GDP. Since 2004/05, the government has focused on developing housing, upgrading slums, providing infrastructure and promoting small urban enterprises. The Growth and Transformation Plan for 2015-2019 continues to target infrastructural development in order to elevate the country to a middle-income nation by 2025.

The major financial institutions operating in Ethiopia are banks, insurance companies and microfinance institutions. MFIs generally offer services to informally self-employed poor people and also formal employed low-income households. Most of the MFIs operating in the city have been in business for nearly a decade, and therefore have adequate experience with financial services, and the diversification of loan portfolios to include housing microfinance loans. Recently, government banks like the Commercial Bank and the Development Bank have joined the mortgage market but only in the commercial construction sector.
Both public and private banking organizations have however limited their involvement in residential mortgages due to the perceived high risk and shortage of experience. MFIs have become increasingly important players, as they are viewed as effective mechanisms for poverty reduction. MFI loan policies indicate preference to poor rural farmers and microeconomic activities of rural and urban communities with small cash requirements. Subsequently, MFIs offer a potential source of finance for poor and low income earners.

One of the key factors constraining affordability in Ethiopia is limited access to housing finance. Following market-led adjustments post-1991, interest rates increased through the removal of subsidized interest rates. Another challenge to housing affordability has been the absence of a diversified and flexible housing finance sector.

There are a number of opportunities in the country, mainly through new residential developments in Ethiopia falling under four main categories. These include government-initiated condominium buildings; privately developed residential neighborhoods which is mainly concentrated in Addis Ababa and surrounding towns; owner-built housing dwellings; and new home activity driven by housing cooperatives. The own-construction model is the primary mode of housing construction in Addis, constituting over half of the city’s total formal sector housing stock.

The Ethiopian government has been addressing the public’s ever-increasing demand for housing through the development of condominium housing schemes for low- and middle-income citizens. In addition, the role of private real estate developers has been on the increase, mainly capitalizing on the favourable policy climate to meet the housing needs of middle- and high-income citizens. Furthermore, the Ethiopian government has paved the way for European and Chinese entrepreneurs to invest in infrastructural development and industrial growth.

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 2018 edition, which has up-to-date profiles for 54 African countries.

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