Housing Finance in Gambia
Overview
This profile is also available in French here.
To download a pdf version of the full 2020 The Gambia country profile, click here.
The Gambia is one of Africa’s smallest countries and is bordered by Senegal to the north and Guinea Bissau to the south. Over the last five years, there has been a concerted effort by government to undertake economic sector reforms supported by international donors. One of the notable interventions involves the 2018 National Development Plan which highlights three key results for land use planning in the form of a National Land Policy, a Land Use Plan and a Nationwide Cadastral Map.
The IMF’s 2019 Country Report notes that The Gambia is enjoying a strong economic recovery with a good prospect of sustained growth over the medium term. It is anticipated that the reforms will improve The Gambia’s Ease of Doing Business ranking which ranks at 134 out of 190 economies for getting credit, and at 132 for registering property. The legal system is tripartite, based on statute law/English common law, Sharia (Islamic law), and customary law. The land tenure system in The Gambia is shaped by its colonial history. Three tenure types exist: freehold, leasehold, and customary. According to the Gambia Bureau of Statistic’s Income and Household Survey, 56.1 percent of households in The Gambia live in owner-occupied dwellings, with 31.2 percent living in rented housing.
Currently, only the Home Finance Company Limited offers mortgages to customers and mortgage market penetration remains low. The Gambia has a pension industry that actively supports housing through the Social Security and Housing Finance Corporation (SSHFC). The SSHFC is embarking on extending housing facilities in the urban centres of the country. With an estimated deficit of 50000 units, the main challenge for private and public sector players will be delivering housing units targeted at the lower ends of the market. There is however an opportunity for the government and the financial industry to develop housing microfinance products that support the efforts of the majority of households that are incrementally building their homes.
Find out more information on the housing finance sector of the Gambia, including key stakeholders, important policies and housing affordability:
- Macroeconomic Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Regulation
- Opportunities
- Availability of data on housing finance
- COVID-19 response
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2020 edition, which has up-to-date profiles for 55 African countries.
Download yearbookGambia
Macroeconomic Overview
The Gambia is one of the smallest countries in the West Coast of Africa with a population of approximately 2.1 million. Most of the population lives in the Greater Banjul Area (57 percent), which makes it one of the densely populated countries in Africa.[1] The urban-based demand for housing continues to exceed supply, with a housing deficit of around 50 000 cited by the Ministry of Lands and Regional Government in 2015.
President Adama Barrow formed the National People’s Party (NPP) in December 2019 and is hoping to seek reelection in 2021. A new draft Constitution, to replace the 1997 Constitution, was produced in November 2019. Parliament is yet to approve this and is seeking support for the new draft by the Gambian people through a referendum.[2]
With an estimated economic growth of 6 percent, the fiscal deficit reduced from 6.2% of GDP in 2018 to 2.6 percent of GDP in 2019. This was brought about by strong growth in tax revenues and donor inflows. “The Gambia was able to improve its chronic debt situation with debt relief from the international creditors and a sustained reduction in its fiscal deficit under the 2019 International Monetary Fund (IMF) Staff-Monitored Program. This sustained development helped improve international reserves to within reasonable levels, reduced interest rates and inflation.”[3]
Economic growth in The Gambia is constrained by internal factors such as bad crops and climate change as well as external factors such as tourism and remittances. Agriculture and aquaculture contribute a large share of economic output and employment but the country is subject to frequent droughts and the movement of fishing grounds, all triggered by climate change. Due to an overreliance on erratic rainfall, lack of investment in irrigation infrastructure, and deteriorating soil quality, productivity in these sectors remains low. Erosion of the coastal areas is also greatly impacting the quality and quantity of sand available for construction, which is affecting low cost housing and hence the speed at which houses are completed for residential and commercial purposes.
Added to these issues, COVID-19 has had severe socioeconomic consequences for the country. The World Bank expects that GDP growth will be reduced from 2.5 to around 2.4 percent in 2020. The collapse of Thomas Cook in 2018, a major tour operator in key markets in Europe, coupled with the pandemic, has resulted in the reduction of the number of tourists visiting the country, thus disrupting trade, foreign currency flow and employment.[4]
The government, with support from international development partners (the European Union (EU), World Bank and Internal Monetary Fund (IMF)), has introduced measures to curb the spread of the pandemic in the country. The IMF has approved the Catastrophe Containment and Relief Trust debt relief of D149 627 708 (US$2.9 million), supported through its D1 093 830 144 (US$21.2 million) Rapid Credit Facility. The EU has provided D500 478 887 (US$9.7 million) as budget support grant and the World Bank is providing support through its D515 957 615 (US$10 million) COVID-19 Emergency Response Project and Social Safety Net Project of D309 574 569 (US$6 million).[5]
Unfortunately, the government does not invest directly in housing construction or through the provision of financial support to private or commercial enterprises but rather encourages housing investment through liberal policies and other state actors like Social Security and Housing Finance Corporation (SSHFC). This has resulted in the mushrooming of informal housing in the Greater Banjul Area, which are poorly planned and are lacking in basic sanitation and amenities as many households are unable to afford housing in the formal markets.
[1] The World Bank (2020). https://www.worldbank.org/en/country/gambia/overview (Accessed 30 August 2020) Updated Jul 14, 2020.
[2] The World Bank (2020). https://www.worldbank.org/en/country/gambia/overview (Accessed 30 August 2020) Updated Jul 14, 2020.
[3] The World Bank (2020). https://www.worldbank.org/en/country/gambia/overview (Accessed 30 August 2020) Updated Jul 14, 2020.
[4] The World Bank (2020). https://www.worldbank.org/en/country/gambia/overview (Accessed 30 August 2020) Updated Jul 14, 2020.
[5] The World Bank (2020). https://www.worldbank.org/en/country/gambia/overview (Accessed 30 August 2020) Updated Jul 14, 2020
Access to Finance
The financial services sector in the Gambia is dominated by four very large banks. There are 12 commercial banks in operation, but the smaller banks are struggling to make any meaningful impact. This has impacted on banking penetration which is at a disappointing 35 percent nationwide. However the major banks are leveraging on technology to digitize most of their operations and are partnering with mobile phone operators to reach out to even the most remote parts of the country through mobile money transfers. The microfinance companies also continue to play a part in the financial inclusion drive of the country with the addition of two mobile money companies and a microfinance company called Bayba Financial Services Company Limited at the beginning of the year.[1]
The Central Bank of The Gambia (CBG) describes the banking sector as profitable, well capitalized and highly liquid. The liquidity ratio is 93.5 percent, significantly higher than the requirement of 30 percent.[2] This increased liquidity makes funds available for lending to the private sector despite increasing government borrowing to fund its recurrent expenditure.
The CBG has mandated the Home Finance Company of The Gambia Limited (HFC) to provide mortgage housing finance loans to the general populace. However some banks provide services similar to this and it as such, the HFC does not really offer anything different to what already exists in the market. The national mortgage market remains underdeveloped, a fact evidenced by the HFC’s narrow portfolio, with just 47 mortgages on its books as of July 2020.[3] The total portfolio of approximately D41 756 408 (US$809 299) is insignificant when compared to the total banking industry construction finance loan portfolio of approximately D1 391 350 000 (US$ 26 966 362).[4] An example of the HFC’s mortgage products is one that can finance up to 70 percent of the value of a property payable over a maximum period of 15 years. The company maintained its mortgage interest rate at 17 percent in 2019 through to 2020. However, it continues to be constrained by non-performing loans (NPLs), which accounts for over 50 percent of its loan portfolio since 2018. This has slowed the growth of the number of mortgages underwritten by the company as it focuses on loan recoveries, which, when coupled with the pandemic, significantly lowered the amounts of mortgages disbursed in 2020.
Although microfinance entities are gaining popularity in the financial services sector, they are prohibited by the CBG to provide housing or construction finance facilities to their customers.[5] Bayba Financial Services Company Limited was granted a license to conduct microfinance business in addition to its money transfer. The other microfinance entities in operation include Credit Unions, Mobile Money Operators and Village Savings and Credit Associations.
The Social Security and Housing Finance Corporation (SSHFC) is the only government institution mandated to provide federated pension schemes. Its housing finance division provides low cost housing to middle-income earners over a 15 year period with a minimum down payment of around 25 percent of the selling price. However, it is important to note that the SSHFC hasn’t embarked on new housing development in the past couple of years. This lack of delivery has also adversely affected the stock of affordable housing in the country.
The World Bank’s Doing Business 2020 report ranks The Gambia at 152 out of 190 economies for getting credit, and at 143 for registering property.[6] There is therefore a need for government to continue with reforms to improve the business environment, which is especially pertinent for the housing finance sector.
The government has not directly intervened during the pandemic in providing finance to address any funding gaps despite some banks and other financial institutions slowing down on lending. The CBG has not made any pronouncements regarding debt deferrals or waivers of interest etc. regarding COVID-19 impacted business who are challenged in repaying their loans. The only notable thing that the CBG continues to do during the pandemic is to relax the prudential guidelines in order to enable banks to have enough liquid reserves to make available cash to their customers as and when required.[7]
[1] Interview with Siaka Bah, Principal at Microfinance Department of The Central Bank of The Gambia, 20 August 2020, Central Bank of The Gambia.
[2] Central Bank of The Gambia (2019). 27 August 2020 Monetary Policy Report.http://www.cbg.gm/research/mpolicy.html (Accessed 20 August 2020).
[3] Home Finance Company of The Gambia (2020). July 2020 Management Accounts of Home Finance Company of The Gambia.
[4] Interview with General Manager Omar Sarr, Home Finance Company of The Gambia, 18 August 2020. The Gambia.
[5] Central Bank of The Gambia (2020). Interview with Siaka Bah, Principal at Microfinance Department of The Central Bank of The Gambia, 20 August 2020.
[6] World Bank (2020). Doing Business 2020 https://www.doingbusiness.org/content/dam/doingBusiness/country/g/gambia/GMB.pdf (Accessed 8 September 2020). Pg. 4.
[7] Interview with Adamou Kora, Director of Financial Supervision Department of The Central Bank of The Gambia, 20 August 2020. The Gambia.
Affordability
Generally, it is expensive to buy a house from developers or build one in The Gambia due to high costs of borrowing and materials. The price of a three-bedroom house (220m²) is approximately D4.5 million (US$87 216), while a two-bedroom house is D2.31 million (US$44 771) based on the prices offered by SSHFC. One of the major property developers, TAf Africa Homes, indicated that it would cost around D9 156 (US$177) a square meter to buy a two or three bedroom house in the urban areas, which approximates to D1 716 750 (US$33 273) and D2 887 500 (US$55 964) a property, respectively.[1] Mortgage providers and developers normally require a down payment of between 25 and 35 percent[2] of property values before the any deal is struck. This makes mortgage financing beyond the reach of many low and middle income earners.
The cost of renting a decent apartment is even more expensive since the agents demand a minimum of six months deposit and a consultation fee, which most people cannot afford. This also increases the eviction rate and rent tribunal cases. It costs between D6 000 (US$126) and D12 000 (US$233) a month to rent a one- or three- bedroom apartment in the urban areas of The Gambia.[3]
The high concentration of the majority of the population in the urban areas also has not helped the cost of low cost housing since the demand is more than the supply and this continues to rise. However, no published data to track and report on trends in housing prices exists.
[1] Interview with Taf Africa Homes General Manager Ya Bajen Njie, Taf Africa Homes. 30 August 2020. The Gambia.
[2] Interview with General Manager Omar Sarr, Home Finance Company of The Gambia, 18 August 2020. The Gambia.
[3]Interview with Abubakar Bensouda, the President of Association of Real Estate Companies 20 August 2020. The Gambia.
Housing Supply
The government does not invest directly in the construction of affordable housing or in the provision of financial support to private or commercial enterprises in support of affordable housing, but rather encourages the development of affordable housing through liberal policies and other state actors like the SSHFC. As of August 2020, the SSHFC is engaged in three housing projects, the Brikama Jamisa project, the Jabang project and the Tujereng project.[1] The SHFC is therefore embarking on extending housing facilities in the urban centres of the country, especially within the Kanifing and Brikama municipalities in a bid to reduce the strain on urban infrastructure and other services.
Other key players in the private sector such as Blue Ocean Properties, Swami India International, Global Properties, Amiscus Horzons and Taf Africa Homes continue to increase their footprint in the affordable housing sector in 2020. However, most of these companies target the high net-worth individuals and people in the diaspora for their housing units. There are also lots of small and active private sector players who mainly sell cheaper estate land for affordable housing development.
The COVID-19 pandemic has contributed to the housing woes of the country. The government’s partial lockdown which started in March 2020 affected housing development since it restricted the movement of people and the availability of construction materials like sand, basalt and cement. The Gambia is heavily import dependent and the lack of available construction materials has slowed the completion of additional housing units.
[1] Social Security and Housing Finance Corporation (2020). https://www.sshfc.gm/housing-finance-fund
(Accessed 31 August 2020).
Property Markets
The property market in the Gambia continues to attract interest from Gambians in the diaspora and others alike. This sustained increase in demand for properties has resulted in increased house prices.
The country has a Deeds Registry at the Ministry of Justice, which is being digitized. The first phase of the digitization was completed earlier this year and funding is needed to complete the second phase. Land tenue continues to be a problem due to traditional ownership of land especially in rural and in some urban areas. This is compounded by the number of procedures and time (at least three years to secure a title deed) it takes to register a property with the associated costs (D4 000 (US$78) in transfer tax to the municipality and D40 000 (US$775) in capital gains tax per transaction). [1]
Generally, the property market is buoyant in The Gambia with lots of formal and informal players. It is, however, highly unregulated. Properties are freely transferable provided the various taxes are paid to the state and councils, whether the parties are foreign citizens or not.[2]
The pandemic has affected the property market since both developers and potential buyers have had to slowdown and observe the impact on the general economy before committing resources. Lenders have also not been keen on extending credit during this time and therefore there has not been much investment in the housing market in the last year.
[1] World Bank (2020). Doing Business 2020 Economy Profile The Gambia Pg. 4.
[2] Interview with Abubakar Bensouda, President of the Association of Real Estate Companies. 20 August 2020. The Gambia.
Policy and Regulation
Property rights and secured interests in property are protected by the Constitution. The Department of Lands (under the Ministry of Lands and Regional Government) issues title deeds, which are duly registered. Both moveable and real properties are recognised and enforced. The concept of a mortgage exists (even though the mortgage market is extremely small) and there is a recognised and reliable system of recording security interests. The legal system fully protects and facilitates the acquisition and disposition of all property rights including land, building and mortgages. However, the bulk of the land is held through customary tenure or controlled by farmers and traditional rulers. Such land can, however, be easily taken over by the government or declared reserved land to be used in future for social amenities such as schools, markets, hospitals, parks or office buildings.
The new government has not instituted any housing specific legislations/regulations or designed any policies guiding the urbanization process. The existing policies that govern the housing sector were developed in the 1980s and 1990s. The most recent Act is the Rent Act of 2014.
The government does not play a direct role in housing development through policy and legislation, except through the SSHFC. It rather facilitates the housing process by making the acquisition and development of land easy for individuals and private developers.
Opportunities
There is a shortage of affordable housing in the country, which represents opportunities for potential investors in the sector to fill the gap. Coupled with the liberal macroeconomic policies of the transitional government in terms of lower interest rates, reduced tax rates and reduced levels of bureaucracy, banks and other lenders will be availed the needed resources to lend to their customers including those in the affordable housing sector. This could positively impact both the speed of housing development and the stock of housing available for use.
The increase in the number of microfinance companies (54) [1]and the size of the existing major ones, present opportunities for the informal and self-built houses in terms of access to finance, although microfinance companies are not yet allowed to directly fund long term housing projects
With the increase in the number of Real Estate Agents and the strengthening of their Association, most of the members have now regularized their legal and financial status. This will facilitate access to finance especially from banks and also enhance their lobbying with the government in terms of access to affordable and reliable power supply, water, sewage, low cost finance and land for commercial development. They will also be able to pursue better regulation since the industry is large self-regulated.[2]
[1] Interview with Siaka Bah, Principal at Microfinance Department of The Central Bank of The Gambia, 20 August 2020, Central Bank of The Gambia.
[2] Interview with Abubakar Bensouda, President of the Association of Real Estate Companies. 20 August 2020. The Gambia.
Availability of data on housing finance
There is no government institution or an association the responsibility to collate and make available affordable data on housing finance. Rather, data is available from so many different sources which impact the reliability and timeliness, and therefore usefulness of information for housing finance decision making.
The first phase of the digitisation of the title deeds at the Deeds Registry was completed this year, with the second phase yet to start. The Deeds Registry is yet to secure funding for the needed D5 million (US$96 907) to complete the process.[1]
The major mortgage lenders do not publish information on the number, value of and nonperforming part of their mortgage portfolio. This makes trend analysis difficult or even assess the impact on Covid-19 on the performance of these loans.
It is also difficult to gather meaningful information or to seek clarification from some government entities since public officials are either not available or are able to only provide limited information.
[1] Interview with Abdoulie Colley Registrar General, The Deeds Registry. 20 August 2020. The Gambia.
COVID-19 response
Government instituted a partial shutdown of the country in April 2020 for 90 days, which was then extended for an additional month. Minimal economic and social activities continued during this time and all borders, schools, provincial markets, nonessential establishments, mosques and churches were closed. Government enforced the wearing of face masks and washing of hands, social distancing, and the prohibition of gatherings of more than 10 people.
Furthermore, in order to cushion the impact of the pandemic on the lives and livelihood of the populace, the government increased health sector spending by D0.5 billion (US$9 690 718) (0.5 percent of GDP) under the Ministry of Health’s COVID–19 Pandemic Action Plan, prepared with the support of development partners.[1] This has helped enforce containment measures, strengthen health security and logistics across the country and build laboratory capacity. Government also adjusted domestic fuel prices in line with global market prices, reallocated resources from non-priority spending, and froze energy subsidies, travel and vehicle expenses.[2]
The government is helping the most vulnerable by providing food aid (a bag of rice, a bag of sugar, and 10 liters of cooking oil). It also took supportive steps to protect jobs in key sectors, such as covering the salaries of workers in the tourism sector for three months (April–June 2020) through social security. Included in the toolkit of the response were extensions for Tax returns for businesses.[3]
The central bank (CBG) reduced its policy rate by 50 basis points in February 2020 to 12 percent and increased the standing deposit facility rate by the same margin to three percent to boost liquidity and support private sector growth. As of the end of June, the central bank had further reduced the policy rate to 10 percent, and the standing deposit facility rate to 2.5 percent.[4]
Finally, regarding informal settlements, apart from the provision of food and other items to the populace, the government has not provided any support to those in the informal settlements.
[1] Ministry of Finance and Economic Affairs of The Gambia https://mofea.gm/directorates/budget (Accessed 14 September 2020)
[2] African Development Bank Group: AFRICAN ECONOMIC OUTLOOK 2020 SUPPLEMENT AMID COVID–19. https://www.afdb.org/en/documents/african-economic-outlook-2020-supplement (Accessed 14 September 2020). Pg. 75.
[3] African Development Bank Group: AFRICAN ECONOMIC OUTLOOK 2020 SUPPLEMENT AMID COVID–19. https://www.afdb.org/en/documents/african-economic-outlook-2020-supplement (Accessed 14 September 2020). Pg. 75
[4] Central Bank of The Gambia (2019). 27 August 2020 Monetary Policy Report.
http://www.cbg.gm/research/mpolicy.html (Accessed 20 August 2020).
Websites
International Monetary Fund https://www.imf.org/external/index.htm
The World Bank https://www.worldbank.org/
The Gambia Bureau of Statistics https://www.gbosdata.org/about-us
Central Bank of The Gambia https://www.cbg.gm/
Ministry of Finance and Economic Affairs of The Gambia https://mofea.gm/directorates/budget
Ministry of Health of The Gambia http://www.moh.gov.gm/covid-19-report/
Social Security and Housing Finance Corporation https://www.sshfc.gm/housing-finance-fund
Ministry of Local Government and Lands The Gambia http://www.molgl.gov.gm/
AllAfrica https://allafrica.com/stories/201406031295.html
