Housing Finance in Gambia

Introduction

The Gambia is a small country of approximately 2.1 million[1] people on the West Coast of Africa. Surrounded on three sides by neighbouring Senegal, with a small Atlantic coastline, The Gambia stretches inland along a river of the same name. The country has fertile land and a market-based economy that relies primarily on services and tourism in the coastal region. The gross domestic product (GDP) is made up of services (61 percent); agriculture (23 percent); and small-scale industry (16 percent).[2]

The Gambia is one of the poorest and most fragile countries in Africa. During the last decade GDP growth has been volatile, averaging approximately three percent and per capita income was D320 810 (US$715) in 2017. The Gambia became increasingly fragile during the past 10 years and was ranked in the bottom 20th percentile in the Fragile States Index in 2017. The country’s fragility is driven primarily by four factors: political instability, economic vulnerabilities, weak public institutions, and vulnerability to external shocks.[3] The Gambian economy is exposed to severe climate shocks as frequent floods, erratic rainfall and droughts regularly affect the agricultural economy adversely. Agriculture employs 46.4 percent of the country’s labour force (ages seven and above), rising to 80.7 percent in rural areas and is the largest employer of the poor (75 percent) and the extreme poor (90 percent).[4]

Poverty is a significant challenge and opportunities to secure sustainable livelihoods are limited for many Gambians. The poverty rate is high and has almost not changed over the past five years from 48.1 percent in 2010 to 48.6 percent in 2015. Extreme poverty is also high at 20.8 percent.[5] The number of poor people grew from 790 000 in 2010 to 930 000 in 2015.

In 2017, The Gambia underwent its first transfer of power in 22 years, ending a period of autocratic rule and economic mismanagement. Under the former regime, the macroeconomic framework was characterised by high levels of debt, high fiscal deficits and almost no international reserves. Interest payments on public debt absorbed almost half of government revenue in 2016, leaving no room for investment or development spending. There was widespread mistrust in the government and the social contract had broken. Following the democratic elections in December 2016, the new government has embarked on economic reforms, supported by international donors and an economic recovery is underway. Real GDP growth was estimated at 5.5 percent in 2017, although the International Monetary Fund (IMF) assessed that The Gambia’s public debt remained unsustainable.[6]

The main challenges facing the new administration include contending with the legacy of fragility, improving services and living standards, and mending the social contract amid a highly constrained fiscal space and with inadequate public-sector ability and performance. To tackle this, the government articulated an ambitious vision for reform and development in the 2018 National Development Plan (NDP). It is expected that achievement of these reforms would help rebuild the social contract. In partnership with the new administration, donors have pledged more than US$1.5 billion to help fund investments aligned to the NDP, more than half of which has come in the form of grants, including US$288 million from the World Bank. While the NDP does not mention urban development and housing, it highlights three key results for land use planning: a National Land Policy; a Land Use Plan; and a Nationwide Cadastral Map.

According to the IMF’s 2019 Country Report, The Gambia is enjoying a strong economic recovery with a good prospect of sustained growth over the medium term. In the two years since the government of President Adama Barrow took office, the economy has rebounded, with growth exceeding 6.5 percent in 2018. Inflation dropped to 6.5 percent at the end of2018 and gross official reserves reached 2.7 months of prospective imports.[7] The IMF Country Report is also supported by the Monetary Policy Report of the Central Bank of The Gambia (CBG), which indicates that in 2018 the economy expanded by a robust 6.5 percent, higher than the 2017 4.8 percent. Headline inflation, as measured by the National Consumer Price Index (NCPI), accelerated to 6.9 percent in April 2019 from 6.1 percent in April 2018, reflecting the marked increase in non-food inflation. Non-food inflation accelerated to 8.7 percent from six percent during the period under review. The Central Bank’s core measure of inflation, which stripes out utility, energy and volatile food items, decelerated to six percent in April 2019 from 6.6 percent in April 2018 and the CBG maintained its policy rate at 12.5 percent.[8]

[1] World Bank The Gambia Social Safety Net Project (P167260). 28 January 2019, updated 7 March 2019. Combined Project Information Documents/Integrated Safeguards Datasheet (PID/ISDS). Pg. 3.

[2] President Adama Barrow’s 2019 Budget speech, delivered on 14 December 2018.

[3] World Bank The Gambia Social Safety Net Project (P167260). 28 Jan 2019, updated March 7 2019. Combined Project Information Documents/Integrated Safeguards Datasheet (PID/ISDS). Pg. 3.

[4] Gambia Bureau of Statistics (May 2017). Integrated Household Survey 2015/2016: Preliminary Survey Findings.

[5] Gambia Bureau of Statistics (May 2017). Integrated Household Survey 2015/2016: Preliminary Survey Findings.

[6] IMF Press Release 18/265 Second Review of the Staff Monitored Program. 28 June 2018.

[7] IMF (2019). The Gambia: IMF Country Report No. 19/128.

[8] Central Bank of The Gambia (2019). 29 May 2019 Monetary Policy Report. http://www.cbg.gm/research/mpolicy.html (Accessed 20 August 2019).

Access to Finance

The Gambian financial sector is comprised of 12 banks (one of which is an Islamic bank) with the remaining 11 conventional banks being mostly foreign-owned. The banking industry continues to cater for the needs of the small formal sector, with CBG estimates for banking penetration ranging from 20 percent to 25 percent nationwide. Financial inclusion continues to be a challenge. This is despite the fact that, as of the end of 2018, 54 registered credit unions, three microfinance companies, one mortgage finance company and 37 Village Savings and Credits Associations were operational.[1]

According to the CBG, the banking sector remains stable with adequate liquidity and capital, and high profitability. The liquidity ratio is 90.6 percent, significantly higher than the requirement of 30 percent. This increased liquidity makes funds available for lending to the private sector despite increasing government borrowing.

The World Bank’s Doing Business 2019 report ranks The Gambia at 134 out of 190 economies for getting credit, and at 132 for registering property. There is a need for government to continue with reforms to improve the business environment, which is especially pertinent for the housing finance sector. There is only one financial operator, Home Finance Company Limited (HFC) that offers mortgages to customers. The national mortgage market remains low and this is evident given the company’s narrow portfolio of just 49 mortgages on its books at the end of 2018. The total portfolio of approximately D25 355 289 (US$510 231) is insignificant compared to the total banking industry construction finance loan portfolio of approximately D977 240 000 (US$19 665 269). HFC offers a mortgage product that can finance up to 70 percent of the value of a property payable over a maximum of 15 years. HFC offers four different types of mortgage products: home purchase, home completion, home improvement and home equity. The company reduced its mortgage interest rate from 18 percent to 17 percent in 2018. However, it continues to be constrained by non-performing loans, which accounted for over 50 percent of its loan portfolio in 2017.  This has slowed the growth of the number of mortgages underwritten by the company as it focuses on loan recoveries.[2]

The Gambia has a pension industry that actively supports housing expansion. The Social Security and Housing Finance Corporation (SSHFC) aims to provide adequate social protection for workers and to facilitate social shelter delivery on a sustainable basis. The corporation operates four constituent funds: the Federate Pension Fund, the National Provident Fund, the Injuries Compensation Fund, and the Housing Finance Fund. SSHFC requires a minimum down payment of 25 percent of the selling price, with the balance payable monthly over a 15-year period.

[1] Central Bank of The Gambia (2019). Interview with Siaka Bah, Principal at Microfinance Department of The Central Bank of The Gambia, 20 August 2019.

[2] Home Finance Company of The Gambia (2019). Interview with Home Finance Company of The Gambia General Manager Omar Sarr, 19 August 2019.

Affordability

The Gambia Bureau of Statistic’s Income and Household survey notes that 56.1 percent[1] of households in The Gambia live in owner-occupied dwellings, with 31.2 percent living in rented housing. A higher percentage of people in rural areas live in owner-occupied dwellings (88.4 percent) compared to the capital city Banjul and other urban centres, where 66.4 percent and 46.5 percent of inhabitants respectively live in rented housing. Accordingly, the demand for housing is higher in the urban areas where 34 percent of the urban population live in slums and are faced with significant challenges around housing, health and environmental degradation.

While curated data on the trend in property prices in The Gambia is unavailable, different players in the industry confirm that prices have risen steadily over the past few years, largely driven by the property interests of Gambians in the diaspora. There is a shortage of affordable housing for most Gambians. The main developer of affordable housing in The Gambia is the SSHFC, which is mandated to provide serviced plots of land, with or without small construction loans, for low and middle income groups.  It also develops complete housing units for purchase by middle income households.  The price of a three-bedroom house (220 square metres) is approximately D4.3 million (US$100 000), while a two-bedroom house is D2.2 million (US$50 000).

According to Taf Africa Homes, a leading real estate developer in The Gambia and the Economic Community of West African States (ECOWAS) sub-region, it would cost approximately D8 720 (US$175) per square metre to buy a two- or three-bedroom house in its planned affordable housing development in the metropolitan area.[2] This amounts to approximately D1 635 000 (US$32 902) and D2 750 000 (US$55 339) per property, respectively. The company has partnered with three local commercial banks (Trust Bank Gambia Ltd, Ecobank Gambia and Guarantee Trust Bank Ltd) to offer a mortgage financing facility for its customers. The mortgage financing facility is a 10-year mortgage plan that requires a 25 percent deposit called equity contribution. While the price point for the planned affordable housing estate by Taf Africa Homes is much lower than that offered by SSHFC, it is still well above the affordability threshold for the vast majority of Gambians. The shortage of affordable housing is also reflected in the lack of adequate, affordable rental housing stock and consistent reports of steep rises in urban area rentals. On average, it costs D6 000 (US$120) and D11 500 (US$231) a month to rent a one- and three- bedroom apartment respectively, in the metropolitan centres.

[1] Gambia Bureau of Statistics (May 2017). Integrated Household Survey 2015/2016: Preliminary Survey Findings.

[2] Taf Africa Homes (2019). Interview with Taf Africa Homes General Manager Ya Bajen Njie. 25 September 2019.

Housing Supply

The demand for housing among the urban population continues to exceed supply, with a housing deficit estimate of 50 000 housing units provided by the Ministry of Lands and Regional Government in 2015 –still the deficit referred to by industry players.

The last major housing programme completed in the country was in 2011, when UN-Habitat implemented its Participatory Slum Upgrading Programme. This 36-month programme, with an estimated cost of US$5 million, sought to meet the housing needs of low and middle income earners in the city of Banjul, and the Kanifing and Brikama municipalities. The programme aimed to construct 2 000 housing units across the three cities. In addition, 200 commercial shops, mosques, three chapels, community centres, recreation facilities and parks were planned for the three sites. The project was part of a wider collection of urban upgrading projects that sought to address urban infrastructure, governance, health, environmental issues, local economic development, urban safety and urban disaster management, all being driven by the support of UN-Habitat. The Gambia is now in the second phase of the programme which entails action planning and programme formulation.

The biggest housing schemes in the country have been implemented by SSHFC, with the most notable in Bakoteh, Kanifing and Brusubi. As at August 2019, SSHFC is engaged in three housing projects: the Brikama Jamisa project, the Jabang project, and the Tujereng project. SSHFC is 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.

Several private sector players operating in The Gambia, such as Taf Africa Homes, Blue Ocean Properties, Swami India International, Global Properties and Amiscus Horizons are planning to engage the affordable housing sector in 2019. While most of these companies are predominantly focused on the higher end of the housing market, Amiscus Horizons’ main objective is to make housing affordable for all Gambians by pioneering the concept of cement block banking. Under the cement block banking scheme, customers will pay for cement blocks which will be kept for them until a certain threshold is reached before the cement blocks are delivered to their sites to start or complete construction of their homes.

 

Property Markets

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 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 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, hospitals or office buildings.

Land tenure remains an ongoing issue in The Gambia. This is partly because registering property involves, on average, five procedures which take 66 days to complete and cost 7.6 percent of the property value. Tenure security is limited, with only 45 percent of the population being secure and in some cities the number is even lower. Tenure security is highest in rural areas, at between 70 percent and 89 percent. It takes an average of three years to secure a title deed and the cost is exorbitant, costing D4 000 (US$80.5) in transfer tax to the municipality and D40 000 (US$805) in capital gains tax per transaction. This limits access to mortgage financing and dampens the incentive to self-build through housing microfinance.

Policy and Regulation

The most notable policy development revolves around the establishment of the Collateral Registry and Registration System, instituted by the CBG under the Securities Interests in Movable Properties Act of 2014. The Act provides for the creation, perfection, priority and enforcement of security interests in movable property. The intent of this is to facilitate credit delivery by providing efficient, cost-effective services and by creating an enabling environment to ensure easy access to credit.[1]

However, there has not been any significant development by the new government in housing-specific legislation and regulation, nor any formulation of an urban development strategy or a policy guiding the urbanisation process. The main policies and regulations that govern the housing sector are: the Social Security and Housing Finance Corporation Act of 1981; the State Lands Act of 1991; the Physical Planning and Development Control Act of 1991; the Land Acquisition and Compensation Act of 1991; the Survey Act of 1991; the Local Government Act of 2002\); the Rent Act of2014; and the Mortgages Act of 1992.

[1] Central Bank of The Gambia (2019). Collateral Registry of The Central Bank of The Gambia. http://www.gambiacollateralregistry.gm/home.aspx  (Accessed 20 August 2019).

Opportunities

The affordable housing market in The Gambia continues to be untapped. However, recent improvements in the government’s implementation of macroeconomic policies, coupled with increased business confidence, may encourage greater private sector participation in the affordable housing segment. A key development is the new government’s commitment to ensuring macro-stability to support a lower interest rate environment. The expectation is for a continued decline in the lending rates of commercial banks and for them to partner with property developers to offer mortgage financing products. There is also a push for the use of alternate approaches, technologies and materials, which speed up the delivery and improvement of housing.

The high level of informal and self-built houses, coupled with an established regulatory framework for the microfinance industry, opens up a window for developing housing microfinance products that the existing financial industry players are yet to take advantage of. The revitalisation of the Association of Real Estate Companies has brought together approximately 60 percent of the estimated registered companies in the country. With more companies expected to join the association, it is envisaged that the association will engage in dialogue with the government to address its key challenges. These include access to low cost finance and land for housing development, slow government procedures, and the need for a reliable supply of electricity and water.[1] The successes of Amiscus Horizons and the gradual and steep fall in the yields of Government Treasury Bills should encourage more financial industry players to seek out greater opportunities within this sector.

[1] Association of Real Estate Companies (2019). Interview with president Abubakar Bensouda 19 August 2019.

Availability of data on housing finance

Data on housing finance is available from numerous sources in the country. However, this data is not often collected, aggregated and shared on a frequent basis. This means that the information available is not always the most recent.

The CBG does not require commercial banks to show their outstanding mortgages separately. Instead, the number of outstanding mortgages is included in the construction category and this makes it impossible to establish the total number and value of the mortgage portfolio in the banking industry. Further, the Microfinance Department of the CBG does not collect and aggregate data on outstanding loans from all the microfinance companies, thus data on the total microfinance loans in the country is not available.

Institutions such as the Deeds Registry have begun the process of digitising title deeds. This is expected to be completed next year. The title deeds are currently recorded in physical books dating as far back as the 1700s.

 

Additional sources

UNDP (2016).  Country Programme Document for The Gambia (2017-2021). https://digitallibrary.un.org/record/835912?ln=en (Accessed 29 Aug 2018).

UNDP (2018).  Human Development Indices and Indicators: 2018 Statistical Update: Briefing note for countries on the 2019 Statistical Update: Gambia. http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/GMB.pdf (Accessed 30 August 2019).

World Bank. Data: The Gambia. http://data.worldbank.org/country/gambiathe?view=chart (Accessed 29 Aug 2019).