Housing Finance in Gambia

Introduction

The Gambia, surrounded by the Republic of Senegal on all sides except the Atlantic Ocean, is the smallest country on mainland Africa with a total land area of 11 295m², of which 50 percent is arable land. The Gambia’s economy relies mainly on services (66 percent of GDP in 2016) as the main driver of growth, and a volatile, drought-prone agriculture sector (21 percent of GDP in 2016)[1] The Gambia has a population of about two million people, which is growing at a rate of three percent per annum.[2] In addition to this high population growth rate, 61 percent of the population resides in urban areas as a result of high and unplanned rural-urban migration.

Following the tumultuous December 2016 election and political impasse, a new government, under the leadership of President Adama Barrow took power in January 2017, marking the country’s first democratic transition since independence in 1965. The new government’s key economic objectives are to restore macroeconomic stability and attain sustained, high and inclusive growth to promote socioeconomic development. The National Development Plan (NDP) 2018-2021 was launched in February 2018, which has   seven crucial enablers geared towards achieving an overall objective to “deliver good governance and accountability, social cohesion, and national reconciliation, and a revitalized and transformed economy for the well-being of all Gambians”[3].

Classified as a least developed country (LDC), with a GNI per capita of US$473.2 in 2017,[4] The Gambia is also ranked 174 out of 189 in the United Nations Development Programme’s (UNDP)  Human Development Report, 2017, with a score of 0.460, which puts it in the low human development category.[5] Accordingly, the incidence of poverty is high, with The Gambia Bureau of Statistics (GBoS) 2015 Integrated Household Survey indicating that an estimated 48.6 percent of the population live below the poverty line. Rural areas are especially disenfranchised, with rural poverty estimated at 79.5 percent. The high incidence of rural poverty and the high population growth rate of 3.4 percent can be seen as leading to the country’s high urbanisation rate of 4.3 percent.[6]

Coastal climate vulnerability poses a significant challenge for land management, use and planning, with approximately 3 515km² (32 percent) of the country’s total land area below 10m of sea level – the capital, Banjul, has 11km² (more than 90 percent) of its total land area below sea level. The new government recognises the vulnerability of the country’s coastal zones to rising sea levels and the NDP seeks to ensure that the country’s environment and natural resources are sustainably managed and conserved to increase resilience.[7]

 According to the IMF’s Country Report of June 2018, The Gambian economy has started to recover following the growth slowdown of 2016.[8] Economic growth in 2017 is estimated at 3.5 percent bolstered by improved market confidence, resurgence in trade and tourism, and an improvement in foreign exchange supply. Headline inflation declined from 8.7 percent in April 2017 to 6.6 percent in April 2018 and the Central Bank of The Gambia (CBG) reduced its policy rate from 23 percent to 15 percent in mid-2017, causing commercial lending rates to decline from 28 percent to about 18 percent.[9] Accordingly, the Government of The Gambia’s (GoTG) policy orientation will continue to be anchored in a liberal agenda and is expected to be in broad agreement with the international development framework as enshrined in the Sustainable Development Goals. 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.

[1] WTO (2017). Trade Policy Review of The Gambia.

[2] World Bank (2018). World Bank World Development Indicators.

[3] Gambia Government (2018). National Development Plan.

[4] World Bank (2017). World Development Indicators.

[5] UNDP (2017). Human Development Indices and Indicators: 2018 Gambia.

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

[7] Gambia Government (2018). National Development Plan.

[8] IMF (2018). The Gambia: IMF Country Report No. 18/197.

[9] Ibid.

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 be highly monopolised, as indicated in the Gambia Bankers Association year-end report for 2016, revealing that the top four banks account for 69.6 percent and 70.6 percent of industry assets and deposits respectively. The banking industry continues to cater towards meeting 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 perennial challenge. This is despite the fact that, as of the end of 2016, 80 registered credit unions, three microfinance companies and 65 Village Savings and Credits Associations were operational.[1]

 According to the CBG, the banking sector remains well capitalised, highly liquid and profitable, with a liquidity ratio at 94.7 percent – significantly higher than the requirement of 30 percent. As result of the slowdown in government borrowing, private sector credit growth is recovering strongly, growing to a peak of 6.2 percent in March 2018, the highest since 2014. Given the improvement in the economic environment, the CBG reduced the monetary policy rate by 1.5 percentage points to 13.5 percent in May 2018 to reinforce private sector credit growth.[2]

The 2018 World Bank’s Doing Business Report ranks The Gambia 146 out of 190 economies for getting credit, and 129 for registering property. There is a need for government to continue embarking on reforms to improve the business environment, which is especially pertinent for the housing finance sector. Currently, 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 47 mortgages on its books as of the end of 2017, with a total portfolio of approximately US$300 000, which is insignificant compared to total banking industry loan portfolio of about US$88 million. HFC offers a mortgage product that can finance up to 70 percent of the value of a property payable over a maximum of 20 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 20 percent to 18 percent in 2017.[3] 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.

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 (2017): Interview with Siaka Bah; Principal at Microfinance Department of the Central Bank of The Gambia: 3 August 2017.

[2] Central Bank of The Gambia (2018). Monetary Policy Committee Press Release: 20 May 2018.

[3] Home Finance Company (2018). Interview with Home Finance Company (HFC) Managing Director Omar Sarr: 27 June 2018.

Affordability

GBoS Income and Household Survey 2015/2016 notes that 56.1 percent 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) as 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 in terms of 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 (220m²) is about US$100 000 (GMD 4.3 million), while a two-bedroom house is US$50 000 (GMD 2.2 million).

According to Taf Africa Homes, a leading real estate developer in The Gambia and the ECOWAS sub-region, it would cost approximately GMD 4 800 (US$100) per square meter to buy a two or three-bedroom house in its planned affordable housing development in the metropolitan centre,[1] working out to around GMD 1 300 000 (US$328 792) and GMD 1 900 000 (US$42 081) per property. 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 – a 10-year mortgage plan that requires 40 percent deposit. 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. This 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.[2] On average, it costs GMD 6 000 (US$140) and GMD 11 500 (US$269) per month to rent a one and three-bedroom apartment respectively in the metropolitan centres.

Given the lack of affordable housing in the country, most Gambians self-build their houses as they cannot afford to purchase a house outright. This has led to the rapid growth of Amiscus Horizons Ltd, a company that runs a cement block savings scheme using a pay as you go model that started operations in 2014. The company allows its clients to build up enough blocks for a period of two to five years to be able to complete their house. Most of the company’s clients are middle income earners like teachers, nurses, police officers, mid-level civil servants and young professionals. As per Amiscus Horizon’s estimates, the cost of affordable housing should be within the range of GMD 500-700 thousand (US$10 000-US$15 000) excluding the cost of the land.[3] This estimate is well below the going rate of affordable housing developments by SSHFC and leading property developers.

[1] Taf Africa Homes (2018). Interview with Taf Africa Homes Gambia Managing Director: Bajen Njie. 27 June 2018.

[2] Ibid.

[3] Amiscus Horizons (2017). Interview with Amiscus Horizons Managing Director, August Prom Jr. 27 July 27 2017.

Housing Supply

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

Based on available information, there have not been any new affordable housing developments in the country in the last year, with the last major housing programme completed in the country being 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 to be constructed in 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 with 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 were implemented by SSHFC, with the most notable ones in Bakoteh, Kanifing and Brusubi. The two former projects were completed in the 1980s. The Bakoteh project provided 200 housing units of two and three-bedroom houses and failed as the end product was unaffordable by the target group of beneficiaries. The government thus had to subsidise the houses for 15 percent and waived any interest incurred on the loans which were given to the beneficiaries for a 25-year repayment period. For the Kanifing Project, the developed land was demarcated on 743 serviced plots ranging in size from 250m² to 350m². Small construction loans were given to project beneficiaries who were then guided in the construction of their own houses. The loan was part of the World Bank Urban Management and Development Project and offered beneficiaries nine percent interest over a 25-year repayment period.

The third housing project, Brusubi, involves three phases and promises to deliver close to 3 000 housing units. This project site’s total area is 6.9 hectares and is covered by the lease for Brusubi Housing Project phase 1. The project comprises 138 service plots, of which 100 plots consist of complete housing units for outright purchase. The remaining 38 service plots are to be sold by tender to mobilise resources to meet additional infrastructural and other costs. The complete housing units consist of three-bedroom bungalows and two-storey houses. The project was co-financed by Shelter Afrique and offered at a 15-year mortgage term. However, a review of the project indicates that the mortgage default rate is relatively high indicating that high loan defaults are a cross-cutting issue for all mortgage finance players in the country.

As at July 2018, SSHFC is engaged in three housing projects – the Brikama Jamisa, Jabang and Tujereng projects – which are all site and services. 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 the immediate urban infrastructure and other services. The Tujereng project comprises 1 515 residential serviced plots, 11 business plots and 94 plots earmarked for the development of complete housing units. The Jabang project has a total of 817 residential serviced plots, 29 business plots and 39 plots reserved for the construction of complete housing units. SSHFC is actively seeking to partner with interested developers for the construction of the complete housing units using alternative building materials. The change of government and the improving financing avenues that are expected to emerge with greater donor engagement with the country are expected to give a boost to SSHFC to launch new affordable housing projects.

Furthermore, there are several private sector players operating in The Gambia, such as Sky High Group, Taf Africa Homes, Blue Ocean Properties, Swami India International, Global Properties and Amiscus Horizons, that have designs on making a foray into the affordable housing sector. While most of these companies are predominantly focused on the higher end of the housing market, Amiscus’ main objective is to make housing affordable for all Gambians by pioneering the concept of cement block banking with plans to extend to other products such as tiles and corrugated sheets.

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 such security interests. The legal system fully protects and facilitates acquisition and disposition of all property rights including land, building and mortgages. That being said, the bulk of the land is customary tenure or controlled by farmers and traditional rulers. Such land can, however, be easily taken over by government or declared reserved land to be used in future for social amenities such as schools, hospitals or office buildings.

As a result, land tenure remains an ongoing issue. This is partly because registering property involves, on average, five procedures, which take 66 days 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: GMD 4 000 (US$93) in transfer tax to the municipality and GMD 40 000 (US$93) in capital gains tax per transaction. This limits accessibility 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 2014, which makes provision for the creation, perfection, priority and enforcement of security interests in movable property.[1] The intent of this is to facilitate credit delivery through the provision of efficient, cost-effective services and by creating an enabling environment to ensure easy access to credit.[2]

However, there has not been any significant development in housing-specific legislation and regulation, or any formulation of a highly needed urban development strategy or policy guiding the urbanisation process by the new government through the Ministry of Lands and Regional Government, which continues to be broadly responsible for implementing housing and land related policy.[3] Accordingly, the main policy and regulatory frameworks that govern the housing sector are as outlined in the 2017 annual report, notably:

• SSHFC Act (1981);
• State Lands Act (1991);
• The Physical Planning and Development Control Act (1991);
• Land Acquisition and Compensation Act (1991);
• The Survey Act (1991);
• Local Government Act (2002);
• Rent Act (2014); and
• Mortgages Act (1992).

[1] CBG (2017).

[2] Ibid.

[3] Senghore Law Practice (2017). Interview with Yassin Senghore: Legal Practitioner in The Gambia: 27 July 2017.

Opportunities

The affordable housing market in The Gambia continues to be untapped. However, recent improvements in the government’s implementation of sound 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 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 levels of informality and self-builds, coupled with an established regulatory framework for the microfinance industry, opens up a huge window for the development of 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 about 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 their key challenges, including access to land for housing development, slow government procedures, and a reliable supply of electricity and water.[1] The successes of Amiscus Horizons and the crash 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 (2018). Interview with President Abubakar Bensouda: 26 June 2018.

Additional sources

Amiscus Horizons (2017). Interview with Amiscus Horizons Managing Director, August Prom Jr. 27 July 2017.

Association of Real Estate Companies (2018). Interview with The President, Abubakar Bensouda. 27 June 2018.

Central Bank of The Gambia (2018). Monetary Policy Committee Press Release: 20 May 2018. http://www.cbg.gm/research/mpolicy.html (Accessed 29 Aug 2018).

Central Bank of The Gambia (2017). Collateral Registry at the Central Bank of The Gambia. http://www.gambiacollateralregistry.gm/  (Accessed 28 Aug 2018).

Central Bank of The Gambia (2017): Interview with Siaka Bah; Principal at Microfinance Department of the Central Bank of The Gambia (3 Aug 2017).

Gambia Bankers Association (2017). Annual Returns of Banks 2016.

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

GoTG (2018). Government  of The Gambia: National Development Plan 2018-2021. https://mofea.gov.gm/ndp (Accessed 29 Aug 2018).

Home Finance Company (2018). Interview with Home Finance Company Managing Director Omar Sarr.  27 June 2018.

IMF (2018). The Gambia: IMF Country Report No. 18/197. https://www.imf.org/~/media/Files/Publications/CR/2018/cr18197.ashx (Accessed 29 Aug 2018).

Senghore Law Practice (2017). Interview with Yassin Senghore: Legal Practitioner in The Gambia. 27 July 2017.

Taf Africa Homes (2018). Interview with Taf Africa Homes Gambia Managing Director: Bajen Njie. 27 June 2018.

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

UNDP (2017). Human Development Indices and Indicators: 2018 Statistical Update: Briefing note for countries on the 2018 Statistical Update: Gambia. http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/GMB.pdf (Accessed 20 Sept 2018).

UNDP (2017). Support to Support to Entrepreneurship and Private Sector Development for Inclusive Growth, Employment Generation and Poverty Reduction Project Document.

World Bank Doing Business. Ease of doing business  in The Gambia. http://www.doingbusiness.org/data/exploreeconomies/gambia (Accessed 28 Aug 2018).

World Bank. Data: The Gambia. http://data.worldbank.org/country/gambia-the?view=chart (Accessed 28 Aug 2018).

World Trade Organisation (2017). “Trade Policy Review of The Gambia”. WT/TPR/S/365, World Trade Organization, Geneva. https://www.wto.org/english/tratop_e/tpr_e/s365_e.pdf (Accessed 29 Aug 2018).