‘When Habitat for Humanity launched the Building Assets, Unlocking Access project in 2012, Ghana was at the top of the list of countries that appeared poised to adopt such a program based on selection criteria including:
- A growing and relatively stable economy, and a political climate that favors investment.
- Increasing regulation in the microfinance sector that hints of future consolidation among institutions.
- High demand for housing microfinance, given that up to 90 percent of the housing stock is self-built.
- Positive preliminary conversation between Habitat for Humanity International and two major microfinance institutions.
When the project started in 2012, it had to rely on data from late 2011 or early 2012, when Ghana’s economy was still booming. In fact, the economy had already started to collapse, but that would not be evident for several months after the project began. This period of economic slowdown was accompanied by an alarming rise in interest rates. The Bank of Ghana’s benchmark lending rate doubled between 2011 and 2015, rising from 12.25 to 25 percent. The timing could not have been worse.
With support from Habitat’s Center for Innovation in Shelter and Finance, two financial institutions (one bank and one savings and loan company) worked throughout 2013 to develop a housing microfinance product. However, when the products were ready to be launched in 2014, the borrowing rate for microfinance institutions had risen to 38 percent, and the deteriorating economic environment in Ghana had dramatically raised the risk premium of launching a new product. The financial institutions were unable to shift increasingly costly capital to the new product. They needed access to longer-term capital with stable pricing, but capital access was not a feature of the project. With no clear sense of when the product would be launched, the project was closed in Ghana. Although several factors contributed to this reversal (which are documented in the project’s midterm evaluation), the most obvious is the economy.’
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