Housing Finance in Gambia

Overview

The Gambia is one of the smallest and least populated countries in West Africa. It is bordered by the Atlantic Ocean and the Republic of Senegal, with a land mass of 10 689 km² and a population of 2.6 million.[1] The Gambia is densely populated with 63% of the population living in its major urban centre, the Greater Banjul Area.[2] The persistent increase in migration from rural to urban areas puts pressure on housing demand, which has resulted in both informal and less than adequate housing developments in the Greater Banjul Area. As of 2021, the housing deficit was over 128 874 housing units. [3]

The Gambian government does not directly invest in housing development and finance but rather facilitates this through institutions such as the Social Security and Housing Finance Corporation (SSHFC) and the private sector. The government facilitates private sector participation by relaxing requirements to set up real estate businesses and by removing barriers to the ownership and development of land for domestic and commercial use. The SSHFC has not made any significant housing development in recent years and the only private mortgage lender, Home Finance Company of The Gambia Limited, went into voluntary liquidation in November 2021, due to the lack of sustained profitability of the company for a good part of its business life.[4]

The Gambia is strengthening its democratic process by successfully organizing free, fair, peaceful and transparent elections. In December 2021, President Adama Barrow was reelected for a second five-year term in office. His National People’s Party (NPP) and its coalition partners hold half of the parliamentary seats following an election in April 2022.[5]

The economy continues to recover from the pandemic-induced slowdown in 2020. Data from The Gambia Bureau of Statistics (GBoS) estimated real GDP growth of 4.3% in 2021 compared to 0.6% in 2020.[6] This growth supported an increase in economic activities relating to fishing and aquaculture, construction, and a moderate recovery in services. The Central Bank of The Gambia (CBG) forecasts a higher real GDP growth of 4.7% in 2022 and predicts strong fiscal activities related to ongoing public infrastructure projects and continued recovery in tourism and private construction. There are considerable risks to this outlook, including the protracted conflict in Ukraine, the impact of COVID-19, and the impact of weather conditions on agriculture. In addition, global economic uncertainties and the lingering effects of the pandemic have somewhat dampened business confidence, as reflected in the Central Bank’s latest Businesses Sentiment Survey.[7]

In April 2022, the dalasi depreciated against the US dollar by 4.6% but appreciated against both the euro and pound sterling by 3.9% and 1.8% respectively. Inflation persisted with headline inflation increasing from 8.2% in March 2022 to 11.7% in April 2022. This significant rise in inflation is driven primarily by the increase in food inflation, which accelerated from 9.2% in March 2022 to 11.6% in April 2022. Inflation is expected to remain high in the short-term premised on the rising global food and energy prices, and structural challenges at The Gambia port, such as congestion, delays and so on which add to the overall cost of clearing the goods.[8]

According to the CBG, the financial sector remains stable and sound with robust liquidity and capital adequacy ratios. Non-performing loans (NPLs) were 4.6% of gross loans in March 2022, compared to 7.7% in December 2021. Banks have continued to make adequate provisions for the NPLs.  Furthermore, the Central Bank continues to maintain interest rates at MPC plus 5% (15%)[9] from last year until May 2022, which has made borrowing much less expensive for all customers including the real estate companies. This enhances their ability to borrow the needed funds for affordable housing development.

A fourth wave of the COVID-19 pandemic hit the country between late 2021 and early 2022. However, by February 2022, new infection cases had dropped to almost zero. The vaccination rate currently stands at about 21% of the adult population.[10]

With above average rainfalls, flash floods, windstorms and even hotter temperatures, the effects of climate change can be felt in most part of the Greater Banjul Area. With three quarters of the population reliant on farming (mainly rice and groundnuts) for their livelihood, changing rainfall patterns could have a huge impact. Deforestation (due to urbanisation and population growth) has contributed to reduced rainfall, with storms and flash floods washing away fertile topsoil, leading to increased desertification of the country.[11] Coastal Erosion is limiting prospects for sand mining which in turn drives up the cost of sand and impacts on the cost of construction. The recent floods in July/August 2022 impacted households in the Greater Banjul Area resulting in displacement and damage to private property and public infrastructure including roads and bridges.[12] The Gambia government had to forcefully demolish some houses to make way for the water to recede. In response to these events, the government set some climate change related targets, which with the help of the international community, is working hard to meet.

[1] International Monetary Fund (2022). The Gambia and the IMF (Accessed 9 September 2022).

[2] The World Bank Group (2022). Gambia, The | Data. (Accessed 9 September 2022).

[3] The World Bank Group, Africa Finance Corporation (November 2021). Introducing the Adequate Housing Index (AHI) – A New Approach to Estimate the Adequate Housing Deficit Within and Across Emerging Economies (Accessed 9 September 2022). Pg. 65.

[4] Interview with the former manager at the Home Finance Company of The Gambia, 15 August 2022. The Gambia.

[5] International Monetary Fund – The Gambia (2022) IMF Country Report No. 22/195 (Accessed 9 September 2022). Pg. 4.

[6] Central Bank of The Gambia (2022). 31 May 2022 Monetary Policy Report. Monetary Policy Committee – Central Bank of The Gambia (cbg.gm) (Accessed 9 September 2022). Pg. 2.

[7] Ibid. Pgs. 2-3.

[8] Ibid. Pg. 5.

[9] See footnote 6. Pg. 8.

[10] See footnote 5. Pg. 10.

[11] UNEP (undated). Weathering the uncertainties of Climate Change in the Gambia. https://www.un.org/africarenewal/news/weathering-uncertainties-climate-change-gambia (Accessed 11 October 2022).

[12] OCHA (2022). Reliefweb. Gambia Floods, July 2022. https://bit.ly/3CSaLOo (Accessed 10 October 2022).

 

Access to Finance

Financial inclusion in the country is at 31% of the adult population, with 35% and 25% in the urban and rural areas respectively.[1] The female adult population with access to finance is 34% compared to 26% of males, which is mainly due to the informal approach to accessing finance called “Osusu”. However, 23% of males and 15% of females respectively have access to formal finance (bank and non-bank). [2] Nonetheless, there is no correlation between these percentages to investment in affordable housing finance by women. To increase financial inclusion and penetration, major banks continue to leverage on technology to reach the remotest parts of the country, through payment platforms, mobile money transfers and money transfer organisations.[3]

There are currently 12 commercial banks including one Islamic bank, coupled with 62 non-bank financial institutions in the country. The four major banks in the country continue to dominate the financial services sector, providing the needed finances for housing development even though they are not called mortgages. The impact of microfinance institutions in the financial services sector is significant, through their offering of finance for incremental housing development throughout the country but mainly in the Greater Banjul Area. Of the 62 non-bank financial institutions in the country, six are finance companies (microfinance), 54 credit unions and two mobile money operations. Their combined assets at end June 2022 were D 5 558 330 (US$102 873). Total assets of the finance companies were D 2 896 210 (US$53 603) of which 26% was gross loans, with non-performing loans (NPLs) at 7%.[4]

There is no curated data that shows deliberate efforts by banks to target women for housing finance products. Women are not in any way restricted in their capacity to borrow, by the legal framework or customs, however if they wish to use family properties as collateral, consent from the relevant family members is required.[5]

The only private mortgage lending institution in the country, Home Finance Company of The Gambia, was voluntarily liquidated on 3 November 2021 due to unprofitability.[6] The loan tenor of the mortgages was between 4 and 15 years, with a minimum down payment of around 20%, depending on the location of the property. The total amount of its outstanding mortgages as at the end of 2020 was D 175 million (US$3 238 870), with over 7 000 borrowers as customers. The level of bad debts is about 20% of the outstanding mortgage portfolio.[7] With the closure of this institution, it is now very difficult to get long term housing loans since commercial bank do not offer that service.

The SSHFC is the only government institution mandated to provide affordable housing to middle income earners. However, the SSHFC has not embarked on any new housing developments since 2019, which has adversely affected the stock of affordable housing in the country.[8]

Finally, there is a credit reference bureau at the CBG, which banks are mandated to access before extending credit to any customer. However, this facility is not yet available to non-bank financial institutions.[9]

[1] UN Capital Development Fund, FinScope Gambia 2019, Topline Results presentation (2019) (Accessed 9 September 2022). Pg. 24.

[2] Ibid. Pg. 27.

[3] Interview with Director at the Central Bank of The Gambia, 25 August 2022, Central Bank of The Gambia.

[4] Ibid.

[5] Ibid.

[6] See footnote 4.

[7] Interview with Director at Social Security and Housing Finance Corporation, 26 August 2022. The Gambia.

[8] Ibid.

[9] See footnote 15.

 

Affordability

The high cost of building materials (basalt, cement, steel, timber), land and borrowing from the financial institutions has made buying a comfortable new house from developers or building one unaffordable to most hardworking middle class Gambians.[1] This is compounded by an unemployment rate of 11.2% as at the end of 2021, in addition to 10.3% of the population living below the poverty line (as of 2021).[2] Mortgage providers and developers normally require a down payment of between 20% and 35%.[3] One of the major property developers, Global Properties Gambia, indicated that it would cost around D 9 990 (US$185) a square meter to buy a new two- or three-bedroom house in the urban areas, which comes to approximately D 2.41 million (US$44 636) and D 4.34 million (US$79 271), respectively.[4] According to the prices offered by SSHFC, a two-bedroom house in an urban area is D 2.66 million (US$49 305), while a three-bedroom house (220m²) is approximately D 5.11 million (US$ 94 501).[5]

There is no source of centralized data to track and report on the rental and purchase prices of houses in both urban and rural areas. These are generally published in the websites of individual developers and real estate agents, which does not facilitate price comparisons. Since the real estate sector is largely unregulated, agents also charge a premium for no extra service. Furthermore, the central and regional governments do not provide any meaningful financial assistance to procure land or build on existing land. There are no allocated public funds for this purpose, thus it is largely left to the private sector. It costs between D5 550 (US$103) and D7 770 (US$144) a month to rent a one- or three- bedroom apartment in the urban areas of The Gambia. The high cost of rent in the Greater Banjul Area is due to high population density, as demand for housing far exceeds supply.[6]

[1] Interview with Manager at Global Properties Gambia, 26 August 2022. The Gambia.

[2] The World Bank Group (2022). Gambia, The | Data (worldbank.org) (Accessed 9 September 2022).

[3] See footnote 22.

[4] Ibid.

[5] See footnote 19.

[6] See footnote 3.

 

Housing Supply

The Gambian Government does not provide any low-cost financing for affordable housing development, and private developers often lack the resources to build sufficient low-cost houses. This creates a shortage in the market and drives up the cost of even the most basic of houses. This shortage forces low-income households to resort to building houses in locations which are not accessible during the rainy seasons or not suitable for habitation. This situation is exacerbated by the high cost of building materials most of which are imported, such as cement, basalt, iron rods, timber, paint and so on. In addition to poor infrastructure, developers must contend with the lack of subsidies, direct financing, and access to low-cost land in prime locations. [1]

There is currently no comprehensive town planning framework to guide the development of major settlements. The government and the three major municipalities are largely failing to reserve land for future housing development. Furthermore, the growing number of real estate developers presents challenges to access to land, and when land is available, it is very expensive and susceptible to legal issues.[2]

Given the poor transportation system in the country, there is significant road congestion which does not support sustainable housing development. Public transportation is largely dominated by the private sector which provides buses, vans, and local taxis.[3]

The waste management system in the country is very poor, due to limited and unreliable companies collecting and disposing solid wastes in the urban areas. Solid waste materials are usually dumped in densely populated areas, which affects the quality of life in those areas. There is currently a proliferation of donkey-driven carts that transport solid waste in the Kanifing Municipality, the main municipality in the country. As a result, these areas are no longer attractive to developers and the residents live in less-than-ideal conditions and in constant fear of relocation from the authorities.[4]

There is no industry body in the country that regulates developers and building contractors. Building inspections are done by the Department of Physical Planning under the Ministry of Lands, which also issues building permits.[5] There is no shortage of skills for the affordable housing sectors, even though wages are largely unregulated and payments to these workers is not standardised.[6] It takes on average of 173 days to obtain a permit and start a building project.[7] There is currently little to no presence of women developers/owners in the real estate industry, but women do occupy senior positions in many companies in other sectors.[8]

[1] See footnote 22.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Interview with Director at Blue Oceans Properties Limited, 26 August 2022. The Gambia.

[7] The World Bank Group, Doing Business 2020, The Gambia. Pg. 4.

[8] See footnote 22.

 

Property Markets

Following the COVID-19 pandemic period, the property market has experienced some buoyancy. However, major banks and some microfinance companies are still cautious about lending to the sector, especially on new business.[1] Coupled with macroeconomic issues, this has greatly affected the supply side of the property market, and eventually leads to increases in the prices of these houses. Higher prices have made the property market more attractive to other foreigners and Gambians in the diaspora.[2]

The country has a Deeds Registry at the Ministry of Justice in Banjul. The first phase of the digitisation of the Deeds Registry was completed two years ago, but further funding is required to complete the second phase. As a result, it is very difficult to know the actual number of residential properties which are mortgaged. However, title deeds are issued in the name of the owner, be it male or female. [3]

Land ownership in the country is mainly communal especially in the rural areas, which makes land tenure problematic. This is aggravated by the number of procedures and time (at least three years to secure a title deed) it takes to register a property (at least three years to secure a title deed) with the associated costs (D4 440 (US$82) in transfer tax to the municipality and D 44 440 (US$822) in capital gains tax per transaction).[4] These costs have largely been maintained by the government.[5]

There is currently no curated data on the number of households owning and renting properties anywhere in the country, either by the government, the municipalities or real estate agents. This is exacerbated by the fact that the property market in The Gambia is highly unregulated with lots of players, both formal and informal. Notwithstanding, properties are freely transferable if all the various tax obligations are paid to the state and councils, whether the parties are locals or foreigners.[6]

[1] See footnote 15.

[2] See footnote 33.

[3] Interview with Registrar General, Deeds Office, Ministry of Justice of The Gambia, 18 August 2022. The Gambia.

[4] See footnote 22.

[5] See footnote 39.

[6] See footnote 33.

 

Policy and Legislation

The Department of Lands, under the Ministry of Lands and Regional Government, issues title deeds, which are duly registered. Property rights and secured interests in property are protected by the Constitution. Interests in both moveable and real properties are recognised and enforced.[1]The concept of a mortgage exists, as provided by The Mortgages Act 1992 (Cap 97:02),[2] although the mortgage market is still very small. There is however a recognised and reliable system of recording security interests.[3]

The legal system protects property rights and facilitates the acquisition and disposal of land, buildings and mortgages. However, most of the land is held through customary tenure or controlled by farmers and traditional rulers. Such land can, however, be easily expropriated by government or declared reserved land to be used for social amenities in the future.[4]

The existing laws and policies that govern the housing sector were developed in the 1980s and 1990s, the most recent Act being the Rent Act of 2014. The current administration has not introduced any new housing specific legislations/regulations or designed any policies informing the urbanisation process. [5]

Instead of playing a direct role in housing development through policy and legislation, the government rather facilitates the housing development process by making the acquisition and development of land easier for private developers and individuals. The only direct government involvement in the real estate sector is through the SSHFC, which has not made any substantial housing development in the past decade. There is currently no legislation which regulates the real estate sector.[6]

The Central Bank has made some policy changes through its Monetary Policy Committee (MPC) by relaxing certain prudential policies to allow financial institutions to hold more cash and lend to the public.[7] However, the lending rate is fixed at 15% effective from 17 December 2020 and has not been revised even though inflation has risen significantly over this period.[8]

[1] See footnote 38.

[2] See footnote 4.

[3] See footnote 15.

[4] See footnote 22.

[5] Ibid.

[6] Ibid.

[7] See footnote 6. Pg. 8.

[8] Interview with Managing Director, Megabank Gambia Limited, 25 August 2022, The Gambia.

 

Opportunities

The current housing deficit, which is estimated to be over 128 8 units,[1] represents an opportunity for potential investors in the sector to fill the housing gap, coupled with liberal macroeconomic policies (lower interest rates, reduced tax rates and reduced levels of bureaucracy).  This will encourage banks and other lenders to support housing finance.

Most developers are buying and banking land for future development due to the difficulties of acquiring low-cost land for affordable housing development in prime locations. For example, the SSHFC has banked 25 sites in all the regions of the country.  The Global Properties Gambia has also banked and is prospecting land between Gunjur and Tujereng, where land is available for future development.

Although microfinance companies are not yet allowed to directly fund long term housing projects, the increase in the number of microfinance companies (62 at end June 2022) and the size of the existing major microfinance institutions presents opportunities for housing finance to support the informal sector and self-built houses.[2]

The number of Real Estate Agents and the strengthening of their Association, means that most of the members have now regularised their legal and financial status.[3] This will improve access to finance and also enhance their lobbying power with the government in terms of access to affordable and reliable power supply, road networks, water, sewage, low-cost finance and land for commercial development. [4]

Finally, lack of trust is one major problem with the real estate sector, which hampers demand especially those in the diaspora. In 2020, the Gambia Competition and Consumer Protection Commission (GCCPC) had to launch an investigation into the sector after receiving 13 complaints from customers alleging fraud.[5]

[1] See footnote 3. Pg. 65.

[2] See footnote 15.

[3] See footnote 33.

[4] See footnote 22.

[5] Gambia Competition and Consumer Protection Commission, Study on the State of Consumer Welfare in the Real Estate Industry (2020). Pg. 2.

 

Availability of Data on Housing Finance

In The Gambia, there is no government institution or association specifically tasked with gathering, collating and publishing data on housing finance. Data is available from a variety of different sources which impacts the reliability and timeliness of the data. There is currently no data on the number of newly built houses in the country or the major metropolises.

It is time-consuming and very difficult to gather relevant and reliable information or to seek clarification from some government entities since public officials are either not available, not helpful or are only able to provide limited information.

The major mortgage lenders do not publish information on the number, value of and nonperforming portion of the mortgages in their portfolio, making trend analysis very difficult The financial reporting framework for large microfinance companies changed in 2019 from local Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Framework (IFRS). IFRS has very different provisioning/impairment guidelines, which makes comparability of non-performing loans misleading.

The first phase of the digitisation of the title deeds at the Deeds Registry was completed in 2020, with the second phase yet to start due to funding not yet being secured.

Available data on climate change is generally not up to date and, where available, relate mostly to agriculture, erosion and flooding. Similarly for gender issues, data is not widely available. Some data points are segregated based on gender but there is little emphasis on gender analysis, especially with respect to affordable housing.

 

Green Applications for Affordable Housing

The real estate sector is still unregulated and largely informal. Green issues are not yet mainstreamed into the activities of the housing and real estate sectors.

The government, banks and the microfinance companies do not provide any incentives to finance green related housing projects, nor are there green related finance products offered by banks or microfinance companies.

Data on these issues is also scare. There is currently no curated data on green related businesses either at state or municipal levels.

The main source of energy in the country is currently electricity (91%), followed by solar (9%). Nationally, 63% of the adult population has access to the national electricity grid, maintained by the National Water and Electricity Company (NAWEC). In addition, 88% and 95% of the adult population have access to water and sanitation respectively.

 

Websites

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/housingfinance-fund

Ministry of Local Government and Lands The Gambia http://www.molgl.gov.gm/

AllAfrica https://allafrica.com/stories/201406031295.htm