Housing Finance in Gambia
Overview
This profile is also available in French here.
To download a pdf version of the full 2021 The Gambia country profile, click here.
The Gambia, with a landmass of 10 689 km2 and a population of 2.4 million, is one of the smallest and least populated countries in West Africa. The majority of the population lives in the Greater Banjul Area (63%). The increase in rural-urban migration continues to put pressure on housing demand, which exceeds supply. The housing deficit was over 50 000 housing in 2015 and has grown since then. The Gambian government does not invest directly in housing development and finance but rather creates an enabling environment to facilitate the private sector and some state enterprises like the Social Security and Housing Finance Corporation (SSHFC) to address the housing need. However, this enablement strategy has resulted in both informal and less than adequate housing developments in the Greater Banjul Area as the private sector and SSHFC have not met the housing demand.
The economy contracted by 0.2% in 2020, 6 percentage points lower than the real growth in pre-pandemic 2019. This contraction in real Gross Domestic Product (GDP) growth in 2020, relative to the growth registered in 2019, is largely due to the impact of COVID-19, the full economic effects of which are still unraveling. The Central Bank of The Gambia (CBG) expects the economy to grow by 4.1% in 2021 due to the relaxation of some of the lockdown measures to allow for movements of persons, goods, and services, the increase in government stimulus spending, and the relatively low number of reported COVID-19 cases at the end of 2020 and beginning of 2021. The easing of the monetary policy stance of the Central Bank of The Gambia has also impacted positively on the estimated growth rate. More recently in 2021, the CBG’s quarterly Business sentiment survey has revealed low confidence in the performance and prospects of the economy, with the overall business sentiment pointing to low economic activity in the first quarter of 2021.
Find out more information on the housing finance sector of the Gambia, including key stakeholders, important policies, and housing affordability:
- Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Legislation
- Opportunities
- Availability of data on housing finance
- Urban Informality
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2021 edition, which has up-to-date profiles for 55 African countries.
Download yearbookGambia
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
In response to the prolonged pandemic, the Central Bank of The Gambia intervened through the periodic Monetary Policy Committee (MPC) meeting to relax key prudential ratios to enhance liquidity and facilitate lending in the financial services sector. In particular, after the 3 December 2020 MPC meeting, the CBG set the maximum prime lending rate for all commercial banks to 15% (Monetary Policy Rate (MPR) of 10% plus 5%) effective from January 2021. This was communicated through a letter to all commercial banks dated 17 December 2020. This was to encourage businesses and individuals to borrow, given the reduced rate (from at least 20% on average for most banks).
The four major banks in the country continue to dominate the financial services landscape. There are currently 12 commercial banks including one Islamic bank, coupled with 70 non-bank financial institutions. To increase financial inclusion and penetration, major banks continue to leverage technology to reach the remotest parts of the country, through payment platforms, mobile money transfers, and money transfer organisations. The impact of Microfinance institutions in the financial services sector is immense even though most do not provide mortgages or housing loans. This has really increased improved banking penetration which is at a low rate of 35%countrywide. Two new Microfinance companies (YONNA Islamic Microfinance and Approved Services (APS) Islamic Microfinance) were issued licenses in 2021.
Despite the pandemic, the banking sector continues to be highly profitable, very liquid, and well capitalised. The risk-weighted capital adequacy ratio is at 31.8%, higher than the statutory requirement of 10%, while the liquidity ratio is 64.25, which is well above the statutory requirement of 30% (as of the end of March 2021). The impact of the pandemic was limited to one large bank, three small banks, and three microfinance institutions (MFIs). Even though non-performing loans (NPLs) increased to 6.8% of gross loans at end-2020, the level of provisions remained comfortable at 85%. Notwithstanding pandemic-related balance sheet weakening in a few MFIs, increasing NPLs, and denting profitability, the subsector remained well-capitalised, liquid and helped facilitate financial intermediation and access through significant growth in mobile banking.
The Home Finance Company of The Gambia Limited (HFC) is the only financial company licensed by the CBG to provide mortgage housing finance loans to the public. The services offered by the company are no different than those provided by major banks, even though they are not allowed to call them mortgages. The HFC has a very narrow portfolio, with just 49 mortgages on its books as of July 2021. The total portfolio of approximately D40.4 million (US$790 254) is insignificant when compared to the total banking industry construction finance loan portfolio of approximately D2 284 420 000 (US$44 684 980). The HFC’s mortgage products generally finance up to 70% of the value of property payable over a maximum period of 15 years. The company maintained its mortgage interest rate at 17% up to June 2020, when it reduced the rate to 15%. The company continues to be plagued by non-performing loans (NPLs), which account for over 21% of its loan portfolio as of June 2021. This above-average NPL ratio of below 5%, coupled with inadequate capital injection hampers growth as it concentrates on recovery than the growth of the portfolio.
The Social Security and Housing Finance Corporation (SSHFC) continues to be the only government institution mandated to provide affordable housing to middle-income earners. These mortgages are given over a period of 4 and 15 years, with a minimum down payment of around 20%, depending on the location of the property. The SSHFC hasn’t embarked on new housing development in the past couple of years, which has adversely affected the stock of affordable housing in the country. However, it is planning the NAFUGAN project which will add 700 housing units, in the form of site and service. The total amount of its outstanding mortgages as of the end of 2020 was D175 000 000 (US$3 423 132) and over 7 000 customers. The level of bad debts is about 20% of the outstanding mortgage portfolio. The SSHFC mortgage portfolio is well more than the HFC portfolio shown above but also far less than the Construction loans for the banking sector.
The impact of Covid-19 has affected debt collection and the level of bad debts for both HFC and SSHFC. However, both entities relaxed repayments temporarily stopped foreclosure and waived interest payments for some struggling customers during this period.
[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
Building a house or buying a house from developers is unaffordable for most Gambians since 10.3% of the population live below the poverty line (as of 2015), coupled with an unemployment level of 9.64% as of the end of 2020. This is further compounded by the high costs of building materials, land, and borrowing from financial institutions. The price of a three-bedroom house (220m2) is approximately D4.6 million (US$89 979), while a two-bedroom house is D2.4 million (US$46 946) based on the prices offered by SSHFC. One of the major property developers, Global Properties Gambia, indicated that it would cost around D9 000 (US$176) a square meter to buy a two- or three-bedroom house in the urban areas, which approximates to D2 172 718 (US$42 500) and D4 345 436 (US$85 000) a property, respectively. Mortgage providers and developers normally require a down payment of between 20 and 35% of property values before any deal is made. This makes mortgage financing beyond the reach of many low- and middle-income Gambians, which represented 38.4% of the country in 2015.
The cost of renting an apartment is also exorbitant since the agents demand a minimum of six months deposits and a consultation fee, which most many people cannot afford. This also increases the eviction rate and rent tribunal cases. It costs between D5 000 (US$98) and D7 000 (US$137) a month to rent a one- or three-bedroom apartment in the urban areas of The Gambia. It is important to note that most agents provided extended credit periods to their customers due to the pandemic, so eviction was very rare during this period.
The exorbitant cost of rent in the Greater Banjul Area is due to high population density, as demand far exceeds supply. Since the real estate sector is largely unregulated, agents also charge a premium for no extra service. There is no curated data to track and report on prices of houses in both the urban and rural areas. These are published in the websites of individual developers and real estate agents, which makes price comparisons difficult and time-consuming.
Disappointingly, the central or regional governments do not provide any assistance to procure land or build on existing land and there is no budget allocation in the current budget or the previous one for land. This is largely left with the private sector players.
[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
Lack of direct government involvement or support for affordable housing development is hampering the supply side of the affordable housing market. A lack of subsidies, direct financing, access to and low-cost land in prime locations, unavailable or poor infrastructure are some of the issues raised by developers as hindering the development of affordable housing. With the large increase in the number of real estate developers, access to land is becoming a challenge and when available, is very expensive and fraught with legal issues. The government and the municipalities are not helping in land banking/reserving land for future housing development. There is currently no updated or coherent town planning framework that informs the development of the major settlements.
Furthermore, since the government does not provide any low-cost financing for affordable housing development, private developers do not have the financial muscle needed 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 that are not accessible during the rainy seasons or not suitable for habitation.
The transportation system in the country is poor and underdeveloped and does not support sustainable housing development. Public transportation is driven by the private sector through the use of buses, vans, and local taxis. There is significant road congestion, which is getting worse each year. The waste management system in the country is poor, with limited and unreliable companies collecting and disposing of solid wastes in the urban areas. These solid waste materials are usually dumped in residential areas, which is affecting the quality of life for those areas. As a result, these areas are no longer attractive to developers and poor households who dwell there, normally live-in squatter-like conditions, and are in a constant tussle with the authorities to relocate.
[1] Social Security and Housing Finance Corporation (2020). https://www.sshfc.gm/housing-finance-fund
(Accessed 31 August 2020).
Property Markets
COVID-19 has greatly affected the property market since lenders, developers and potential buyers have stopped committing resources during this time. Some banks and microfinance companies have been badly affected by the pandemic since they were significantly exposed to the real estate and/or hospitality industries. However, the property market in Gambia continues to attract interest from Gambians in the diaspora and other foreigners. This sustained increase in demand for properties, coupled with the increase in the general costs of materials, has resulted in increased house prices.
The country has a Deeds Registry at the Ministry of Justice, which is currently being digitised. The first phase of the digitization was completed in 2020, and further funding is required to complete the second phase. As a result, it is impossible to know the number of residential properties which are mortgaged.
Land tenure continues to be a problem due to communal ownership of land especially in rural and in some urban settlements. This is exacerbated 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$782) in capital gains tax per transaction). The government has not increased these costs due to the pandemic.
The property market in The Gambia is generally resilient with lots of players, both formal and informal, and highly unregulated. However, properties are freely transferable if all the various taxes are paid to the state and councils, whether the parties are foreigners, residents, or citizens.
There is also no published data on the number of households owning and renting properties, either by the government or real estate agents.
[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 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. The concept of a mortgage exists, provided by The Mortgages Act 1992 (Cap 97:02), albeit the mortgage market is still very small. There is however 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, most of the land is held through customary tenure or controlled by farmers and traditional rulers. Such land can, however, be easily expropriated by the government or declared reserved land to be used in the future for social amenities such as parks, markets, schools, hospitals, or office buildings.
The current government has not introduced any new housing-specific legislations/regulations or designed any policies guiding the urbanisation process. The existing laws and policies that govern the housing sector were developed in the 1980s and 1990s. The most recent Act has been 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. There is currently no Act regulating the real estate sector The Central Bank has made policy changes through its MPC by relaxing certain prudential policies to allow financial institutions to hold more cash and lend to the public. In the process, it fixed the lending rate to 15% effective from 17 December 2020.
Opportunities
The shortage of affordable housing in the country represents opportunities for potential investors in the sector to fill the housing deficit, which is currently over 50 000 units. Coupled with the easing off of COVID-19 restrictions and liberal macroeconomic policies (lower interest rates, reduced tax rates, and reduced levels of bureaucracy) banks and other lenders are supported in financing housing.
Given the difficulty of acquiring low-cost land for affordable housing in prime locations, most developers are buying and banking land for future development. For example, the SSHFC has banked 25 sites in all the regions of the country. Also, Global properties the Gambia has banked and is prospecting land between Gunjur and Tujereng, where a lot of lands is available for future development. The increase in the number of microfinance companies (70)44 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.
The number of Real Estate Agents (70) and the strengthening of their Association, means that most of the members have now regularized their legal and financial status. 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. They will also be able to pursue better regulation since the industry is largely self-regulated.
One major problem with the real estate sector with their customers is a lack of trust. A couple of real estate company Chief Executive Officers (CEOs) were taken to the police for alleged fraud.
[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
It is very difficult and time-consuming 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 able to only provide limited information.
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. 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 the comparability of non-performing loans misleading.
There is no government institution or an association tasked with the responsibility to collate and make available data on housing finance. Rather, data is available from many different sources which impact the reliability, timeliness, and trustworthiness of the sources. There is currently no data on the number of newly built houses in the country or the major metropolises.
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. The Deeds Registry is yet to secure funding for the needed D5 million (US$97 804) to complete the process.
[1] Interview with Abdoulie Colley Registrar General, The Deeds Registry. 20 August 2020. The Gambia.
Urban Informality
The proportion of the country’s urbanised population has significantly increased from 57% in 2019 to 62.58% in 2021. Urbanisation is putting pressure on existing resources, driving up the price of houses for both purchase and rent. The average person is struggling to make ends meet given very high and sustained costs of living. This is leading to increased urban informality in the urban centres, with households building informally in low-lying open areas, making these households vulnerable to floods annually. Piped water is accessible in most urban settlements; however, there are daily shortages with supply being inconsistent.
The government, through its development partners, is embarking on major infrastructure development projects by constructing and rehabilitating major roads/bridges, extending electricity and water networks throughout the country, enabling private real estate companies to provide affordable land and housing by relaxing regulations, reducing bureaucracies and encouraging the SSHFC to provide housing in the rural areas, which is not attractive to the private real estate companies, among others.
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
