Working paper 3: The Impact of Basel III and the Latest Changes in Regulation on Access to Housing Finance in Africa

There is a broad recognition that access to affordable housing finance is critically important, not least because of the demand for housing and the importance of housing for the well-being of population, and for the economy. As a result, a greater attention is (should) now being given to ensuring access to affordable housing finance for all in Africa. This will require understanding and addressing the critical factors that are impeding the development of effective housing finance systems across the continent.

Basel III is an internationally agreed comprehensive set of reform measures developed by the Basel Committee on Banking Supervision (BCBS),2 to strengthen the regulation, supervision and risk management of the banking sector. International Financial Reporting Standard 9 (IFRS9) introduces a new impairment model based on expected credit losses (ECL) to replace the incurred losses of the previous international accounting standard (IAS 39).

This working paper reviews how the African financial sector is reacting to the Basel III requirements, and examines how Basel III and IFRS9 regulations are affecting, or are likely to affect, the capacity of African financial institutions to provide affordable housing finance products. The main focus is twofold: 1) clarify the likely effects of the Basel III and IFRS 9 proposed regulatory changes initiatives on the supply of affordable housing finance in Africa; and 2) describe implementation of Basel III in WAEMU and South Africa.

This working paper is also available in French.