Scoping study: overview of the housing finance sector in Zambia

FinMark Trust commissioned a scoping study last year to review Zambia’s Housing Finance Sector. The study was undertaken by Knight Frank, Planet Finance and the Peoples Process on Housing and Poverty in Zambia. This is the final report.

The study found that the residential mortgage sector in Zambia is enjoying rapid growth. Between 2008 and 2012, the commercial banks mortgage portfolio grew from ZMW 698 million, ($139.6 million), to ZMW 1.208 billion, ($241.6 million); a 256% increase. This is only part of the picture of the housing finance landscape. Conventional (i.e. secured) mortgage finance remains comparatively expensive, with interest rates averaging 18.8% (2011), and leading to most groups seeking alternative, cheaper options. The most common route to home ownership is the incremental self-build route, often with individuals using cyclical loans to reduce the overall cost of borrowing. The study reveals that there are a multiple of supply-side actors engaged in the sector, from public, private and tertiary spheres, with non-conventional products, reaching even the low-income sectors.  Access to finance is by no means universal, with individuals across all income groups subject to constraints of varying degrees. Sector risk and market constraints have limited the channeling of funds towards housing finance, and kept borrowing costs high. Nevertheless, there is the potential for market expansion, and evidence of existing innovations with the potential to be scaled up to serve a wider cross-section of the population.

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