Case Study 1 | The FOGARIM: A Housing Loan Guarantee for the Informally Employed
FOGARIM is a Moroccan government mortgage guarantee program started in 2003 to open up access to housing loans to those who work in the informal sector. As more than a third of the Moroccan population are informally employed, the banks’ traditional practice of granting housing loans to those who can provide proof of income excludes a large part of the population. With limited resources, Morocco could not afford a large subsidy program or direct loans to help those with no access to housing finance. Instead, it chose to leverage its small resources by guaranteeing loans granted by banks. The Centre for Affordable Housing Finance in Africa commissioned a case study on FOGARIM to contribute to the growing track record of novel solutions and initiatives, pioneered by policy makers, financiers, developers and households themselves that suggest that there are new opportunities for making the housing finance sector work for the poor in Africa.
FOGARIM has widened access to housing finance and, through it, has improved financial inclusion. With access to housing finance, FOGARIM improved access to home ownership. This was not without challenges such as a relatively high default rate (5.6 percent), high costs to the banks and misunderstanding of the guarantee. While open to all banks, FOGARIM is only used by a few and two of them share 81 percent of the FOGARIM “market.” Thus the success of the guarantee is somewhat limited. The case study poses questions about the possibility of replicating the FOGARIM experience in other African countries and the pre-requirements for its implementation such as a strong banking system, land tenure and the extent to which foreclosures can be enforced. We hope that this case study, and the other case studies in the series, contribute to the development of imaginative solutions by housing finance practitioners across the continent, assisting them in adapting initiatives to manage the vast array of challenges they face daily.
This case study was prepared with the support of the National Housing Finance Corporation
