Despite most households in Africa financing their housing through savings, savings for housing is an under-developed area of product innovation and development. There is little research on the scope of savings, currently, for housing purposes and how this is organised by service providers and the savers themselves. To support market development, the Centre for Affordable Housing Finance in Africa undertakes research to understand how people save formally and informally through a variety of channels, and how these savings are used for housing. This is to identify national economic drivers and inhibitors of savings for housing and to make recommendations for both public and private practitioners to develop approaches that enhance savings for housing proposes.
The issue of loan-to-value ratios (LTVs) is a key area of focus, as formal savings rates are generally low and households operate on the edges of their affordability. High LTVs create risk concerns for lenders, results in premiums applied on interest rates and, ultimately, limits access to mortgages and other forms of housing finance.
In December 2020, the Centre for Affordable Housing Finance (CAHF), urbaMonde and urbaSEN signed a partnership agreement to conduct a case study on the collaborative production of affordable housing in Senegal and its financial and legal modeling.
The partnership aimed to implement a short study or benchmark on the experiences of community financing mechanisms for the production of affordable housing in Africa.
The short study – also available in French – documents and disseminates 10 experiences – including the Revolving Fund for Urban Renewal in Senegal – of affordable housing production programs and projects in Africa, focusing in particular on their financial model and design. Using bibliographic research and in-depth interviews, the study analyzes the capacity of projects and partners to fit into the public and private financing chain, and to mobilize so-called «citizen» or «community» finance.
The analysis is not exhaustive and many other experiences could have been presented. The decision was made to select community financing mechanisms that offer a similar or complementary approach to the Senegalese Revolving Fund for Urban Renewal and that stand for innovative partnerships and financial approaches. A community financing component, combined with additional funding sources (private or public, grants or loans, etc.) is common to all of the experiences selected. A number of experiences were selected through the collaborative database cohabitat.io, run by urba-Monde as part of the CoHabitat Network, and from experiences documented by the CAHF.
The information is sourced through written sources (websites, funding reports, CAHF documentation, etc.) and interviews with project managers that support the financial mechanisms.
Furthermore, it was decided to analyze and present the housing projects, each rooted in a country and a local context, through the lense of their financing mechanism mobilized as a tool for the production of affordable housing.
The benchmark feeds the reflection on the case study on the collaborative production of affordable housing in Senegal and its financial and legal modeling. In addition, an in-depth documentation was conducted on the Senegalese Revolving Fund for Urban Renewal in both French and English.