Research proposal writer

HOUSING FINANCE 2020

COURSEWORK1

Answer all questions

1. In not more than 2 pages write about the organization of any low cost government backed housing finance program in your country?
2. Explain the different sources of Housing Finance in Africa?
3. How do effective housing finance systems contribute to social economic development of a country?
4. Explain the key challenges encountered in achieving housing targets in your country?
5. Mention and explain the operations of any 2 housing finance schemes offered by the Banking sector of your country?

Housing finance 2020

1. In not more than 2 pages write about the organization of any low cost government backed housing finance program in your country?

The economy of South Sudan has suffered slow progress due to the July 2016 bouts of political insurgency that undermined development gains recorded earlier during relative calm and stability. With the peace deal collapsing in 2016, hundreds of thousands of people were killed and about 5 million were displaced leading to a worsened regional refugee situation. One half of the relatively small population of 12.57 million continue to face severe food insecurity.

It is against this background that efforts to restore peace commenced and culminated in the signing of a peace deal between South Sudanese President Salva Kiir and rebel leader Riek Machar on 26 June 2018, which aimed at ending the war. The peace deal is likely to see an implementation of a permanent ceasefire, cantonments for all forces and the deployment of forces by the Intergovernmental Authority on Development and the African Union to safeguard the ceasefire.

Additionally, the country will have three capital cities; namely Juba, Wau and Malakal on a temporary basis to host the three proposed vice-presidents. The Khartoum government will also be allowed to secure oil fields in South Sudan in coordination with the Juba administration, and to rehabilitate the wells to restore the previous levels of production. This is likely to boost trade gains for the most oil-dependent country in the world, whose oil export revenues account for approximately 60 percent of its GDP.1 South Sudan’s GDP per capita was SSP144 719 (US$1 111) in 2014, dropping to less than SSP30 871 (US$237) in 2017.2 Due to the fragile political state of the country, the subsistence sector has become dominant and livelihoods increasingly rely on low productive, unpaid agriculture and pastoralist work. The county’s economic collapse from July 2017 to June 2018 has seen output contract and inflation soar. For the one-year period to June 2018, the economy has contracted by 6.9 percent because of an increasing reliance on low output agriculture and a remarkable decline in oil production. Whereas the contraction in GDP is significantly better than the -11 percent recorded in 2016-2017, the position has worsened the fiscal deficit to over 4 percent of GDP in 2017. Exports and household consumption have continued to decline while government consumption recorded a sharp increase because of high-level spending on security operations of this fragile political state. Public expenditure is skewed toward security at the expense of development initiatives. Security-related spending accounts for over 70 percent of the total budget whereas, the combined South Sudan KEY FIGURES Main urban centres Juba Exchange rate: 1 US$ = [a] 22 Jul 2018 PPP Exchange rate (Local currency/PPP$) 1 South Sudanese pound = [b] Inflation 2016 [c] | Inflation 2017 [c] | Inflation 2018 [c] 142.38 South Sudanese pound 6.90 379.8 | 187.9 | 104.1 Population 2017 [b] | Urban population size 2017 [b] Population growth rate 2017 [b] | Urbanisation rate 2017 [b] Percentage of the total population below National Poverty Line Unemployment rate [d] 12 575 714 | 2 423 089 2.78% | 4.02% n/a 18.5% GDP (Current US$) 2017 [d] | GDP growth rate annual 2017 [d] GDP per capita (Current US$) 2017 [b] GNI per capita (Current US$) 2017 [b] Gini co-efficient [e] HDI global ranking [e] | HD country index score [e] US$2 870 million | -11.1% US$237 US$390 45.50 187 | 0.388 Is there a deeds registry? Number of residential properties that have a title deed Lending interest rate Mortgage interest rate | Mortgage term (years) Downpayment Mortgage book as a percentage of the GDP Estimated number of mortgages Price to Rent Ratio in City Centre | Outside City Centre Gross Rental Yield in City Centre | Outside City Centre Construction as a % of GDP Yes n/a 24.20% 24% | 24 60% n/a n/a n/a | n/a n/a | n/a n/a What is the cost of standard 50kg bag of cement? What is the price of the cheapest, newly built house by a formal developer or contractor? (Local currency) What is the price of the cheapest, newly built house by a formal developer or contractor? (US$) What is the size of this house (m2)? What is the average rental price for this unit (US$)? What is the minimum stand or plot size for residential property? US$45 2 135 700 South Sudanese pound US$15 000 120m2 n/a 40m2 Ease of Doing Business Rank [f] Number of procedures to register property [f] Time to register property (days) [m] Cost to register property (as % of property value) [f] 187 9 50 days 15.90% NB: Figures are for 2018 unless stated otherwise. [a] Bank of South Sudan [b] World Bank World Development Indicators [c] IMF World Economic Outlook Database [d] Central Intelligence Agency (CIA) World Factbook [e] UNDP Development Indicators [f] World Bank Doing Business 246 Access to finance The Bank of South Sudan, at the helm of the country’s monetary policy, has been instrumental in licensing financial institutions in the country. The banking industry now boasts 22 commercial banks concentrated in major urban areas of South Sudan. Access to bank branches and ATMs is estimated at 1.4 and 0.76 respectively per 100 000 adults. Access to deposit bank accounts stands at a marginal 6.4 percent. Although access to banking services is still minimal, the rise in commercial banks’ presence is monumental as it signifies a 100 percent jump from 11 banks in 2011. The financial sector in South Sudan is still plagued by low levels of regulatory oversight, weak depositor protection legislation and low levels of client financial literacy. The leading financial institutions are regional entities with roots in neighbouring Kenya. These include Kenya Commercial Bank (KCB), Equity Bank and Co-operative Bank. These banks have, however, not derived value from their operations in South Sudan, thus making their subsidiaries in the country unlikely to remain profitable due to the recent conflict and currency depreciation. KCB, Stanbic, Equity Bank, and Co-operative Bank have seen their subsidiaries in the troubled country fall on hard times due to hyperinflation and currency devaluation, coupled with the recent armed conflict that has nearly crippled the fragile country’s economy. To help the economy stabilise and attract investments in the banking industry, the authorities need to put special emphasis on controlling public expenditure, increasing non-oil revenues, encouraging investment and economic diversification and removing subsidies to the national oil company (Nilepet). The 2018 national budget aims to limit the government’s ability to deplete the central bank’s resources through borrowing, reducing inflation and preventing further depreciation of the South Sudan pound. In financial services, the insurance industry is nascent, comprising 10 companies, both private and partially government-owned providers. The total premiums collected by the industry amount to US$0.7 million and is still unavailable to support mortgage lending in the country. The pension sector is a key driver of long-term funding for mortgage lending in many developed and developing nations. The country’s Pension Regulation was passed in 2013 but little has been done to establish and support pension schemes in the country. The deduction of civil servant’s pension contributions began in late September 2016 for workers at the national government level. This excludes workers at state level. In addition, the Military Pension Scheme, Organised Forces Scheme and private sector schemes are yet to be established. The microfinance sector is young, underdeveloped, and unregulated. The sector is monitored by the South Sudan Microfinance Development Facility, a joint initiative of the government, the Bank of South Sudan and the Multi-donor Trust Fund, yet these shortfalls remain prevalent. A number of microfinance institutions (MFIs) operate in the country, as well as small savings and cooperatives or Rotating Savings and Credit Associations. The largest MFIs by asset base are BRAC SS (a subsidiary of the Bangladeshi INGO), SUMI (the result of greenfield investment funded by USAID), and FSL (funded by ARC International and Micro Africa Limited). MFIs still face huge operational challenges including high non-performing loans as a result of emigration resulting from civil unrest, and low levels of client financial literacy and business skills, both of which, collectively, drive up the MFIs’ cost of doing business. Overall, the banking industry suffers from limited utilisation of the credit reference bureau due to a low coverage rate and an underdeveloped collateral registry, thereby restricting access to credit facilities. The financial sector has been characterised by high interest spreads of up to 24 percent while most of the lending activity is concentrated in short-term lending, usually between three to 24 months over the entire period of post-independence (2010 and beyond). Less than eight percent of the entire loan portfolio is attributed to the real building and construction sector, with banks preferring to lend to well-known and wellestablished individuals and institutional customers. Commercial bank lending is still less advanced with over 90 percent of the loans being short-term (less than a year) at interest rates of between 8 and 10 percent.3 Medium-term loans of one to five years, at interest rates of between 22 and 24 percent, constitute about four percent of the loans. Loans of over five years constitute the balance (one percent), and they are offered at interest rates of between 18 and 20 percent. The main sectors which received commercial loans include (i) domestic trade, (ii) households, (iii) building and construction and (iv) real estate. The average loan size is estimated at approximately US$25 000. A high downpayment of up to 60 percent is required to reduce credit risk. However, financial institutions have scaled down housing finance because of rising political tension and increasing credit risk. Some banks have, including Equity Bank, exited the mortgage space. As an intervention in the financing space, the government introduced a Youth Business Startup Programme to offer financing opportunities to youth in the politically fragile country. Under this programme, approximately SSP130 260 to SSP156 312 (US$1 000 to US$1 200) is offered as a grant to youths, of which 60 percent are female beneficiaries. The recipients participate in week-long training for life and business skills before they obtain access to the allotted grant through their respective commercial bank account. The grant is unconditional and can be used for any expenditure at the discretion of the beneficiary. The initial programme attracted about 6 000 applicants in 2014 and funds were disbursed in 2015 through to 2016. The programme was, however, cancelled due to the outbreak of war in 2016. It is hoped that more youth will be considered with the return of relative peace and calm over 2018, leading to marginal improvements in access to finance. Affordability The government of South Sudan has over the past few years been the major economic player in the country, through its various monetary and fiscal arms as well as being the dominant employer after the collapse of the private sector due to armed conflict. With a deteriorating revenue base and rising defence-related spending, the government has largely been financing itself through accumulated arrears to civil servants and printing more money to finance the deficit. Nonpayment of salaries to government employees in both urban and rural areas has affected their ability to afford the minimum food basket and has resulted in a number of employees quitting government service. The urban labour force participation rate in urban South Sudan has declined from about 50 percent to about 34 percent between 2016 and 2017. The drop has mainly been attributed to deterioration in the political and economic conditions of the country. Printing of more money on the other hand accelerated inflation from 187 percent in June 2016 to 550 percent in September 2016, before decelerating to 118 percent in recent months to the end of 2017.4 This has resulted in a large loss of wage purchasing power, driving many households into poverty. Poverty among wage-earning households has more than doubled from 28 percent in 2015 to over 65 percent in 2017 Economic decline has resulted in an increase in poverty from 49 percent in 2015 to 74 percent in 2017, particularly in urban areas.5 The urban poverty gap increased by over 54 percent between 2015 and 2017. The gap between the rich and the poor also increased as reflected by the poverty severity index which doubled from 0.10 in 2015 to 0.22 in 2017. Overall, deterioration in economic conditions has led to depressed demand for goods and services across all sectors of the economy. Housing supply The supply of housing units in South Sudan has continued to weaken amid periods of political unrest. Several small-scale developers that had commenced the supply of low-income housing units stopped because of declining demand for rental houses in South Sudan’s major urban centres, including Juba, Wau, Malakal, Bor, Gogrial, Nimule, Yei, Tonj and Torit. The demand for residential housing units had risen because of an increasing presence of not-for-profit organisations and smallbusiness holders serving various segments in the young nation. With the outbreak of war in 2016, most project staff and business operators were forced to flee the country, leaving most housing units vacant. Over the past two years, the supply of housing units has largely been through the re-introduction of formerly occupied residential units that have since lost tenants due to civil strife. Impediments to housing finance continue to be evident as the major commercial banks including the Co-operative Bank, Equity Bank, KCB Bank and CFC Stanbic Africa Housing Finance Yearbook 2018 247 Bank and Buffalo Commercial Bank continue to scale down operations in most areas affected by political instability. A significant number of residents in major cities including Juba continue to reside in temporary structures at a going rate of US$25 a month for a single room. Furthermore, land acquisition, particularly the high cost of land leases, has deterred prospective investors from developing modest housing projects (between 20 and 50 units). Property markets The bulk of housing units in South Sudan are low cost, low quality housing structures mainly constructed for the poor and migrant low cost earners (earning below SSP26 052 (US$200). Many peri-urban areas are dotted with grass thatched huts (Tukuls) that are traditionally built for family units and other structures made from iron sheets and timber that are mostly leased to foreign nationals at monthly rates ranging between SSP2 605 (US$20) and SSP3 908 (US$30). A few luxury single-suite apartments are also available at rates ranging between SSP325 650 (US$2 500) and SSP390 780 (US$ 3 000) a month. Such luxury structures include Liaison Courts with 12 apartments, Tongpin area with 14 units, Atlabara with 20 units, Diplomat, Hudsson and Classiqueson. The cost of renting these structures varies depending on the developer’s business model. Some developers rent the rooms out on a daily rate and others on monthly basis. The daily rates model mostly applies to structures built near markets, with a focus on the mobile traders, especially those delivering items to markets and then heading out of the city once they have sold their merchandise. A daily fee of SSP391 (US$3) is charged for this usually furnished room with a single bed, plastic seat and table. The monthly payment model targets low income (earning an average of SSP19 539 to SSP26 052 (US$150 to US$200) a month) foreign nationals with some level of residence in South Sudan. These are usually market traders, hotel or restaurant attendants, construction labourers and other poor people. Tenants are required to move in with their household items because the monthly rental is not inclusive of furnishing. Overall, the property market is significantly underdeveloped with most residential areas lacking access to electricity, piped water and clear access roads. This makes such areas unattractive to prospective developers due to additional estate running costs of thermal power generation, water pumping and road maintenance. A few real estate brokers are available, listing some properties in their portfolio at high prices. Other service providers in the housing supply chain are difficult to locate, operating informally in less structured settings. These include architects, quantity surveyors and property valuers. Prospective buyers therefore encounter challenges in ascertaining the true value of properties being offered. The current benchmark of similar structures in nearby localities could be misleading if such properties also appear to be overpriced. Verification of true owners of landed properties tends to be strenuous due to the absence of clear processes at the land records office. Verification of ownership can take weeks, thus hindering immediate conclusion of purchase transactions. Policy and regulation In the past year, there have been no new developments in the policy and regulatory environment governing South Sudan’s housing finance sector. Efforts to end the protracted conflict have, for two consecutive years, forced the government to prioritise military spending, stifling resources to ministries, departments and agencies whose mandate is relevant to the development of the housing industry and housing finance sector. The country has several policies, strategies and regulatory frameworks that espouse practical and feasible measures on how to adequately and sustainably develop the housing industry and housing finance sector. The Ministry of Housing, Physical Planning and Environment continues to oversee housing developments in the country and also monitors compliance with established planning and building standards. The Land Act of 2009 continues to govern land use management. Additionally, the government adopted the Land Policy of South Sudan in 2013 to address issues pertaining to land acquisition and land management. Opportunities South Sudan is a country with immense growth potential across several sectors of the economy. The bulk of this growth depends on renewed activity in the oil sector, which is likely to commence with the actualisation of the peace agreement signed in June 2018. A few challenges will need to be overcome for the opportunities in the housing sector to be realised. The first is restoring peace and security through cessation of hostilities and implementation of governance and security arrangements that promote private sector-led investments. The delivery of affordable housing entails harnessing both multiple stakeholder initiatives and private sector-led initiatives to ensure housing sector development. To support such initiatives, the government will need to implement comprehensive macroeconomic reforms to unify the official and parallel exchange markets and reduce inflation. This is essential for foreign direct investment in housing and other sectors of the economy. Additionally, clear plans for longer-term action to boost employment, build infrastructure, and diversify the economy will help create demand for housing units during the post-conflict period of economic recovery.

2. Explain different sources of housing finance in Africa?

Introduction

Property market segments differ in terms of their performance and attributes. This has implications for the incentives, investments, risks and barriers experienced by the range of actors involved in each segment. The complexity of the property market lends itself to different analytical approaches.

Residential versus commercial.

The most distinguishable characteristic of the property market is that some properties are built for residential use, while others are built for commercial use (CAHF, 2016; Zille et al., 2008). Infrastructure development cuts across the market segments and is critical in supporting both residential and commercial property market activity. Residential property ranges from informal settlements and government-subsidised housing to luxury single-standing homes, while the commercial property market segment includes office buildings, retail stores and industrial property.

Tenure status: ownership versus rental. The residential and commercial property market segments can be further distinguished by users’ tenure status, i.e. whether the property is owner- occupied or made available to rent.

Renting affordable and decent houses is a still a problem to many Ugandans and other people in Africa. For this reason Shelter Africa and UN Habitat have come up with plans to deliver affordable houses and policy suggestions for governments.

Housing finance plays a vital role in the housing delivery value chain. This is due to the fact that finance is needed for both the demand and the supply of housing. On the demand side, the availability of and access to housing finance is a significant determinant in a household’s decision to acquire, build, or rent a house. Similarly, on the supply side, develop- ers need financing to build the mass housing projects that are needed to address the continent’s housing deficit.

Housing finance, being an essential part of financial systems, contrib- utes to the development and deepening of financial markets and has some potential impact on the financial and economic stability of a country. Therefore, it contributes to deepening and broadening the financial sec- tor,  increasing financial access, and  promoting  financial inclusion. However, the development of housing finance on the continent has not kept pace with the backlog in housing demand.

Africa’s rapid urbanization and economic growth have led to an increas- ing demand for housing finance. The dearth of long-term finance, weak credit markets, an unstable macroeconomic environment, and limited or inexistent housing finance systems are major obstacles to the continent’s.

Housing market in Africa

The residential property market is the largest component of the South African property market, accounting for the majority of property assets, and a crucial source of household wealth. In 2019, there were 6.6 million residential properties on South Africa’s deeds registry, valued at approximately R5.5 trillion. Of the total properties, more than half (55%) were valued under R600 000. Government- subsidized properties also made up a sizable portion (30% or 2 million) of all residential properties, particularly in the lower end, indicating the impact of the massive investment of the national government housing programme over the years.

South Africa’s resale market far exceeds the new-build market for houses   in 2019, three quarters of all residential transactions were in the resale market. The resale market often serves as a first step on the property ladder for first time home buyers/owners. In 2019, 94 157 households became homeowners for the first time. Of these, 20 223 (21%) were beneficiaries of the government’s subsidised housing programme.

Insurance sector

Insurance sector in contribution housing finance in Africa; Property markets matter for economic development and resilient cities. The property market contributes to economic development on at least two fronts. Directly, increased activity in property markets supports GDP growth and employment opportunities, through new construction, the supply of materials and equipment, renovation, maintenance and the provision of professional real estate services (Pirounakis, 2013). Indirectly, property markets support development by building resilient communities and cities. Consultations for this study highlighted that population growth and rapid urbanisation result in “inadequate housing conditions [for] the majority”, while putting pressure on available land resources and basic services (Gencer, 2016; Taylor and Peter, 2014). As many African cities address their infrastructure and service gaps1, there are opportunities for planning, designing and implementing sustainable urban development pathways. It is no surprise, then, that property markets are often a national policy priority for governments. In Southern Africa, Zambia, Mozambique and South Africa, for instance, have national ministries or directorates that focus, either in part or exclusively, on housing development. Falling short of demand. Despite the demand for and importance of property, the formal supply and financing of property remains insufficient in sub-Saharan Africa. For instance, in the West African Economic and Monetary Union, about “800,000 new housing units are needed every year to address housing shortages” in the region, yet banks in these countries collectively only issue 15,000 new mortgages per year (World Bank, 2017). The lack of housing supply is significantly constrained by underinvestment. While there are many ready investors and more and more investing mechanisms are emerging, stakeholder consultations revealed that investors struggle to find “investment-ready” projects”. High risks and financing constraints continue to curtail property market development across the continent.

A clear role for insurance in principle. Well-functioning insurance markets enable productive risk- taking, mitigate the impact of exposure to insurable risks and support more appropriate risk management. In addition, insurance markets help to strengthen capital market development by contributing to capital accumulation and intermediation of funds in the economy (Chamberlain et al., 2017). The risk transfer and capital intermediation functions of insurance markets speak to the high risks and financing constraints that form critical barriers to property market development. This would lead one to expect that insurance markets are well positioned to support and complement urban property market development. Yet, experience across sub-Saharan Africa suggests that this role is not yet adequately articulated or leveraged. Though there is awareness of the respective roles of property markets and insurance markets in development and of the potential complementarity between insurance and property markets, consultations for this study indicated that limited research has been conducted specifically on the role of insurance markets in supporting property market development.

Micro-finance Deposit taking Institutions (MDIs)

The MDI Act adopted in 2003 has to date allowed 4 MFIs become regulated deposit taking institutions. Between December 2005 and December 2006, total assets of the four licensed MDIs grew by UShs 24.9 billion (24%) from UShs 103.7 billion to UShs128.6 billion. Total customer deposits also increased by UShs 7.7 billion or 50 % from UShs 15.5 billion to UShs 23.2 billion between December 2005 and December 2006, while total loans went up by UShs 13.7 billion (21.7 %) from UShs 63.2 billion to UShs 76.9 billion between December 2005 and December 2006. Total borrowings stood at UShs 41.3 billion up from UShs 32.7 billion between December 2005 and December 2006. The MDIs’ net profit was UShs 3.2 billion up from UShs 1.1 billion recorded on December 2005. Overall, liquidity of the MDIs was satisfactory with a liquid assets surplus of UShs 21 billion as of 31 December 2006.this made cash available on lending for construction of houses

The Uganda Securities Exchange (USE) is Uganda’s only stock exchange.

The USE has been in existence for slightly over 10 years has been founded in June 1997. Trading on the USE started in January 1998 with one listing – a bond issued by the East African Development Bank. The USE currently has 6 local companies and 3 cross Listed from the Nairobi Stock Exchange trading as well as over 25 Treasury and Corporate bonds. The companies listed on the USE include in the financial services sector such as Bank of Baroda (U) Ltd, DFCU Group, Stanbic Bank, manufacturing (Uganda Clays Ltd., BAT (U) Ltd, East Africa Breweries Ltd); insurance(Jubilee Holdings Ltd.); printing and publishing (New Vision Printing and Publishing Corporation Ltd.); and aviation (Kenya Airways Ltd). East Africa Breweries Ltd and Kenya Airways are cross-listed at the Nairobi Stock Exchange and the Dar-es-Salaam Stock Exchange. Planned for this financial year namely, Uganda Telecom, Kinyara Sugar Works, National Insurance Company and Housing Finance Bank Ltd (a 30 billion bond) all are source of housing finance

Community Self-Help Projects

Four self-help projects have been undertaken in Uganda to provide low-cost housing for the poor. They have all had a Public-Private approach and donor support that have give an

Overview of the Masese Project, from which other projects were guided and informed on proper implementation

Non Conventional Housing Finance

Through rotating credit societies, saving clubs and SACCOs which are under government’s programme of “Prosperity for All”, the poor who are unable to access the above means of housing finance have been enabled to finance small scale businesses and in some cases they have enabled the construction of houses.

In Uganda, SACCOs have a relatively wide institutional outreach into the rural areas. They have great potential as rural financial intermediaries though most of them have weak financial positions and their inability to operate strictly on commercial principles further minimizes their chances of becoming sustainable

SACCOs issue loans on a revolving fund mechanism in which they do group lending where the borrower is not only responsible for the repayment of his loan, but also for the outstanding loans of other group members.

Commercial banks

The financial liberalization of government assistance in many countries has partially contributed to growing the housing finance market over the past years. In South Africa, the mortgage market grew by 10.3 percent from R 124.38 billion (US$8.2 billion) in 2013 to R 137.19 billion (US$9.1 billion) in 2014.  However, the number of mortgage loans   approved in the affordable housing segment grew by only 4.5 percent during the same period. In Kenya, the value of outstanding mortgage loan assets has steadily increased since 2012 when the central bank started col- lecting data on residential mortgages. The value of outstanding mortgage loans in Kenya increased from K Sh 119.6 billion (US$1.2 billion) in December 2012 to K Sh 164 billion (US$1.6 billion) in 2014, represent- ing a growth of K Sh 44.4 billion (US$438.7 million) or 37 percent.

In the West African Economic and Monetary Union (WAEMU) countries Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Sénégal, and Togo the size of the housing finance market has also grown considerably over the last decades. Annual lending volumes in WAEMU increased from an average of CFAF 80 billion (US$160 million) between 2005 and 2011 to CFAF 203.7 billion (US$407.4 million) in 2013.

The Cash Loans Approach

Uganda Microfinance Limited (UML) is the only MDI in the country directly offering loans to the housing industry.

They have been in the housing micro-finance sector for the last 5 years, issuing home improvement loans only until 2006 when they introduced the home building loans. All their loans are secured and they do not exceed UShs 50 million (US $ 29,000), payable within 2 years at an interest rate of 36% per month. As it was noted above, other MDIs and MFIs like FINCA Uganda, Pride Microfinance and Women’s Finance Trust have been providing loans that have indirectly gone towards home improvement.

• Stromme Foundation, a wholesale lending institution is one of these NGOs. It plans to introduce a tripartite arrangement in which it will select one MFI from the 19 it finances to start issuing housing micro-finance products to its clients. The third party; NHCC will provide planned sites in which low cost houses will be built from the loans issued by the MFI. Loans will range between UShs 6 and 8 million (US $ 3,500 and 4,600), repayable within a period of 2 – 3 years. Stromme Foundation will also consider setting up a housing microinsurance scheme to cater for the vulnerable.
• Habitat for Humanity Uganda (HFHU) is the other NGO and it directly issues home improvement loans to low income earners through two of its branches in Luweero and Masindi District. The loans are disbursed in cash at an average loan amount of UShs 1.4 million (US $ 805), payable within 2 years at an interest rate of 2% per month. HFHU is also financing UGAFODE – an MFI to issue home improvement loans to its clients.

.

Housing Micro-finance

Housing micro-finance is on the whole a new product in the country’s housing finance sector. It employs a 2- way approach in which individuals can either access cash loans for home improvement or they can actually first get skills on how to build a house and through loaned construction materials, they build their own houses.

Through MDIs, MFIs, SACCOs and other support programmes, housing micro-finance is expected to grow considerably due to a combination of significant donor funding and government support

Commercial Banks

Commercial banks finance mainly residential property and a few commercial property developments. Financed residential property developments which are offered by all the 5 commercial banks include; house construction, house completion, home improvement, purchasing of houses, equity release and refinancing mortgage. Granting of loans is negotiable depending on the credit rating of the mortgagee and the quality and value of the houses to be built or purchased

Urban Areas

Uganda has not had a well-managed scheme on the supply of housing for over the last 25 years. The country’s current housing supplies are still basic and poorly managed. The country has very few organized real estate developers, such as Akright Projects and a number of individuals who play a relatively substantial role, but whose activities cannot be easily quantified. Coupled with inadequately funded physical planning and the lack of capacity to deal with the challenge of urban development, the housing stock in urban areas is generally of poor quality, making it unattractive to primary mortgage providers and a disincentive to the development of secondary mortgage providers

The low quality of housing in the country today mirrors the low income levels and the use of own savings to undertake construction incrementally.

Rural Areas

Scattered structures of low quality make up the main form of housing in rural areas and they constitute the largest settlement (60.5%) arrangement in Uganda. Unlike the urban areas, supply of decent quality housing in rural areas has been extremely low and limited by the fact that the majority of the rural population lives in abject poverty. Supply initiatives undertaken have been through self-help projects funded by the government, Donors and NGOs in which low-cost houses have been constructed to ease on the housing needs for the rural poor.

Pension Schemes

In the pension schemes sector, businesses are supported through the statutory NSSF, which is a mandatory provident fund. Employees of medium companies are required to contribute 5% of their gross monthly salary and employers to contribute 10% of the total monthly salary of each employee to the Fund. The combined pension related funding aggregates to about 2% of GDP.

In addition to investing in short-term Government securities and property, NSSF has also acquired 50% equity investment in HFB to enable it channel its long-term funds into the housing market.

Financial institutions

Bank of Uganda (BoU) regulates the financial services sector in accordance with the Financial Institutions Act (FIA), 2004. The Act is based on modern banking legislation and it addresses shortcomings in previous legislation like requirements that could increase the possibility of political interference in key prudential decisions. The enactment of this Act also gave birth to mortgage lending by allowing commercial banks issue long-term loans

Microfinance Deposit-Taking Institutions

Through the Microfinance Deposit-Taking Institutions (MDI), Act 2003, the operations of MDIs have for the last 3 years been supervised by BoU. The Act enables MFIs to become licensed to take intermediate savings. It however only allows MFIs that meet prudential requirements to mobilize deposits for on-lending and currently only four of the largest MFIs are licensed to be MDIs

Micro-Finance Institutions

MFIs are very small institutions that include multipurpose NGOs, cooperatives and informal organizations. They are limited by liquidity and consequently offer short-term loans. The Ministry of Finance Planning and Economic

Development (MFPED) is in the process of strengthening them through improving on their operational efficiency by providing capacity building in the areas of book keeping, financial and business management, among others.

Mortgage Bill

The legal aspects involved in the amended mortgage bill that is to be passed this year are expected to impact negatively on the growth of the housing finance sector through the banking industry and most banks are considering them a disincentive in engaging in mortgage activities. For example, some conditions like the need for spousal consent before a mortgage is carried out can be problematic. Also, provisions of giving the court leeway to re-interpret some of the terms of the loan agreement and allow a mortgager rent out the property and benefit from the rental proceeds instead of realizing their security are not conducive.

Household Income

Uganda’s large informal sector (over 80% of the population) makes it difficult to estimate exact income levels of individuals and the fact that many employed persons also engage in extra activities to supplement their incomes makes it even more challenging. Nevertheless, results from the 2005/6

National Household Survey estimated the combined monthly average household income at UShs 170,891 (US$ 98). The Capital City, Kampala recorded the highest monthly income per household of UShs 347,918 (US$ 200) while the central region (excluding Kampala) recorded a monthly household income of UShs 209,369 (US $ 120).

Since all commercial banks require an individual to have a monthly salary of at least UShs 1 million (US $ 575) to access a mortgage loan less than

1% of the country’s households qualify for a mortgage loan.

3. How do effective housing finance systems contribute to social economic development of a country?

Poverty, unemployment, and lack of affordable housing are commonly recognized causes of homelessness. These risk factors can be exacerbated by personal vulnerabilities such as mental and substance use disorders, trauma and violence, domestic violence, justice-system involvement, sudden serious illness, divorce, death of a partner, and disabilities.

Housing and shelter programs can help address the root causes of homelessness through a range of essential recovery support services, including mental and substance use disorder treatment, employment, and mainstream benefits. Types of housing and shelter programs include:

• Emergency shelters are often where people experiencing economic shock first turn for support through a wide range of services.
• Transitional housing typically involves a temporary residence of up to 24 months with wrap-around services to help people stabilize their lives.
• Permanent supportive housing offers safe and stable housing environments with voluntary and flexible supports and services to help people manage serious, chronic issues such as mental and substance use disorders.
• Providing permanent supportive housing on a housing first basis—without requiring transitional steps or demonstrated sobriety—is effective for people experiencing chronic homelessness. People with a serious mental illness, substance use disorder, or co-occurring mental and substance use disorder have demonstrated similar or better housing stability and substance use, compared to those placed in housing with pre-requisites. Large-scale studies demonstrating the benefits.
• Research shows interventions to prevent homelessness are more cost effective than addressing issues after someone is already homeless. The longer a person is homeless, the harder and more expensive it becomes to re-house this person. Rapid rehousing helps people move from emergency/transitional shelter or on the street into stable housing as fast as possible. It also connects people with supportive, community-based resources that help them maintain housing.

We focus on creating systems that address the needs of households across different income levels and developing solutions that are scalable, sustainable, and oriented to the private sector. Our work in housing finance helps clients provide market-based safety nets, and fund long-term investments to support sustainable and inclusive economic growth and therefore below is development system

Developing Resilient Housing Finance Markets: We conduct diagnostic analysis, advise on legal & regulatory frameworks and policy reforms, support institution building to create a sustainable and efficient housing finance system, and work on other building blocks of housing finance markets development. This work includes support to our clients in understanding and implementing fintech innovations in housing finance product development, delivery, and legal and regulatory frameworks.

Designing and Implementing Long-Term Funding Solutions: We provide solutions to improve access to long-term finance through capital markets instruments such as liquidity facilities and covered mortgage bonds as well enhanced systems to incentivize longer-term savings. We also help diversify long-term funding options, including through local currency bond markets.

Expanding Access to Lower-Income and Informal Markets: We enhance access to lower-income and informal workers’ segments of the population through credit markets, housing microfinance, rental housing, residential leasing, contractual savings, effective targeted subsidies, and guarantee schemes.

Addressing Obstacles to Affordable Housing: In addition to the finance side that affects the demand, affordability reflects the cost of housing and its supply, so increasingly, we work on various supply side issues: titling, land use and land infrastructure issues, construction finance, and housing policies including supply subsidies. Furthermore, we apply innovative thinking to reduce costs – both financial and environmental costs – of formal housing through the introduction of new, cheaper, technologies and supporting energy-efficient buildings.

Climate change agenda in housing finance: Cognizant of the significant contribution of the housing sector to global GHG emissions, of up to 40% of the total in some countries, we provide policy, legal and regulatory support to client countries and globally on setting up sustainable financial solutions for affordable and impactful “green” housing refurbishment and construction in support of reaching the Paris COP targets.

Explain the challenges encountered in achieving housing targets in your country?

South Sudan is witnessing a deepening “power crisis in land administration and confusion in roles of… the existing institutions at the different levels of the Government of South Sudan (Goss) and state and local government. Despite an ambitious framework for land administration expressed in the 2009 Land Act, 2009 Local Government Act and 2011 Transitional Constitution of South Sudan, the institutional foundations for such a structure remain largely inexistent due to capacity and resource constraints. Elites are widely known to engage in large-scale ‘land grabbing’ and for not respecting land laws. Likewise, most soldiers are not or only irregularly paid, leading many of them to raid and loot property to sustain them.

In the few urban areas where statutory land administration structures are functional, statutory and customary land administration systems co-exist in an uneasy relationship, generating disputes as the national, state and community level compete with each other over land access and control. The confusion over administrative boundaries between the jurisdiction of statutory and customary system is further compounded as the 2009 Land Act does not clearly spell out the roles and responsibilities of the various levels of government with regards to land administration, in regard to the land in south Sudan is owned by community and public at large. Thereof the challenges undertaken are seen below,

Erosion of customary authorities

South Sudan’s customary authorities have been greatly weakened by the killings and disappearances of chiefs and political appointments of customary leaders by the respective state leadership. In many areas, in particular around Juba, chiefs have been appointed to areas to which they do not have a prior connection and of which they have no prior knowledge. Often drawn into political power struggles related to the current conflict, chiefs are said to often abuse their position to bypass the community and make land use decisions unilaterally. As stated by a key informant, “people have realized that many chiefs are now government officials, and some even of them even wear uniforms. They used to work on behalf their communities, but across the country many chiefs are now on the government payroll’’. In other areas, chiefs are also pushed away by military personnel, leading to the militarization of existing customary structures. At the same time, the ongoing conflict is leading many South Sudanese to rely more on community leaders instead on state structures, which tends to reinforce ethnic cleavages. In customary systems, access to land is closely tied to kinship and family relations, so individuals and groups from outside can be restricted from settling on community land.

Rapid and unregulated urbanization, lack of urban planning

The urban and peri-urban areas of South Sudan have experienced unprecedented growth since the signing of the 2005 Comprehensive Peace Agreement (CPA). Much of this urbanization has occurred unregulated and ad-hoc, leading to an ongoing expansion and proliferation of informal settlements in the country. Estimates suggest that after the CPA, Juba’s population tripled to 750,000 in five years. As a result, between 2005 and 2009 Juba’s built-up area expanded by more than four times to 52 km2, largely through the proliferation of informal settlements on land outside its administrative boundaries. The continuous and unmanaged expansion of towns leads to the ‘encroaching’ onto surrounding (community) land, causing increasing disputes around administrative boundaries and respective oversight.

In 2014, an estimated 50 percent of the overall urban population of South Sudan resided on unregistered land. In non-demarcated areas, residents neither enjoy tenure security nor possess official documentation to attest to their HLP ownership. They also run the risk of eviction once the land is officially surveyed and demarcated, as many cannot afford the demarcation/surveying fee. Pressure on urban and peri-urban areas will likely only increase with the onset of return, as many returnees will not go back to their ancestral land for farming, but instead prefer to live in urban areas which offer more economic opportunities.

Emergence of hybrid land registration processes in urban areas

The 2009 Land Act requires that land in urban areas needs to be officially demarcated and registered. While most landholdings in urban areas are still managed primarily through leaseholds with the state government, there is no standardized and transparent government-led registration process. With increasing pressure on and competition for land in urban and peri-urban areas, community-led land registration initiatives have emerged in an effort to address the lack of organized land allocation. The key differences between these two processes are as follows;

• Government-led registration initiatives involve the direct identification of an existing informal settlement to be surveyed and registered, or direct negotiation “with communities living in peri-urban areas to gain access to a parcel of land for the government to develop and distribute to interested applicants“.Independent of the process, the state level Ministry of Lands and Physical Infrastructure will conduct a survey and provide landholders copies of a written lease and hence The Survey Department will in turn supply the sketch of the allocated plot (“croquis”). This lease is then registered in the Land Registry located at the High Court.

• Community-led registration initiatives involve community leaders and influential local power brokers to come together to form Land Demarcation Committees, which are tacitly tolerated by the government. These Committees set their own criteria and costs for land demarcation. Demarcation itself is often outsourced to private surveyors. Community leaders make decision on land class and plot size and upon payment give out tokens which authorize (often only temporary) use of the land. Upon additional payment, these tokens can be upgraded to proper title deeds with the State Ministry of Housing. However, tenure security is significantly lower than through the government-led process, which directly leads to the issue of land leases for 25 years or more.

Limited and often unreliable land rights documentation

While land commercialization steadily increased prior to the conflict, resulting in significant surveying and demarcation efforts, 84% of all land in South Sudan still remains un-surveyed without formalized land titling. Among those who possessed ownership documentation, many have also lost their documentation due to the conflict.

Further, as the Land Registry in South Sudan is manual and not computerized, opportunities to sell a single plot of land to multiple parties are manifold. As expressed by a key informant, “anyone with money can obtain a land ownership document, as authorities tasked to issue land documents are extra corrupt.” This was echoed by another respondent who stated that “it is common for three people to have title deeds to the same plot of land, given out by the same authority.”

The Land Registry is not open to the public and it is difficult to access information without hiring an intermediary, severely compromising the transparency of the process. Therefore, any existing ownership documentation has to be treated with caution and should not be accepted as prima facie evidence of ownership.

Unlawful expropriation of HLP left behind by displaced populations

Urban and peri-urban areas of South Sudan are witnessing an often systematic take-over of land and properties belonging to displaced populations. Several interviewees reported that in several key locations such as Juba, Bor and Bentiu, land and properties belonging to displaced populations are systematically confiscated by actors to the conflict. This also includes the unlawful transfer and sale of confiscated properties for profit. Likewise, many IDPs and returnees, for lack of other shelter options, are now occupying HLP left behind by those displaced.

In some of these areas official land demarcation is ongoing while most of former residents remain displaced, with Bor and Bentiu Town being two prominent examples. With the original residents displaced, it is unclear who the title deeds to these lands are given to. In Juba, GoSS officials allegedly fenced off land belonging to IDPs now living in Juba PoC, in particular in and around the Tong Ping neighborhood. While (former) Chief of Army Peter Malong officially ordered the eviction of unlawful occupants from these properties, estimates are that around 3000 houses are affected by secondary occupation in Juba alone raises great concerns around the return of displaced populations and their access to their former land and property, in particular in light of the government’s objective for IDPs to leave the PoCs.

Rising land disputes in urban areas, lack of resolution capacities

Courts in urban areas of South Sudan have long been inundated with land disputes. In 2014, experts estimated that land disputes comprise as much as 80 to 90% of civil cases in the formal system. Since then, land disputes, especially in urban areas, have further – and drastically – increased. In a 2017 study among 942, non-displaced respondents from urban areas across all 10 (now 32) states, 66% indicated that land disputes were common in their communities; most pronouncedly so in Bor (100% of respondents) and Juba (85% of respondents). In addition, a third of all respondents indicated that they are currently involved in a land dispute, with Bor (100%) and Juba (52%) again reporting the highest percentage.

The main causes of land-related disputes were reported to be secondary occupation and squatting, boundary disputes between individuals, boundary disputes between communities, land grabbing and unlawful expropriation of land and property. Unsurprisingly, recent research also clearly shows that

those who experienced displacement are much more likely to be involved in land disputes.

As conflict-related displacement has disproportionately affected members of certain ethnic communities, it is likely that “large-scale returns will not only increase the number of land-related disputes, but also that these disputes will quickly devolve into conflicts over identity, autochthony, and ethnicity.

Difficulties for traditionally marginalized groups to access their HLP rights

The 2009 Land Act provides men and women with equal access to land holdings. The 2011 Transitional Constitution likewise states that “women shall have the right to own property and share in the estates of their deceased husbands together with any surviving legal heir of the deceased.” However, while evidence points to increasing acceptance of women’s rights to property, research shows that there has been little change with regards to their ability to independently obtain and exert tenure rights, both in rural and urban areas. Despite equal rights to own land under statutory law, the majority of women continue to access holdings exclusively through a male relative as required by customary law.

Although a small number of highly educated women in Juba have successfully registered plots in their own names, women continue to face major obstacles associated with land registration. Women are also very vulnerable to unlawful dispossession of HLP, Research further suggests that officials in registration departments are often unwilling or unable to register land in women’s name and that “it is rare to find women who have land registered in their name in most urban areas.” The adverse

effects of existing gender inequalities in access to HLP have multiplied due to the increasing number of displaced households headed by women who have been widowed or abandoned in the ongoing conflict. The conflict has led to an increasing number of women no longer having the relationship with a male required by customary law systems for them to access their HLP rights

Continuous creation of new administrative divisions leading to new conflicts over land

In October 2015, President Salva Kiir announced Establishment Order 36/2015, which signaled a major re-arrangement of the administrative structure of South Sudan by dividing the country from 10 to 28 states. With the given rationale of ‘bringing the government closer to the people’, the changes to the country’s administration took on even further complexity on 15 January 2017 with the creation of another 4 states by presidential order – thus bringing the total to 32. Irrespective of the official motivation and despite the unilateral rejection by the international community of these new divisions, the creation of the 32 states has critically increased the ethnic undertones of the ongoing conflict and accentuated pre-existing grievances over land ownership and control.

There are no official maps of the new states since they were declared in 2015 and the GoSS is unlikely to do so until the much delayed boundaries commission has completed its work With the primary locus for decision-making on land issues being at the state level, “the creation of new states will have far-reaching impacts for how power over land is allocated in South Sudan.” While all previous 10 states were served by respective State Ministries of Physical Infrastructure – key institutions in the statutory land administration – most of the new States have not yet established any substantial land administration. As the Head of the National Land Commission in Juba stated: ‘We do not have information on any newly formed State Ministries of Physical Infrastructure in most of the new states.

Conflict-induced changes to ethno-demographic landscape, including ethnic reconfiguration

A long term objective of the political elites and warring parties is to secure territorial advantage for their respective ethnic groups. This has, inter alia, found its expression in the ongoing “effort to redraw boundaries in favour of specific ethnic polities“and the „deliberate ethno-political targeting of civilians …including the transfer [of] populations.“ Several respondents maintained that attempts at ethnic reconfiguration have become a politically expedient tool to consolidate support and control.

These dynamics can be well observed in and around Malakal, where government troops have pushed out Nuer and Shilluk populations off the east bank of the White Nile; allowing only Padang Dinka to remain in an area where Padang Dinka, Nuer and Shilluk have long voiced the same territorial claims. The 2015 Establishment Order has exacerbated these pre-existing tensions by much increasing the political importance of Malakal Town, which the Dinka claim as the future capital of Eastern Nile state. The Order also effectively denies the Nuer and Shilluk access to the oil reserves in the area likewise active fighting has led to completely changed demographics in many other areas, In Bor Town, most Nuer neighbourhoods have been completely destroyed and/or lands and properties confiscated, rendering a return of these displaced populations nearly impossible.

As these demographic changes in South Sudan are intensifying, the stance of humanitarians and especially shelter actors vis a vis these developments needs to be urgently discussed and clarified. At the very minimum, there is a critical need for humanitarian/shelter actors to obtain an understanding of demographic changes in any given locality before the provision of any shelter support that extends beyond immediate emergency needs.

HLP in South Sudan Peace Process

Tackling land issues is part of the 2015 Agreement on the Resolution of Conflict in South Sudan (ARCISS). The Agreement commits to four specific measures regarding the land policy and administration, two of them within specific timeframes, which can be used for advocacy purposes. While the very future of ARCISS is currently in doubt, the inclusion of these measures is an important rally point for any future negotiations:

• Initiate in-depth national debate for review of land policy and the Land Act – within 12 months of the transition period
• Establish an independent Registry of Lands at all levels of government – within 18 months
• Empower the Land Commission at different levels of government
• Assist in the mediation of conflicts arising from land

Looking ahead, the issue of compensation for lost or damaged land and property is absolutely critical. However, as of yet, any discussion around needed institutions, policy frameworks and procedures for such a land restitution process is entirely absent from the (dormant) ARCISS process.

Nonetheless, it is encouraging that the ARCISS acknowledges the importance of HLP rights, which are indeed essential to sustainable returns. Shelter actors and the Humanitarian Country Team (HCT) can make use of this tacit recognition in their advocacy and direct engagement with the GoSS. In doing so, it is important to recognize both preexisting disputes over land and more recent HLP grievances related to the current conflict. Both are areas of critical concern which urgently need to be addressed if the peace process in South Sudan is to move forward

1. Mention and explain the operations of any two housing finance schemes offered by banking sector of your country

South Sudan had an estimated population of 11.2 million in 2020, of which approximately half a million live in the capital and largest city, Juba. The country is ranked 185 out of 189 countries and territories in the United Nations Development Programme’s (UNDP’s) Human Development Index (HDI). Nine out of 10 South Sudanese experience multidimensional poverty and almost 83% of South Sudan’s population of 11.2 million people live in rural areas, though less than 5% of arable land is cultivated. With an urbanisation rate of 2.68% and high levels of poverty, most of the population (both in rural and urban areas) live in largely self-built and owner-occupied traditional mud houses. South Sudan also lacks efficient land administration services and mechanisms to settle disputes at national and state levels. Housing, land, and property rights, including reclamation, restitution and reconstruction, therefore continue to be an issue.

Commercial banks dominate the financial system in Sudan. The financial system includes 37 banks and several non-bank financial institutions—mainly insurance companies and small-scale microfinance institutions, with limited size relative to the economy. Four state-owned banks (with

14 percent of total banking assets) operate as specialized banks, focusing on providing credit to targeted sectors, such as agriculture or infrastructure development. The Central Bank of Sudan (CBOS) and state governments also hold small shares in other joint-venture commercial banks. Seven foreign banks are registered as branches in Sudan (accounting for 23 percent of total banking assets), with owners from Gulf states (UAE, Jordan, Saudi Arabia, and Qatar) and neighboring countries (Egypt, Lebanon, South Sudan and Ghana). As of November 2019, total assets of banking sector were about SDG 505 billion, accounting for 25 percent of GDP. The CBOS is responsible for the regulation of the financial system but information on non-bank financial institutions is limited. The CBOS operates a real time gross settlement system with participation by commercial banks, with very limited turnover volume.

References

Makur, P. M. (2014). The effects of financial innovation on the financial performance of commercial banks in South Sudan (Doctoral dissertation, University of Nairobi).

Kur, C. P. (2021). The Impact of Risk Management on Banks’ Performance: A Case Study on the Banking Sector in the Republic of South Sudan. International Journal of Science and Business, 5(10), 67-86.

Buny, A. A. (2017). Appreciating the Contributions of Commercial Banks to the Local Economy in the Republic of South Sudan. Journal for Research on Business and Social Science (ISSN (Online) 2209-7880), 3(1).

Chol, B. B. (2021). Banking supervision and financial soundness in developing countries: Insights on South Sudan. Asian Journal of Research in Banking and Finance, 11(10and11), 16-22.