Financial Sector Development in Africa: Opportunities ... - World Bank

Housing Finance 115
countries, down to those with the lowest levels of slums. The overall total
for Africa shows that in 2005, there were some 175 million city dwellers
living in slum conditions equivalent to over 50 percent of the urban
population. While some progress has been made in reducing this ratio as
part of the Millennium Development Goals program, the absolute level
of slum dwellers remains high.
Housing Finance as a Driver of Growth
A central theme of global policy is currently how to stimulate job creation
and find the road back to growth. The benefits of promoting housing
as a policy objective include both the tangible improvement in
people’s living conditions and the potential impact of constructing housing
as a way to create jobs. Many of the jobs will be low skilled and are
therefore very accessible and can come on-stream rapidly. For countries
such as Nigeria, which currently have unemployment reaching as high as
50 percent of the population, the types of jobs that housing development
would create would have broad benefits for all strata of the population.
This section of the chapter considers a theoretical framework of benefits
arising from housing finance.
Economic Benefits of Housing Finance
The section below provides some theoretical background on the
importance of housing finance as a driver of growth, as well as some
of the other externalities that result from investing in housing. Much
of this background is directly applicable to the current situation in
Africa:
• Deepening financial access. There is a broad literature on the impact of
deepening financial access on poverty levels (Beck, Demirgüç-Kunt,
and Levine 2007; Honohan 2008). Gaining access to finance can be a
way out of the perpetual cycle of poverty that is prevalent at the bottom
of the income pyramid. This poverty trap is well illustrated in the
book Portfolios of the Poor: How the World’s Poor Live on $2 a Day
( Collins et al. 2009), which chronicled in detail the financial lives of
households in India, Bangladesh, and South Africa. It describes how,
without credit, it can be extremely difficult to climb out of poverty
for the poorest among us. Credit allows unexpected events to be confronted
without causing a slide back down to the bottom of the
income distribution.