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

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132 Walley Box 4.4 The Egyptian Mortgage Refinance Company (EMRC) The Egyptian Mortgage Refinance Company (EMRC) is a private liquidity facility operating on commercial principles with a profit-making goal. It is majority privately owned by its users, predominantly mortgage finance companies and active banks. Many public and private lenders have participated in the capitalization of the EMRC, which indicates their interest in expanding their mortgage lending. The central bank of Egypt is a strategic investor, with around a 20 percent ownership share; the Mortgage Finance Fund (a government housing subsidy agency) has a small, 2 percent ownership share; and 19 banks and 6 mortgage finance companies have the remaining shares. The initial debt financing for the EMRC was provided through a US$37 million loan from the World Bank. The EMRC neither takes deposits nor lends directly to households. It simply provides loans to mortgage lenders secured by a charge over some of their eligible mortgage assets. Its presence helps to promote prudent lending standards while enhancing competition in the mortgage market by creating a funding source also accessible to nondepository institutions. Its business is the refinancing of long-term residential mortgage loans originated by primary lenders for which it will raise term funding by issuing bonds in the capital markets. This narrow mandate will strengthen the credit quality of the bonds and thereby help to keep the EMRC’s cost of funds relatively close to rates on government bonds. By borrowing from the EMRC, or at least by having the EMRC available when needed to serve as a first-resort source of finance, mortgage lenders will be better enabled to offer longer-term financing for residential housing development at market terms and conditions that are favorable for many potential homebuyers. Lenders also view the EMRC as a source of liquidity they can tap at short notice. Source: Walley 2008. mortgage assets to the liquidity facility in exchange for long-term funds. Essentially this arrangement allows banks to repo their mortgage loans. During the crisis, this function was undertaken by a number of central banks to support their mortgage markets in the absence of a mortgage liquidity facility. Saving for housing schemes is not widely developed in Africa. This represents a significant opportunity, especially in markets where lenders
Housing Finance 133 are unable to obtain the credit histories of borrowers. Requiring borrowers to save for a period allows lenders to verify the potential borrower’s capacity for regular saving and ability to meet a mortgage payment, as well as building up a deposit and some equity in the purchase of a property. There are, nonetheless, some countries, such as Nigeria, where the national housing fund mechanism requires a six-month savings period before a borrower is eligible to access a loan. This is a closed saving scheme that relies on the amount saved to disburse the loans to borrowers. A six-month savings period qualifies many more potential borrowers than can be serviced by the fund, which is therefore fundamentally unsustainable. The other better example is in Kenya, where housing bonds can be invested in and allow borrowers to build up the necessary equity for the purchase of a house. The government actively encourages this scheme by providing tax concessions to savers. A similar scheme also exists in Uganda, although without the tax break. Impact of the Financial Crisis Given the low level of development of many housing finance markets in Africa, the direct impact of the crisis has been limited. This, in part, reflects Africa’s lack of connection to the global capital markets, which to some extent insulated it from the contagion effects of the global crisis. There have certainly been some secondary effects resulting from the rise in food prices, for instance, or the lower levels of growth that have impacted incomes. However, the conservative nature of much of the lending has meant that the feed-through to nonperforming loans has been minimal, with no appreciable rise in levels of delinquencies. The lower level of world growth will also have had an impact on remittances and investments into property by the diaspora. Another secondary impact has been felt in the longer-term development prospects of housing finance. Many banks had ambitious expansion plans across Africa and capital/debt raising plans. Banks with a strong presence across the continent—such as Stanbic, Barclays, Ecobank, and Societe Generale—have all scaled back their expansion plans, although they still have a positive long-term outlook on Africa (The Economist 2010). This is particularly the case for many Nigerian banks—such as the Union Bank of Africa, which had very ambitious continent-wide plans that have had to be scaled back dramatically in the wake of the banking crisis in Nigeria. Alongside expansion plans there had been tentative signs that some banks would look to international capital markets such as the
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lic Disclosure Authorized Public Di
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Financial Sector Development in Afr
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Contents Foreword Acknowledgments E
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Contents vii PART III Safeguarding
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Contents ix 4.4 Size of Mortgage Lo
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xii Foreword In their own way, each
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xiv Acknowledgments led by Stefan N
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xvi Editors and Contributors of Acc
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xviii Editors and Contributors deve
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xx Abbreviations FSB FSD FSDT FSI G
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2 Beck and Maimbo to the bottom of
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4 Beck and Maimbo advocate a “bui
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CHAPTER 1 Microfinance in Africa Al
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Microfinance in Africa 9 Figure 1.1
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Microfinance in Africa 11 A Special
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Microfinance in Africa 13 Figure 1.
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Microfinance in Africa 15 Impedimen
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Microfinance in Africa 17 Figure 1.
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Microfinance in Africa 19 to physic
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Microfinance in Africa 21 Understan
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Microfinance in Africa 23 Some exam
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Table 1.2 Fanikisha Project Type of
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Microfinance in Africa 27 world reg
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Microfinance in Africa 29 implicitl
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Microfinance in Africa 31 Financial
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Microfinance in Africa 33 situation
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Microfinance in Africa 35 have yet
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Microfinance in Africa 37 9. This i
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Microfinance in Africa 39 Ehrbeck,
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CHAPTER 2 Mobile Financial Services
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Mobile Financial Services in Africa
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Table 2.2 African First- and Second
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Table 2A.1 ID and SIM Registration
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79 Guinea Yes http://fr.allafrica.c
Page 103: Togo Yes http://www.mediaf.org/fr/t
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Page 108 and 109: 86 Coates and Hofmeister unions in
Page 110 and 111: 88 Coates and Hofmeister trap for t
Page 112 and 113: 90 Coates and Hofmeister Sources of
Page 114 and 115: 92 Coates and Hofmeister Box 3.1 Ca
Page 116 and 117: 94 Coates and Hofmeister farm input
Page 118 and 119: 96 Coates and Hofmeister Technical
Page 120 and 121: 98 Coates and Hofmeister agree to b
Page 122 and 123: 100 Coates and Hofmeister Box 3.3 C
Page 124 and 125: 102 Coates and Hofmeister Attitudes
Page 126 and 127: 104 Coates and Hofmeister developin
Page 128 and 129: 106 Coates and Hofmeister specifica
Page 130 and 131: 108 Coates and Hofmeister ———
Page 133 and 134: CHAPTER 4 Housing Finance Simon Wal
Page 135 and 136: Housing Finance 113 Figure 4.1 Mort
Page 137 and 138: Housing Finance 115 countries, down
Page 139 and 140: Housing Finance 117 • The housing
Page 141 and 142: Housing Finance 119 limited to a fe
Page 143 and 144: Housing Finance 121 housing and inf
Page 145 and 146: Housing Finance 123 borrowed by ext
Page 147 and 148: Housing Finance 125 Box 4.1 Afforda
Page 149 and 150: Housing Finance 127 Box 4.2 South A
Page 151 and 152: Housing Finance 129 the degree to w
Page 153: Housing Finance 131 markets is the
Page 157 and 158: Housing Finance 135 greenfield vent
Page 159 and 160: Housing Finance 137 Figure 4.5 Obst
Page 161 and 162: Housing Finance 139 changes in the
Page 163 and 164: Housing Finance 141 • Introduce a
Page 165 and 166: Housing Finance 143 Box 4.6 Progres
Page 167 and 168: Housing Finance 145 of the impact o
Page 169 and 170: Housing Finance 147 funds. Within s
Page 171: Housing Finance 149 Hassler, O., an
Page 175 and 176: CHAPTER 5 The Reform Agenda for Fin
Page 177 and 178: The Reform Agenda for Financial Reg
Page 199: PART IV Financial Sector Reform: Ac
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182 Dafe having a positive theory o
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184 Dafe In sum, high transaction c
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186 Dafe through the selective allo
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188 Dafe institutions of the indust
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190 Dafe the boundaries of informat
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192 Dafe range of examples of both
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194 Table 6.1 Period Since the end
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196 Dafe state-owned financial inst
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198 Dafe The degree of success, in
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200 Dafe Although the current conse
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202 Dafe The interdependence of the
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204 Dafe in the 1980s and 1990s wer
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206 Dafe Alternative Approaches to
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208 Table 6.2 Approach to explain/
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210 Dafe state-centered, and interd
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212 Dafe particularly important fac
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214 Dafe Table 6.3 (continued) Mana
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216 Dafe activism in the developing
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218 Dafe structures can undermine m
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220 Dafe Conclusion There is strong
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222 Dafe policy is not straightforw
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224 Dafe banks that open agents in
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226 Dafe Bankable Frontier Associat
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228 Dafe Goldsheid, R. 1958. “A S
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230 Dafe ———. 2001. Types of
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