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

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136 Walley financial literacy. A clear lesson from the crisis is the need for an effective consumer protection framework. The creation of consumer protection agencies with direct responsibility for financial services in both the United Kingdom and the United States is a clear sign of intent by the authorities. The need for such regulation is especially important in housing finance because of the size of the financial commitment relative to income, as well as the length of the commitment. In Africa, consumer protection is often seen as a luxury part of market development that only “developed” markets can afford. Quite the contrary: given that much of the maturity transformation that is at the heart of housing finance is based on confidence in the banking system, creating mechanisms to underpin that confidence is crucial. This is all the more necessary in markets where mortgages are not well understood and levels of financial literacy are very low. A recent good example is the new mortgage law passed in Tanzania, which explicitly requires lenders to disclose pricing and terms and conditions of the mortgage loans in a standard way that is comparable across lenders. As well as having laws and regulations, having the systems to enforce them is also important. Thus, having a clear complaint-handling procedure, and having dispute resolution mechanisms or an ombudsman system are all important parts of a working consumer protection framework. In summary, the direct impact of the crisis on housing finance markets in Africa has been relatively muted. This is in large part due to the overall lower level of development of the mortgage sector and the lack of contagion effect to Africa’s capital markets, which are not yet well integrated into the global system. There are undoubtedly also some indirect impacts resulting from the slower world growth that has had an effect on incomes and prices. The expansion plans of large banking groups may also be subject to some retrenchment. This reduction may slow the expansion of financial access and development of new products. Equally, however, many of the lessons learned and a more considered approach to opening new housing finance markets could create better foundations for future market development. Obstacles to Financing the Housing Gap Many constraints currently limit the growth of the housing finance market. Figure 4.5 attempts to categorize some of the most prevalent obstacles hampering the growth of housing finance across Africa. Each country
Housing Finance 137 Figure 4.5 Obstacles to Housing and Housing Finance in Africa Housing Supply Housing Finance Land - Access to land for development - Cost of land - Zoning of land for residential purposes - Corruption in land allocation system Finance - Access to developer finance (debt and equity) - Tax-raising capacity of local government for land improvement Developer capacity - Project management skills - Accounting skills - Lack of scale Raw materials - Cost of construction material - Lack of domestic production capacity Construction skills - Lack of skilled workforce electricians, engineers, project managers Macroeconomy - High levels of inflation - Low levels of income - High interest rates - Lack of fiscal resources Funding - Shortgage of long-term funds - Difficulty in using short-term deposits - Lack of secondary mortgage markets Credit risk - No credit bureau - Informal economy - No identification scheme Capacity - Training of staff - Ability to develop new products and systems Legal and regulatory issues - Time and cost in foreclosing - Time and cost in registering title and mortgage lien Cost of infrastructure - Developers have to pay for access roads, sewerage, water, electricity, transport Cultural - Lack of financial literacy - “Debt is bad” culture - Distrust of fomal banking system Government policy - Lack of integrated urban planning - Housing used for political purposes - Lack of long-term housing policy - Inadequate building codes Consumer protection - Absence of well-defined consumer protection rules - Lack of standards for pricing, fees, terms, and conditions - No means of redress Source: Author. will face a different set of challenges and consequently no single solution can be offered. Chief among these obstacles is the shortage of affordable housing available for purchase. Africa is characterized by a severe shortage of housing at a price within reach of most households. A range of issues lie
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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
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Togo Yes http://www.mediaf.org/fr/t
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84 Coates and Hofmeister chains. It
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 and 154: Housing Finance 131 markets is the
Page 155 and 156: Housing Finance 133 are unable to o
Page 157: Housing Finance 135 greenfield vent
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
Page 202 and 203: 180 Dafe lack access to external in
Page 204 and 205: 182 Dafe having a positive theory o
Page 206 and 207: 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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