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

Housing Finance 139
changes in the macroeconomic outlook. Governments can do more to
develop mortgage lending by sound economic stewardship of the economy
than any number of fiscal resources or subsidies put into affordable
housing.
A final constraint worth highlighting is access to titled land. In his
seminal book The Mystery of Capital, Hernando de Soto set out the vast
potential of unlocking land and property as a source of collateral for the
huge disenfranchised poor population (de Soto 2000). Although the
book may have overstated the potential benefits, improving property
rights can clearly help to expand secured lending and the residential
mortgage market. Not only are strong and secure property rights necessary,
but an efficient institutional framework for recording land rights and
an enforcement mechanism are needed. A framework for registering is
another requirement. Whereas there is often a presumption that Africa is
a special case because of the complicated land rights arising from
postcolonial changes and customary land rights, this need not be an insurmountable
obstacle.
It can rightly be argued that the traditional African way of life is also
moving from rural—in some cases nomadic—occupations toward urban
living. For this transition to happen, land tenure also needs to change.
The traditional land rights and customary rights need modernizing. As
deSoto describes, this is a process that has occurred in almost all countries.
The United Kingdom moved from a feudal system; the United
States moved from multiple land ownership systems following its Civil
War; other countries all have their own peculiarities and histories. The
key issue, though, is that an equitable transition is needed. This should
involve compensation where appropriate and a clear and transparent
dispute resolution mechanism. Combining strong property rights with an
expansion in financial access can be a powerful mix for generating economic
expansion among lower-income groups and unlocking “dead”
capital.
Recommendations
Making recommendations applicable to a whole continent is a difficult
task, especially given the diversity that exists on the African continent in
terms of both economic development and financial sector development.
The following broad recommendations represent the key development
pillars for growing housing finance systems and tackling access to housing
finance for lower-income groups.