WB injects USD 40 million into housing finance project in Tanzania

THE World Bank through the International Development Association (IDA) has approved a credit of USD 40 million (Tsh. Over 42 billion) to support implementation of a housing finance project in Tanzania. The project’s objective is to develop the housing mortgage finance markets through the provision of medium and long term financing to mortgage lenders. The objective will be achieved through the creation of a mortgage, liquidity facility, a possible housing micro-finance fund and a technical assistance and capacity building programs. Tanzania like other African countries which suffers from severe shortage of good quality housing that grows year after year was being compounded by lack of long term housing finance, lack of a formal residential housing construction sector, difficulty with land rights and rapid population growth and urbanization. By strengthening access to housing finance, the loan will promote equitable economic growth which in turn creates jobs and reduces poverty, according to World Bank country Director for Tanzania, Uganda and Burundi. Mr. John Murray. Housing has historically been a powerful force for poverty reduction by raising living standards, creating jobs and increasing the public resources available for social spending.Long term financing for housing was scarce at present in part because lenders did not have reliable access to sources of term finance that could help them to mitigate the associated business and lending risks.

Developing access to housing finance would therefore help improve affordability and construction standards, and encourage the private sector to take a greater role in the provision of housing. Timing of the project was supported by recent significant improvements in the environment of lending for housing. The passing of the mortgage finance (Special Provision) Act No: 17 of 2008 had created a strong momentum in government for the development of housing finance and had also generated a high level of expectations. Many banks in Tanzania were in the process of developing a strategy for mortgage lending. The mortgage market in Tanzania excludes the vast majority of the country’s population from accessing housing finance to improve their housing opportunities. This highlights the need for appropriate housing finance products that meet the needs of those who cannot afford mortgage finance for complete houses. This is the third operation to be approved by IDA for Tanzania during fiscal year 2009/2010 bringing total IDA approvals this fiscal year to USD 250 million (Tsh. 300 billion).