The West African Development Bank (BOAD), the WAEMU Commission, the West African regional mortgage refinance company (CRRH-UEMOA) and the World Bank today signed a $155 million package to support the development of affordable housing finance in the West African Economic and Monetary Union (WAEMU).
110 million people currently live in the WAEMU region; over the next twenty years, an additional 100 million more will be born. Most of them will be urban dwellers, as the area is experiencing rapid urbanization. This trend is aggravating a large housing deficit, which mostly affects lower income groups in a context of widespread poverty (about 43 million live below the extreme poverty line). Some 800,000 new housing units are needed every year to address the housing shortage. Yet WAEMU banks only issue about 15,000 new mortgages per year, a tiny fraction of the estimated needs.
The WAEMU countries include Benin, Burkina, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.
The project aims to address the chronic housing shortage by expanding access to long-term housing finance for households with modest and irregular incomes. “This goal will be achieved by lengthening the term of mortgage loans, currently at 7-8 years on average, to 15 years and beyond, thanks to the action of the regional mortgage refinance company which BOAD has supported since inception,” said Christian Adovelande President of BOAD.
Funding from IDA will be channeled from BOAD to CRRH-UEMOA, which will extend long-term loans to banks and microfinance companies, allowing them in turn to extend the term of their loans to households with moderate and irregular incomes. IDA funding into CRRH-UEMOA will facilitate about 50,000 new mortgages, and will leverage much greater amounts of investment into affordable housing through the bond-raising activity of CRRH-UEMOA. “The project represents a good example of the World Bank Group new approach to maximize finance for development; overall it is estimated that one dollar of IDA will leverage about 5 dollars of private finance,” said Rachid Benmessaoud, World Bank Country Director for West Africa Regional Operations.
The project is also expected to support job creation. Housing investment has a strong multiplier effect across the economy given the number of linked sectors, whether it is production of raw material, construction sector, finished goods or financial services. Applying a conservative job multiplier of five to the additional mortgages originated by the project would result in the creation of about 250,000 jobs across the WAEMU region.
In addition, the project will provide technical assistance to develop the enabling environment to support the construction of cheaper housing. “The WAEMU Commission is proud to manage the technical assistance element of the project aimed at strengthening national housing policies and supporting the increased provision of secured and serviced land, which is a key concern in our countries,” noted Abdallah Boureima, President of the WAEMU Commission.
“IDA financing along with the recent IFC investment into CRRH-UEMOA will strengthen our business model and our ability to mobilize long-term resources to expand affordable housing finance to the benefit of WAEMU households,” said Christian Agossa, General Manager of the CRRH-UEMOA.
The $155 million package consist of an IDA Scale-up credit of $130 million to BOAD, the first IDA SUF credit to a regional organization, and a $25 million regional IDA grant to the WAEMU.