One of Tanzania’s greatest long-term development challenges has been to provide citizens with access to decent and affordable housing. Despite rapid urbanization and increased demand for affordable housing and housing finance, government interventions have had limited success. Many low and middle income families in Tanzania have been forced to spend years living in poor or unfinished houses or renting with little hope of saving enough money to build or buy their own.
Access to affordable housing can have a significant impact on a person’s well-being. A safe and secure home can improve health, hygiene, and educational opportunities by ensuring access to clean water, safe toilets, electricity, and respite from heat and disease-spreading insects. .
To develop the housing finance market, the government created the Tanzania Mortgage Refinance Company (TMRC). The innovative IDA-backed Housing Finance Project in Tanzania has supported TMRC, enabling it to provide medium- and long-term liquidity to mortgage lenders, making it easier for them to provide loans to families to purchase housing. new homes or improve their existing homes.
The expansion of the housing finance market has made loans more affordable, mortgage repayment periods have been extended from five years to 25 years, and interest rates have been cut from over 21% to 15% per year. . The project also established a Housing Microfinance Fund to provide medium-term liquidity to microfinance institutions, enabling them to offer microfinance housing loans to the low-income population.
With the support of the project, TMRC has contributed to a seven-fold increase in the Tanzanian housing finance market. Between 2010 and 2019, the number of financial institutions offering mortgage loans increased by almost 30, the country’s mortgage portfolio grew to over 5,000, and 2,000 housing microcredit loans were granted. Almost 34 percent of the beneficiaries were women.
In 2020, the International Finance Corporation (IFC) invested in TMRC with support from IDA’s private sector window, further scaling up affordable mortgages to create more affordable housing for Tanzanian families.
“IFC’s investment will help TMRC attract new investors, which means we can secure longer-term, more diversified funding and sustainable pricing,” said Oscar Mgaya, CEO of TMRC.
The expansion of housing finance brings credit within the reach of traditionally disadvantaged groups, such as women and micro, small and medium enterprises, and harnesses urbanization to promote economic growth. The project illustrates how private capital, even in less developed financial markets, can be successfully mobilized through appropriate public investments.