Urban sprawl: An aerial view of Africa’s largest slum, Kibera, in Kenya. Experts at a conference in Uganda are considering ways to finance homes for low-income earners in Africa who don’t have collateral. Picture: HALDEN KROG/THE TIMES
Urban sprawl: An aerial view of Africa’s largest slum, Kibera, in Kenya. Experts at a conference in Uganda are considering ways to finance homes for low-income earners in Africa who don’t have collateral. Picture: HALDEN KROG/THE TIMES

Granting small loans to help low-income earners in Africa’s rapidly growing cities build their own homes could help solve a looming housing crisis, experts said on Thursday.

About 40% of Africa’s one billion people already live in towns and cities, and the World Bank predicts the urban population will double over the next 25 years, putting huge pressure on housing.

Most of the new homes being built target the middle and upper classes, and experts say a lack of financing makes it hard for lower-income earners to buy or build homes, forcing them into illegal slums or other informal housing.

"It could take up to two generations for people to build their home incrementally if they don’t have financing," said Sandra Prieto, global director of operations at home-building charity Habitat for Humanity.

Small loans with short repayment terms make it possible for people to complete the process more quickly, she said on the sidelines of a housing conference in Uganda’s capital, Kampala, this week.

The forum brought together housing and microfinance players to discuss how small loans can be used to increase access to affordable housing.

It could take up to two generations for people to build their home if they don’t have financing

The Kenya Women Finance Trust (KWFT) is providing loans of as little as 5,000 Kenyan shillings ($50) to help women access loans to build homes.

Commercial lenders are reluctant to provide finance without collateral.

KWFT’s MD, Mwangi Githaiga, said many of the trust’s more than 45,000 beneficiaries do not have titles to the land they are building on, which would traditionally be used as collateral.

Instead, recipients of microfinance guarantee each others’ loans. Anyone wanting to borrow money must secure at least three guarantors.

"You need an institution that understands that dynamic and is willing to invest in that kind of situation and look at other ways of creating collateral," he said.

Six out of 10 urban households in Kenya are in slums, and the country needs to build 2-million affordable city homes to meet demand.

SA’s cities have similar challenges. Their expanding slums have increasingly encroached on private land as new people arrive, exacerbating tension between rich and poor.

"Access to financing is important [but] access to land is crucial," said Kevin Chetty, director of market development and housing finance at Habitat for Humanity. "Without land you don’t have a house. This is always a challenge in the urban context."

Thomson Reuters Foundation


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