Challenges in establishing sustainable mortgage markets in African countries: Lessons from Tanzania

For the past three decades many African countries have been implementing institutional reforms. The extent and impact of the reforms differ from one country to another and from one sector to the other. Property market is one of the sectors that have benefited from the reforms. Reforms have attracted the attention of institutional investors in the respective countries. Foreign investors are also gradually getting attracted into the sector. In the real property sector, upscale commercial and residential sub-sectors have benefited the most from the reforms. On the other hand, affordable housing sub-sector has received marginal attention from both investors and financiers, despite various initiatives to ensure that the reforms attract investors and financiers into the sub-sector. This study, which was carried out in Tanzania, looks into the challenges in establishing sustainable mortgage markets in African countries. Along with assessing the adequacy of the existing institutional framework in sustaining the market, the study evaluates the previous and current mortgage market promotion initiatives. The study entailed a survey of senior officials from commercial banks, pension funds, developers, and financial markets regulators. The aim of the survey was to capture key stakeholdersí views on the prospects for mortgage market in Tanzania. Findings of the study show that the main challenges in establishing a sustainable mortgage market in Tanzania revolve around coming up with an institutional framework that blends imported institutions into the local institutions which shape the behaviour and culture of the local people. These findings suggest an incomplete process of reforming some key legal, economic and social institutions. The study contributes to the literature on mortgage financing in infant markets, which is useful in devising tailor-made mortgage products suitable for infant market settings.