Housing Market Constraints in the West African Region

Abstract

This study examines the constraints limiting lending institutions’ participation in housing finance supply in the West
African region. It also recommends actions necessary for addressing these constraints. It is based on regression analysis of
secondary data related to factors necessary for lending institutions’ participation in formal housing finance supply. The ratio of
the private credit to GDP of West African countries between 2008 and 2010 is regressed against the independent variables
Inflation rate, procedures to register property, time to register property, cost to register property, strength of legal right index and
depth of credit information system. The private to credit ratio is used as a proxy for the mortgage to GDP ratio due to lack of
access to data for most of the West African countries. The regression analysis showed that two factors: ‘depth of credit
information system’ and ‘strength of legal right index’ are statistically significant to explain the lack of depth of the private credit to
GDP ratios in the region. It is concluded that the housing market across several West African countries could be strengthened if
the governments act to substantially improve the legal strength of lenders is increased through stronger foreclosure laws, and
where lenders can effectively access, collect, share and disseminate credit information on prospective borrowers in the region.
This can be addressed by setting up institutions to convert credit information from informal thrift and savings societies which are
active in the region, to formal private and public credit bureaus.