Housing Loan Scheme in Zimbabwe
Zimbabwe’s financial sector has remained resilient besides slowing GDP growth in recent years. Notwithstanding the country’s highly developed financial sector (16 commercial banks, 3 building societies and about 150 microfinance institutions), financial exclusion persists. FinScope’s 2011 survey found that 40 percent of the population were excluded from formal and informal banking.
The current housing deficit in Zimbabwe is estimated at 1.25 million units, and housing supply has been made a priority by the Ministry of National Housing and Social Amenities. A social National Housing Policy was adopted in 2012, highlighting mass housing projects specifically aimed at low income earners. The price of a newly built house is somewhere around US$12 000, which goes at a rate of anywhere between 14% and 18%. CABS for example, charges a rate of 15% over a 10 year plan, with a 75% (Loan to Value) LTV and 25% repayment to income. According to a recent article on AllAfrica, the City of Harare and CABS Zimbabwe, have embarked on a big housing project to construct 3 102 houses. The units will be sold for between US$17 000 and US$27 000, and CABS will provide financing over 10 year loans. In many instances (compared to other counterparts in Africa) this is affordable particularly for the middle class. However with almost 40% of the population under the national poverty line, alternative solutions are needed for this group.
In comes Vantage Affordable Housing Company, a micro credit MFI providing affordable finance solutions for low income earners. Vantage has partnered up with United Builders Merchant (a Zimbabwean building material and hardware store). This partnership will enable low income earners to finally be able to access housing through a finance scheme called ‘Build one room at a time’. While other financiers require some level of collateral, Vantage does not; the only thing they require is an approved building plan. The model will require the customer to deposit 50% of the cost of building one bedroom and Vantage will cover the rest as a loan. After having realised the potential of housing microfinance, Vantage was able to build a model that ensures that the client utilises the funds as intended.