Beacon of hope. The impact of housing microfinance on housing improvment and construction for low income households in Accra, Ghana. The case of Boafo Microfinance Services Ltd

Lack of appropriate housing finance mechanisms in Ghana have led to a situation where the majority of housing stock is produced informally through incremental building practices. This type of building practice takes several years to complete housing units and this has contributed to the current housing deficit in the country. The government has now recognized the role played by households in beefing up housing supply in the country and is seeking to develop viable institutional systems that will provide appropriate housing finance to households who build incrementally. It seeks to encourage microfinance institutions, savings and loans companies and banks to develop housing financing schemes for the low income households to help them improve or build their homes incrementally. The main objective of the research is therefore to examine the market for housing microfinance and its impact on housing improvement for the low income households in Accra. The research methods include a case study, and background literature research. The main findings are that; the concept of housing microfinance is relatively new in Ghana and the market for it can best be described as a new and emerging market with associated high risks factors. The product has had abysmal impact on housing improvement and construction in terms of quantity of houses improved/constructed. This abysmal impact is largely due to the risk aversion nature of the suppliers who are not willing to take additional risks by expanding the operations of the product. However, in terms of speeding up the incremental building process and therefore shortening the time taken to produce housing by the incremental methods, it has had a significant impact. There is a huge potential demand for HMF services in Ghana. Demand for housing is far in excess of supply and hence a huge housing deficit. Housing production is largely driven by individual households who produce housing through the incremental building process. However the current demand is limited to low income households who have started the process of owning homes by purchasing land and have started or are intending to start building their structures in the peri-urban areas in Ghana The HMF products have been targeted at a particular segment of the market. This market segment include private and public sector salaried workers who have either purchased land and had started some building structures or who desire to purchase land and start the building process. Few self-employed business entrepreneurs also form part of the target market. However, these are people who have well established business and have considerable daily cash flows. There is the need for housing consumer education and professional marketing of the product by the stakeholders involved. Closely linked to intensifying housing consumer education is the need for institutional orientation for the suppliers and potential suppliers of HMF. Once HMF has been recognised as a major product of the institution everything should be done to make it succeed, after all a good performing HMF product helps the institution to diversify its risks and increase its portfolio. There is the need for the supplier of HMF to enter into private_private partnerships with building contractors and building materials suppliers. The HMF institutions should identify recognised building material suppliers and contractors and bargain for the best price of building materials so that they could issue coupons to their clients instead of cash and direct them to these suppliers.