One of Tanzania’s greatest long-term development challenges has been providing citizens with access to decent and affordable housing. Despite rapid urbanization and an increased demand for affordable housing and housing finance, interventions by the government were having limited success. Many lower and middle-income families in Tanzania were forced to spend years living in poor or unfinished houses or renting with little hope of saving enough money to build or buy their own home.
Access to affordable housing can have a big impact on a person’s well-being. A safe, secure home can improve health, hygiene, and educational opportunities by ensuring access to clean water, safe toilets, electricity, and a respite from heat and disease-spreading insects.
To expand the housing finance market, the government created the Tanzania Mortgage Refinance Company (TMRC). The innovative, IDA-supported Tanzania Housing Finance Project supported the TMRC, allowing it to provide medium-and-long-term liquidity to mortgage lenders—making it easier for them to give loans to families to purchase new homes or improve their existing homes.
The expansion of the housing finance market made loans more affordable, mortgage repayment periods were extended from five years to up to 25 years, and interest rates were brought down from above 21 percent to 15 percent per year. The project also created a Housing Microfinance Fund to provide medium-term liquidity to microfinance institutions, allowing them to offer housing microfinance loans to the low-income population.
With the support of the project, the TMRC has contributed to a seven-fold expansion in the Tanzanian housing finance market. Between 2010 and 2019, the number of financial institutions providing mortgages grew by nearly 30, the country’s mortgage loan portfolio increased to over 5,000, and 2,000 housing micro-finance loans were provided. Nearly 34 percent of the beneficiaries were women.
In 2020, the International Finance Corporation (IFC) invested in TMRC with the support of the IDA Private Sector Window, further boosting affordable mortgage lending to create more affordable housing for Tanzanian families.
“IFC’s investment will help TMRC attract new investors, meaning that we can obtain longer term, more diverse funding and sustainable pricing,” explained Oscar Mgaya, Chief Executive Officer for TMRC.
Expanding housing finance puts credit within reach of traditionally disadvantaged groups, like women and micro, small-, and medium-sized enterprises, and harnesses urbanization to promote economic growth. The project illustrates how private capital, even in less-developed financial markets, can be mobilized successfully through the right public investments.
