Primary Mortgage Market Development in Emerging Markets – Is the Central and Eastern Europe Experience Replicable in Sub-Saharan Africa?

Abstract

The provision of more and better housing remains a long-standing policy problem in the transition from central planning to market economies in the early 1990s in Central and Eastern Europe (CEE) and Central Asia. Broad financial sector reform and favourable economic development supported the introduction of mortgage products, the development of keen competition and the emergence of various instruments or models to fund the increasing demand for home purchases. The region responded to this challenge through different financing mechanisms such as the covered mortgage bond, contractual savings schemes or the securitisation of mortgages. With this experience in mind, this chapter explores whether models, techniques and mechanisms of housing finance developed in CEE offer lessons and useful adaptations for emerging markets, such as in Africa. This chapter was originally prepared before the outbreak of the global financial crisis (the crisis). Although most of the findings of this paper refer to the period before the crisis, they have been reviewed to consider their relevance in light of the effects of the crisis. Whereas most markets in CEE collapsed due to high exposure to foreign currency mortgages and loose lending standards, markets in Sub-Saharan Africa (SSA) have remained relatively stable (with the exception of South Africa) reflecting in sulated smaller and simpler markets which had only weak links to international capital markets.

The findings, interpretations, statements and conclusions expressed herein are those of the author alone and do not necessarily reflect the views of the World Bank and its affiliated organisations, or those of the Executive Directors of the World Bank.