Alternative Housing Finance for Namibia's Labour Force
Alternative Housing Finance for Namibia's Labour Force
Business Model Description
Provide affordable housing finance to individuals who do not currently qualify for mortgage and have limited credit history with formal banks but are gainfully employed. Financing is provided on basis of conditional monthly repayment rates, using certain aspects of banking and non-banking criteria to determine a risk profile.
Expected Impact
Facilitate access to home ownership for Namibia's labour force not supported by commercial banks.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Namibia: Countrywide
Sector Classification
Infrastructure
Development need
The Africa SDG Index and Dashboards Report 2019, on SDG 9 (Industry, Innovation and Infrastructure) indicates that Namibia has “major challenges” in achieving this SDG (VIII). The country's infrastructure performance is ranked 94 out of 114 countries in the WEF Global Competitiveness Report 2019 (XII).
Policy priority
The Government prioritises infrastructure development towards SDG achievement (I). Namibia's 5th National Development Plan (NDP5) highlights how the lack of infrastructure development results in bottlenecks for economic development (II). It committed to spending 42% (NAD 74 billion, USD 5.3 billion) of the country's GDP on infrastructure projects over five years (VII).
Gender inequalities and marginalization issues
Given that infrastructure projects are typically linked to large-scale construction, gender representation in the construction industry was used as a proxy to gauge gender equality within the infrastructure sector. Namibia’s construction industry is male-dominated; 92% of its workforce is male (XII).
Investment opportunities introduction
Namibia put in place the Public Private Partnership Act in 2018, which aims to address the country's critical infrastructure needs through participation from the private sector through leveraging public private partnerships (PPPs) (IX). It also established a dedicated infrastructure fund to support the sector's growth (X).
Real Estate
Development need
Ensuring access for all to adequate, safe and affordable housing and basic services in Namibia, as captured under SDG 11 on Sustainable Cities and Communities, continues to face significant challenges in Namibia, even if its indicator is expected to be achieved (VIII).
Gender inequalities and marginalization issues
In Namibia's rural areas, 75.3% of female headed households resides in traditional dwellings compared to 58.5% of male headed households. In urban areas, a slightly higher number of male headed households (30.4%) reside in improvised housing units, compared to 28.5% of female headed households (XIII, XVI).
Real Estate
Pipeline Opportunity
Alternative Housing Finance for Namibia's Labour Force
Provide affordable housing finance to individuals who do not currently qualify for mortgage and have limited credit history with formal banks but are gainfully employed. Financing is provided on basis of conditional monthly repayment rates, using certain aspects of banking and non-banking criteria to determine a risk profile.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Rental expenditure constitutes the highest expense for households in Namibia, totalling 70% of all housing expenditure. With 119,217 households, Windhoek is a lucrative market worth USD 614 million spent on housing annually, of which rental expenditure stands at USD 85.4 million annually (2).
Indicative Return
15% - 20%
Based on experiences from the RTO Alternative Housing Finance Bond Programme at the Namibian Stock Exchange (NSE), the IRR for government financing ranges between 15 and 20% (3).
Investment Timeframe
Medium Term (5–10 years)
Based on experiences from the RTO Alternative Housing Finance Bond Programme at the Namibian Stock Exchange (NSE), the investment timeframe is 5-10 years (3).
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Namibia's current housing stock is too expensive and remains unaffordable for the economically active labour force of Namibia. The current housing prices especially in Windhoek leaves the majority of Namibia’s economically productive labour force outside of the property market.
Using transaction data, which shows a minimum mortgage amount of USD 50,000, implies that the qualifying gross salary for a 100% mortgage is USD 1,571 per month. Comparing this with salary levels, it implies that mortgage products by commercial banks cover only 14% of employed Namibians (2, 4).
Gender & Marginalisation
Namibians who are economically active but operate with lower salary levels remain excluded from home ownership and are exposed to high rent costs, especially in urban localities.
Expected Development Outcome
Increased access to formal housing, covering the majority of Namibia's population.
Increased balance sheets for large sections of the population, thereby decreasing economic inequality.
Increased affordable housing stock and heightened financial inclusion.
Gender & Marginalisation
Primary SDGs addressed
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
1.4.1 Proportion of population living in households with access to basic services
1.4.2 Proportion of total adult population with secure tenure rights to land, (a) with legally recognized documentation, and (b) who perceive their rights to land as secure, by sex and type of tenure
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
Corporates
Public sector
Outcome Risks
New innovative finance instruments may reduce demand for traditional finance products used by low income consumers, such as microfinance and stokvels (rotating credit unions or saving schemes).
Impact Risks
Due to the economic downtime following COVID-19, the demand for home ownership may be limited among private sector employees, reducing the market of this opportunity to Government employees.
Namibians most in need may not be able to afford the financing and remain excluded from accessing formal housing and its benefits.
Impact Classification
What
The outcome is likely to be positive, important and intended because alternative housing finance provides access to home ownership with its socio-economic benefits.
Who
Economically productive labour force outside of the property market gaining access to affordable housing.
Risk
While alternative housing finance models exist, they can lead to indebtedness especially for Government employees already engaging micro-lenders.
Impact Thesis
Facilitate access to home ownership for Namibia's labour force not supported by commercial banks.
Enabling Environment
Policy Environment
National Housing Policy, 2017: States that the role of Government is to facilitate and promote partnerships between all relevant public and private parties concerned with the delivery of land, shelter and human settlement development (5).
Vision 2030, 2004: Identifies the objectives of providing access to adequate shelter for 60% of Namibia's low-income population by the year 2025 (6).
Financial Environment
Financial incentives: Government employees are provided with housing subsidy in line with their income brackets (but limited housing stock hinders most from activating the subsidy) (14).
Other incentives: The National Housing Enterprise and the Build Together programme promote home ownership for individuals earning under USD 2,000 per month (7, 8).
Regulatory Environment
Banking Institutions Act, 1998: Consolidates and amends the laws relating to banking institutions, and provides for the authorisation of a person to conduct business as a banking (9).
Friendly Societies Act, 1956: Provide for the registration, incorporation, regulation and dissolution of friendly societies (10).
Usury Act, 1968: Provides for the limitation and disclosure of finance charges levied in respect of money lending transactions, credit transactions and leasing transactions (11).
Pension Fund Act, 1956: Provides for the registration, incorporation, regulation and dissolution of pension funds (12).
Sales of Instalment Act, 1971: Regulates contracts of purchase and sale of certain kinds of land under which the purchase price is payable in instalments over a period of one year or longer (13).
Marketplace Participants
Private Sector
Investors such as the Government Institution Fund (property / housing mandate department) and the Development Bank of Namibia. Existing financiers and projects such as Rent-To-Own (RTO) Namibia, which was established by Ongos Valley Development.
Government
Ministry of Finance, Minister of Urban and Rural Development.
Non-Profit
Shack Dwellers Federation of Namibia.
Target Locations
Namibia: Countrywide
References
- (I) Republic of Namibia, National Planning Commission, 2018, Implementation of Sustainable Development Goals, Voluntary National Review, https://sustainabledevelopment.un.org/content/documents/19880New_Version_Full_Voluntary_National_Review_2018_single_1_Report.pdf. II) Republic of Namibia, National Planning Commission, 2017, Namibia's 5th National Development Plan (NDP5), https://www.npc.gov.na/?wpfb_dl=294. III) Republic of Namibia, Office of the President, 2016, Harambee Prosperity Plan 2016/17 - 2019/20 Progress Report, Goals and Outcomes, https://op.gov.na/documents/84084/572904/HPP+Report+2019/66c2eef8-3b23-45be-bc2c-5e728699057e. IV) African Development Bank Group, 2020, Namibia: African Development Bank approves $121.7 million loan, Euro 3 million grant to support water and sanitation sector, https://www.afdb.org/en/news-and-events/press-releases/namibia-african-development-bank-approves-1217-million-loan-euro-3-million-grant-support-water-and-sanitation-sector-34727. V) Canning, David & Bennathan, Esra. 2000, The Social Rate of Return on Infrastructure Investment, The World Bank, Policy Research Working Paper Series, https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-2390. VI) Republic of Namibia, Public Private Partnership Act 4, 2017, Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. VII) African Development Bank Group, 2018, 2018 African Economic Outlook, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/country_notes/Namibia_country_note.pdf. VIII) SDG Center for Africa and Sustainable Development Solutions Network, 2019, Africa SDG Index and Dashboards Report 2019, Kigali and New York: SDG Center for Africa and Sustainable Development Solutions Network, https://sdgcafrica.org/wp-content/uploads/2019/06/SDGS_INDEX_REPORT_2019WEB.pdf. IX) Republic of Namibia, Public Private Partnership Act 4, 2017, Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. X) World Bank, 2020, Leveraging Pension Fund Investment for Domestic Development: Namibia’s Regulation 29 Approach, http://documents1.worldbank.org/curated/en/125241594367606090/pdf/Leveraging-Pension-Fund-Investment-for-Domestic-Development-Namibia-s-Regulation-29-Approach.pdf. XI) Ino Harith Capital, Our Partners, https://www.harith.co.za/our-partners-2. XII) Schwab, K, World Economic Forum, 2019, The Global Competitiveness Report 2019, http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf. XIII) Republic of Namibia. Namibian Statistics Agency, 2018, Labour Force Survey 2018 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NLFS_2018_Report_Final_.pdf. XIV) United Nations, 2018, Accelerating SDG 7 Achievement Policy Brief 12 Global Progress of SDG 7 - Energy and Gender, https://sustainabledevelopment.un.org/content/documents/17489PB12.pdf. XV) Republic of Namibia. Namibian Statistics Agency, 2016, Namibia Household Income and Expenditure Survey (NHIES) 2015/2016 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NHIES_2015-16.pdf. XVI) DNA Economics, 2021, SAM Multiplier Analysis for the SDG study in Namibia, Six Capitals.
- (1) Jade Lennon, 2018, How Namibia’s housing shortage became a humanitarian crisis, https://medium.com/@Jade_Lennon/how-namibias-housing-shortage-became-a-humanitarian-crisis-eef05ba14b9b.
- (2) Namibia National Household Income and Expenditure Survey 2015/16, https://cms.my.na/assets/documents/NHIES_2015-16.pdfand statistical data sheet of housing consumption breakdown sourced from Namibia Statistics Agency (NSA).
- (3) RTO Namibia Pty (Ltd), Investment Prospectus, 2020, Available on request from RTO Namibia.
- (4) FNB Housing Price Index, 2010 - 2020, https://www.fnbnamibia.com.na/housing-index/index.html.
- (5) Namibia National Housing Policy, Republic of Namibia, 2017.
- (6) Namibia Vision 230, Republic of Namibia, 2004, https://www.npc.gov.na/vision-2030.
- (7) National Housing Enterprise, Namibia, https://www.nhe.com.na.
- (8) Build Together Programme, Namibia, https://world-habitat.org/world-habitat-awards/winners-and-finalists/build-together-programme.
- (9) Banking Institutions Act, 1998, Republic of Namibia, https://www.bon.com.na/About-Us/Laws-and-Regulations/Banking-Institutions-Act,-1998,-as-amended/Banking-Institutions-Act,-1998.aspx.
- (10) Friendly Societies Act, 1956, Republic of Namibia, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=205.
- (11) Usury Act, 1968, Republic of Namibia, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=400&cid=283.
- (12) Pension Fund Act, 1956, Republic of Namibia, https://laws.parliament.na/cms_documents/1962---general-regulations-a2fcc01ea5.pdf.
- (13) Sales of Instalment Act, 1971, Republic of Namibia, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=176.
- (14) Office of the Prime Minister of Namibia (2018) data on the breakdown of housing subsidy per income bracket for civil servants, Available on request to Monasa Advisory & Associates.