ADDIS ABABA – The World Bank has approved a US$15 million credit to Djibouti to help expand access to affordable housing in the country.
The housing project aims to expand the mortgage market to low-income households by widening the scope of an existing partial credit guarantee fund to mortgage loans, the bank said this week.
It will also support housing microfinance and by converting rent-to-own contracts into mortgage loans.
“The lack of available finance has been a major bottleneck for lower-income families who want to own their own home,” said Boubacar-Sid Barry, World Bank Resident Representative in Djibouti.
“This new credit, along with financing from private banks, will help people to build better lives for their families and communities,” he added.
Since the 1960s, Djibouti’s population grew around 4.2 percent each year and this rapid growth led to greater urbanization.
More than 78 percent of Djibouti’s population currently residing urban areas.
This trend put increased pressure on the housing market, with low-income households largely shut out of the mortgage and home-building sector.
“What’s important about this project is that solutions for the housing crisis are coming largely from the private sector which is more sustainable in the long run and eases pressure on public funding,” said Caroline Cerruti, World Bank Senior Financial Sector Specialist.
The partial credit guarantee portion of the project (US$7 million) is expected to mobilize around US$70 million in private capital from banks to finance mortgages for homes.
About 2,000 low-to-middle-income households are expected to benefit from affordable mortgage loans partially guaranteed by the guarantee fund, according to the World Bank.
Some 450 poor households are also expected to have access to finance to build homes themselves.