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Amid Recession, World Bank Optimistic Over Sub-Saharan Africa Economic Recovery

April 3, 2021

Economic growth in Sub-Saharan Africa is estimated to have contracted by 2.0% in 2020, closer to the lower bound of the forecast in April 2020, and prospects for recovery are strengthening amid actions to contain new waves of the pandemic and speed up vaccine rollouts, according to the World Bank’s biannual economic analysis for the region.

The latest Africa’s Pulse, The Future of Work in Africa: Emerging Trends in Digital Technology Adoption, notes that a slower spread of the virus and lower COVID-19-related mortality, strong agricultural growth and a faster-than expected recovery in commodity prices has helped many African economies weather the economic storm induced by the COVID-19 pandemic. The report notes that economic recovery hinges on countries deepening reforms that create jobs, encourage investment, and enhance competitiveness. The resurgence of the pandemic in late 2020 and limited additional fiscal support will pose an uphill battle for policy makers as they continue to work toward stronger growth and improved livelihoods for their people.

Albert G. Zeufack, World Bank Chief Economist for Africa

“African countries have made tremendous investments over the last year to keep their economies afloat and protect the lives and livelihoods of their people,” said Albert G. Zeufack, World Bank Chief Economist for Africa. “Ambitious reforms that support job creation, strengthen equitable growth, protect the vulnerable and contribute to environmental sustainability will be key to bolstering those efforts going forward toward a stronger recovery across the African continent.”

Growth in the region is forecast to rise between 2.3 and 3.4% in 2021, depending on the policies adopted by countries and the international community. A second wave of COVID-19 infections is partly dragging down the 2021 growth projections, with daily infections about 40% higher than during the first wave. While some countries had a significant drop in COVID-19 infections due to containment measures adopted by the government, other countries are facing an upward trend in infections. Real GDP growth for 2022 is estimated at 3.1%. For most countries in the region, activity will remain well below the pre-COVID-19 projections at the end of 2021, increasing the risk of long-lasting damage from the pandemic on people’s living standards.

Sub-Saharan Africa’s recovery is expected to vary across countries. Non-resource-intensive countries, such as Côte d’Ivoire and Kenya, and mining-dependent economies, such as Botswana and Guinea, are expected to see robust growth in 2021, driven by a rebound in private consumption and investment as confidence strengthens and exports increase.

In the Eastern and Southern Africa subregion, the growth contraction for 2020 is estimated at -3.0%, mostly driven by South Africa and Angola, the subregion’s largest economies. Excluding Angola and South Africa, economic activity in the subregion is projected to expand by 2.6% in 2021, and 4.0% in 2022,

Growth in the Western and Central Africa subregion contracted by 1.1% in 2020, less than projected in October 2020 partly due to a less severe contraction in Nigeria, the subregion’s largest economy, in the second half of the year. Real gross domestic product in the Western and Central Africa subregion is projected to grow 2.1% in 2021 and 3.0% in 2022.

The Pulse also notes that African countries can speed up their recovery by ramping up their existing efforts to support the economy and people in the near term, especially women, youth and other vulnerable groups. Africa’s Pulse recommends those policies be complemented by reforms that fosters the country’s inclusive productivity growth and competitiveness. Reducing countries’ debt burdens will release resources for public investment, in areas such as education, health, and infrastructure. Investments in human capital will help lower the risk of long-lasting damage from the pandemic which may become apparent over the longer term, and can enhance competitiveness and productivity. The next twelve months will be a critical period for leveraging the African Continental Free Trade Area in order to deepen African countries’ integration into regional and global value chains. The report also notes that reforms that address digital infrastructure gaps and make the digital economy more inclusive–ensuring affordability but also building skills for all segments of society- are essential to improve connectivity, boost digital technology adoption, and generate more and better jobs for men and women.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Covid-19 Pandemic Threatens Human Capital Gains of the Past Decade

September 20, 2020

World Bank Group President David Malpass

The COVID-19 pandemic threatens hard-won gains in health and education over the past decade, especially in the poorest countries, a new World Bank Group analysis finds. Investments in human capital—the knowledge, skills, and health that people accumulate over their lives—are key to unlocking a child’s potential and to improving economic growth in every country.

The World Bank Group’s 2020 Human Capital Index includes health and education data for 174 countries – covering 98 percent of the world’s population – up to March 2020, providing a pre-pandemic baseline on the health and education of children. The analysis shows that pre-pandemic, most countries had made steady progress in building human capital of children, with the biggest strides made in low-income countries. Despite this progress, and even before the effects of the pandemic, a child born in a typical country could expect to achieve just 56 percent of their potential human capital, relative to a benchmark of complete education and full health.

“The pandemic puts at risk the decade’s progress in building human capital, including the improvements in health, survival rates, school enrollment, and reduced stunting. The economic impact of the pandemic has been particularly deep for women and for the most disadvantaged families, leaving many vulnerable to food insecurity and poverty,” said World Bank Group President David Malpass. “Protecting and investing in people is vital as countries work to lay the foundation for sustainable, inclusive recoveries and future growth.”

Due to the pandemic’s impact, most children – more than 1 billion – have been out of school and could lose out, on average, half a year of schooling, adjusted for learning, translating into considerable monetary losses. Data also shows significant disruptions to essential health services for women and children, with many children missing out on crucial vaccinations.

The 2020 Human Capital Index also presents a decade-long view of the evolution of human capital outcomes from 2010 through 2020, finding improvements across all regions, where data are available, and across all income levels. These were largely due to improvements in health, reflected in better child and adult survival rates and reduced stunting, as well as an increase in school enrollment. This progress is now at risk due to the global pandemic.

The analysis finds that human capital outcomes for girls are on average higher than for boys. However, this has not translated into comparable opportunities to use human capital in the labor market: on average, employment rates are 20 percentage points lower for women than for men, with a wider gap in many countries and regions. Moreover, the pandemic is exacerbating risks of gender-based violence, child marriage and adolescent pregnancy, all of which further reduce opportunities for learning and empowerment for women and girls.

Today, hard-won human capital gains in many countries are at risk. But countries can do more than just work to recover the lost progress. To protect and extend earlier human capital gains, countries need to expand health service coverage and quality among marginalized communities, boost learning outcomes together with school enrollments, and support vulnerable families with social protection measures adapted to the scale of the COVID-19 crisis. The World Bank Group is working closely with governments to develop long-term solutions to protect and invest in people during and after the pandemic: In Ethiopia, Haiti and Mongolia, the Bank has been supporting the acquisition of vital medical equipment.In Bangladesh, Burkina Faso, and Nepal, the Bank is supporting the development of school safety and hygiene protocols while working with Water Supply, Sanitation, and Hygiene teams to provide basic sanitization and hygiene supplies.

In Jordan and Turkey, through recently approved new operations, the Bank is supporting the development of TV and digital content for blended teaching and learning for the new academic year, as well as psycho-social counseling and remedial courses.

In the Sahel region, the Bank is backing the Sahel Women’s Economic Empowerment and the Demographic Dividend (SWEDD) project aimed at creating a favorable environment for women and girls’ empowerment through programs to keep girls in school, and to expand economic opportunities and access to quality reproductive health services. .The Bank is also helping India immediately scale-up cash transfers and food benefits, using a set of pre-existing national platforms and programs, to provide social protection for essential workers involved in COVID-19 relief efforts; and benefit vulnerable groups, particularly migrants and informal workers, who face high risks of exclusion.

Ambitious, evidence-driven policy measures in health, education, and social protection can recover lost ground and pave the way for today’s children to surpass the human capital achievements and quality of life of the generations that preceded them. Fully realizing the creative promise embodied in each child has never been more important.

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. We will be deploying up to $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Why World Bank Suspended ‘Ease of Doing Business’ Rankings

August 30, 2020

The World Bank has announced the suspension of its flagship “Ease of Doing Business Report, which ranks countries based on the costs of doing business. The shocking decision to suspend the ranking exercise is the latest crisis to beset the global lender with a far reaching impact on its other programmes. The Bank had in a statement noted that “A number of irregularities have been reported regarding changes to the data in the Doing Business 2018 and Doing Business 2020 reports.”

Carmen Reinhart, World Bank chief economist

The institution said it had informed the authorities of the most affected countries, but did not name them. “We will act based on the findings and will retrospectively correct the data of countries that were most affected by the irregularities,” the statement added. There are reports that data on China, Azerbaijan, the United Arab Emirates and Saudi Arabia “appeared to have been inappropriately altered.”

If confirmed, the revised data could affect the rankings of the five countries. The latest report, for example, showed vast improvement among Middle Eastern economies with Saudi Arabia climbing 30 places. The latest report, published last year, ranked Togo and Nigeria among the 10 countries that had shown the most improvement and collectively accounted for “one-fifth of all the reforms recorded worldwide.” But there are no reports that either the scores of either country were tampered with.

In the report, only two Sub-Saharan economies, Mauritius and Rwanda, ranked among the top 50. Kenya, South Africa, Zambia, Botswana, and Togo ranked among the top 100 while South Sudan, Eritrea and Somalia ranked among the lowest globally.

The decision to suspend the rankings is also likely to reignite controversy around the annual report, particularly in the methodologies behind the rankings. In the 17 years it has been published, the Doing Business reports have amassed “surprising influence over global regulatory policies,” researchers wrote in a paper published in 2019. The researchers found that the rankings strongly affect policy as governments make reforms to improve their ranking.

“Changes over time in the Doing Business rankings are not particularly meaningful. They largely reflect changes in methodology and sample—which the World Bank makes every year, without correcting earlier numbers—not changes in reality on the ground,” Researchers at the Center for Global Development wrote in February 2018.

In June, the Bretton Woods institution appointed Carmen Reinhart as its new chief economist. Reinhart’s two predecessors, Penelope Koujianou Goldberg and Paul Romer, resigned after less than two years on the job. Romer quit in January 2018 after igniting a controversy around Chile’s ranking in the Ease of Doing Business Report, which he suggested may have been deliberately lowered under the presidency of left-leaning Michelle Bachelet.

The World Bank is also struggling to counter the fallout from the publication of an internal paper that looks at elite capture of foreign aid. The key finding of the study is that aid handouts “coincide with significant increases in deposits held in offshore financial centres known for bank secrecy.” Pinelopi Goldberg quit in February, effective 1 March.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Ethiopia secures $3 Billion Development fund from the World Bank

December 15, 2019

The Ethiopian economy has received a huge boost courtesy of a $3 billion funding from the World Bank aimed at strengthening structural imbalances, and macroeconomic growth. It will also help the country to address some underlying factors slowing down its economic growth.

Ethiopian Prime Minister Abiy Ahmed

Ethiopia which has been one of Africa’s fastest growing economies over the last decade has witnessed huge infrastructural development impacting growth and pumping up employment, however, political instability occasioned by protests and violence has slowed down growth in some sectors.

The country’s tourism and hospitality industry which has attracted a lot of attention in recent years has been at the receiving end of the political upheavals which l led to a change of government in the last two years, as expectations have been dampened as a result of the violence.

The government however, has vowed to continue churning out positive growth numbers through structural balancing and strengthening macroeconomic growth.

Speaking on government’s efforts to see growth rebound soonest, the Ethiopian Prime Minister Abiy Ahmed said at the weekend that Ethiopia will receive $3 billion from the World Bank to help strengthen reforms in its traditionally state-controlled economy.

The announcement was made two days after the International Monetary Fund said it had reached a preliminary agreement for a three-year, $2.9 billion financing package to support Ethiopia’s economic reforms.

Abiy did not give more details on the World Bank funding. He said on his Twitter account that unnamed development partners have pledged more than $3 billion in addition to the World Bank and IMF funding.

The money will go toward macroeconomic, structural and sectoral reforms, he said.“This reaffirms both Governments’ and donors’ partnership to transition Ethiopia to a prosperous and peaceful nation,” Abiy tweeted.

The Prime Minister is hell bent on opening up the Ethiopian economy to the private sector which was the core of his promise when he came to power in 2018. Ethiopia is one of the remaining African countries with huge public sector run centrally controlled economy. Sectors like the telecomms and banking are still in government hands. It is expected that the country will open its economy to forein investors in key sectors.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

IMF/WORLD BANK CALLS FOR MORE RESOURCES TO MITIGATE CLIMATE CHANGE

October 24, 2019

THE launch of the International Platform for Sustainable Finance at the ongoing IMF/World Bank annual meetings marks the beginning of serious efforts at cooperation to pull resources together to fight climate change. Few countries have the means to finance environmentally-friendly development from their budget and therefore there is the need to raise money from the market to grow sustainably according to Valdis Dombrovskis, EU’s Vice President for Social Dialogue. Seven countries comprising Argentina, Canada, Chile, China, India, Kenya and Morocco together banded together to launch the platform.

Valdis Dombrovskis, EU’s Vice President for Social Dialogue.

For Kristalina Georgieva, IMF Managing Director, she is happy the IMF was the place chosen to launch the platform highlighting the importance of green finance in the fight against climate change and achieving the SDGs. Recalling her time at the World Bank where she was part of the team that launched the first green bond in 2008, Georgieva says it is important to develop market instruments that can shift resources to sustainable projects.

“The objective of carbon pricing and tax is to capture finance for sustainable development” she says. About $900 billion has been raised according to her but this represents just 2 percent of total credit outstanding while green bond has raised just $86 billion. Raising sustainable finance from the market, in her view, should be guided the principles of transparency, disclosure, impact and cooperation.

China despite being the workshop of the world is committed to green and sustainable development according Yi Gang, Governor of the Peoples’ Bank of China. China financial market has green instruments that is “evolving in line with the need to change lifestyle and ways of production to reduce carbon emission”.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Ghanaian Appointed Chairman of IMF/World Bank Board of Governors

October 22, 2019

It was a major breakthrough for Africa over the weekend as Ghana’s Central Bank Governor; Dr. Ernest Addison was appointed Chairman of the Board of Governors of IMF and the World Bank Group. With this appointment, Dr. Addison will chair the Board of Governors of IMF and the World Bank Group for 2020. To this end, he will preside over the 2020 plenary and other committee responsibilities.

Dr. Addison takes over from Aiyaz Sayed-Khaiyum who is the Fijian Attorney-General and the Minister for Economy, Civil Service and Communications. The Board of Governors is the highest decision-making body of the IMF consisting of one governor and one alternate governor for each member country, the governor who is mostly appointed by the member country of the Brettonwoods institution is usually the minister of finance or the head of the central bank.

While the Board of Governors has delegated most of its powers to the IMF’s Executive Board, it retains the right to approve quota increases, special drawing right (SDR) allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the Articles of Agreement and By-Laws.

The Board of Governors also elects or appoints executive directors and is the ultimate arbiter on issues related to the interpretation of the IMF’s Articles of Agreement. Voting by the Board of Governors usually takes place by mail-in ballot.

With this elevation, Dr. Addison will among other things chair other functional Committees of the two institutions. He will chair the Joint Committee on Remuneration of Executive Directors and their Alternates (JCR). His duties also include the appointment of two other Committee members (on the recommendation of the President of the Bank and the Managing Director of the Fund), reviewing briefing papers, and convening meetings of the Committee. And equally chair the Joint Procedures Committee (JPC)/MIGA Procedures Committee.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

World Bank Sets New target for cutting “Learning Poverty”

THE World Bank said at the just concluded IMF/World Bank annual meetings introduced an ambitious new Learning Target, which aims to cut by at least half the global rate of Learning Poverty by 2030. Learning Poverty is defined as the percentage of 10-year-olds who cannot read and understand a simple story.

Using a database developed jointly with the UNESCO Institute of Statistics, the Bank estimates that 53 percent of children in low- and middle-income countries cannot read and understand a simple story by the end of primary school. In poor countries, the level is as high as 80 percent. Such high levels of learning poverty are an early warning sign that all global educational goals and other related sustainable development goals are in jeopardy.

“Success in reaching this learning target is critical to our mission,” World Bank Group President David Malpass said. According to him, tackling learning poverty will require comprehensive reforms to ensure domestic resources are used effectively.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Zambia must use renewable natural resource to revive its economy – World Bank

July 23, 2019

Zambia’s path to economic recovery remains weak, reflecting both exogenous and policy uncertainties say the latest World Bank’s Economic Brief on Zambia, titled: Wealth Beyond Mining: Leveraging Renewable Natural Capital.

Despite the Zambian economy growing by 3.7 percent in 2018 from 3.5 percent in 2017, a stronger recovery was undermined by lower crop harvest and fiscal slippages that led to the accumulation of new public expenditure arrears and high government borrowing that impacted private sector activity.

Under the current policies, growth is forecast to weaken to 2.5 percent in 2019 and remain below 3 percent over the medium-term. While inflation remained within the authorities’ target range of 6-8 percent in 2018, averaging 7.5 percent for the year, pressures are now mounting, leading the central bank to tighten its monetary policy stance in May 2019 for the first time in over two years.

“Zambia needs to undertake bold fiscal and structural policy reforms to preserve macroeconomic stability, boost business and market confidence, and improve its growth prospects for 2019 and beyond in line with the Zambia Plus,” said Samson Kwalingana, World Bank Senior Economist for Zambia.

The brief suggests some policy options including (i) front-loading fiscal consolidation to return to medium risk of debt distress and create fiscal space for inclusive growth; (ii) strengthening debt management to reduce the debt service burden and minimize debt-related vulnerabilities; (iii) rebuilding foreign exchange reserves to buttress external stability, and (iv) implementing plans to improve the financial and operational sustainability of ZESCO and enhance the transparency of State-Owned Enterprises (SOEs).

The report highlights multiple opportunities that Zambia’s abundant renewable natural resources present to support sustainable economic growth. “Zambia’s economy has thus far been dominated by discoveries, expansion, and fluctuations in the minerals sector, but going forward, the country needs to harness its renewable natural resource endowment to promote sustainable growth.

While the contribution of renewable resources like agricultural land, forestry and fishing to GDP has declined in recent years, the sector’s linkages with the rest of the economy remain significant,” said Ina Ruthenberg, World Bank Country Manager for Zambia.

The Brief notes that the Bank’s recent Systematic Country Diagnostic revealed risks in the current use of Zambia’s natural resources, particularly the increased levels of deforestation from increased agriculture expansion and charcoal production.

Investments in non-timber products and tourism related to natural areas could generate high economic returns for the country without contributing to deforestation. Similarly, licensing for forestry products (i.e. timber, honey, wax, and charcoal) can contribute to higher government revenue collection, exports, and foreign exchange reserves.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

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Tunisian Startups Can Now Benefit From World Bank $75m Fund For Startups

July 13, 2019

Tunisian startups now have a huge pool of funds to tap from to support their businesses. The World Bank Group has announced a new US$75 million fund to support the Tunisian government’s “Startup Tunisia” programme.

A Look At The New Fund

The Startup Tunisia programme is led by the country’s Ministry of Communication Technologies and Digital Economy and aims to encourage the creation and growth of tech startups and digital small businesses.

The project is a seven-year Project which will provide a comprehensive package of financing, ecosystem and firm-level support, and project management and capacity building. It will run until 31 December 2026 and includes the provision of equity and quasi-equity investment in startups and small businesses.

“This project represents concrete support for a new generation of entrepreneurs in post-revolution Tunisia,” said Anouar Maarouf, Tunisia’s minister of communication technologies and digital economy. “It is a promise from the Tunisian government towards its young and innovative entrepreneurs to develop a stronger entrepreneurship ecosystem in which their ideas and businesses can thrive and grow.”

The project is led by World Bank senior financial specialist Fadwa Bennani and comprises three components, namely:

Component 1:

Equity and Quasi-Equity Financing for Innovative Startups and SMEs (US$62 million).

Under this component, the project will provide equity and quasi-equity financing through both Start-up Capital and Smart Capital. This component will finance the provision of the following equity investments:

(a) equity and quasi-equity financing through Startup Capital Fund (through “participating financial intermediaries” or PFIs, such as Tunisian banks) to eligible innovative startups; and;

(b) equity and quasi-equity financing through Smart Capital Fund to eligible innovative SMEs.

Component 2:

Ecosystem and firm-level Support for Innovative Startups and SMEs (US$8 million):

This component aims to strengthen the pipeline of innovative start-ups and SMEs, support the entrepreneurship ecosystem, as well as provide support for firm-level adoption of innovation and technology and investment readiness.

Component 3:

Project Management and Capacity Building (US$5 million):

This component will cover costs incurred by the CDC in its role as the implementing agency. Under this component, CDC will also provide needed support to Start-up Capital and Smart Capital to deliver activities under components 1 and 2 and additional outreach and capacity building activities.

Summary of Assessment of Environmental and Social Risks and Impacts

The majority of the projects are expected to be Low Risk, specifically for investments in startups and SMEs at low ticket sizes (USD200,000 — USD500,000) and/or at low tenors (1–5 years). However, maybe a small number of investments at higher ticket sizes/tenors, as well as projects which could potentially have some negative environmental and social impacts, particularly in the SMEs.

Project Beneficiaries

The final project beneficiaries will be innovative startups and SMEs.

The investment strategy and eligibility criteria, along with deal-flow activities, will ensure that funding is allocated to early-stage startups and high-growth technology-based SMEs.

In addition, particular focus will be made on increasing the participation of women-led startups and SMEs and on expanding project activities to lagging areas and the interior regions.

Intermediate beneficiaries will include actors that provide risk capital and business development support to innovative startups and SMEs. These actors will include private financial intermediaries, such as PE/VC funds; entrepreneurship ecosystem intermediaries, such as incubators, accelerators, and other Business Development Service (BDS) providers; and academic and research institutions.

In May last year, Tunisia passed a startup act which includes 20 measures that aim to encourage entrepreneurship, make it easier to start a business, as well as access funding and international markets.

The US$75 million Tunisia Innovative Startups and SMEs project aims to catalyze the creation and growth of digital, innovative startups and SMEs, and boost economic and employment opportunities for Tunisian youth.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

World Bank Approves $250 Million Loan for Kenya’s Affordable Housing Project

May 2, 2019

For building developers, housing investors, and homeless Kenyans, this may be some good news. The World Bank has approved a loan of Sh25 Billion ($250 Million) for Kenya’s Affordable Housing Project. The loan appears to be a silver lining on the horizon at last, since Kenyan investors have refused to subscribe to the idea of government’s affordable housing demand.

Key Highlights of the Loan and Its Final Destination

The whole loan funds would be deposited in the Kenyan Mortgage Refinance Corporation (KMRC), the National Treasury and the Lands ministry, which would then see that the Affordable Housing Project is implemented.
KMRC hopes to drive the funds further down the drain by extending affordable long-term funding to financial institutions, who would then lend the money to home-buyers on a long tenure basis.
In all, the project will be jointly implemented through KMRC, the National Treasury and the Lands ministry.
80 per cent ownership stakes in the KMRC goes to the private sector while the remaining 20 per cent is for Kenya’s National Treasury.

“The project will also assist the Ministry of Lands and Physical Planning to improve property registration and address structural constraints in the land management system in Kenya,” the World Bank said in a statement.

The World Bank further hinted that the Kenyan Affordable Housing Finance Project (KAHFP) will support the operation of the Kenyan Mortgage Refinance Corporation (KMRC), a largely private-sector-owned and non-deposit taking financial institution supervised by the Central Bank of Kenya (CBK).

Mr. Felipe Jaramillo, Country Director, World Bank, further said:

“We believe Kenya’s vibrant private sector offers an excellent opportunity to crowd in privately-held skills and resources towards achieving the country’s Big Four affordable housing goals and in alignment with the World Bank Group’s Maximizing Finance for Development agenda.”

The Problem of Finding An Apartment To Let In Kenya

Housing deficit in Kenya is so bad that most Kenyans can’t even afford any , if there are. Commercial banks in Kenya hold only about 26,000 mortgage loans of a value of Sh11million.

Kenyans largely access loans from saccos (cooperative societies) which provide estimated 90 per cent of Kenya’s total housing finance.

“Urban housing currently remains unaffordable for most Kenyans due to cost of financing, the short loan tenures and the high cost of properties,” Mr. Jaramillo said.

According to the World Bank, the 2016 interest rate cap in Kenya, joined with an overall Non-Performing Loan (NPL) ratio of 12 per cent, meant banks locked up their grant of credit to potential home-owners, meaning that middle to low income earners bore the most brunt.

Aside from the World Bank’s intervention, about 20 banks, savings and credit cooperative societies (saccos) have contributed towards the affordable housing project so far.

Also See: Nigerian Central Bank Plans To Sell More N109.7B Treasury Bills On Thursday

However, World Bank sees these efforts as simply not enough. According to the bank:

“While saccos’ interest rates remain low at 12 per cent, they remain highly constrained by the short-term nature of their deposit liabilities and short loan tenures of not more than five years.”

Kenya’s Affordable Housing Finance Project In A Nutshell

The KAHFP targets households classified by the government as falling within the mortgage gap and low-cost categories representing 95 per cent of the formally employed population.
KAHFP expects to do this by increasing access to finance by tripling the proportion of urban households with access
to a mortgage.
The project will promote inclusive finance by way of the KMRC serving saccos and microfinance banks which target borrowers on low and irregular incomes.
Investment in affordable housing will have a strong economic multiplier effect, given the number of linked sectors, and could support 132,000 new jobs.

“The World Bank has supported many mortgage refinance companies in emerging markets, and Kenya has the right pre-conditions for KMRC to be successful, such as supportive macroeconomic conditions, well-developed capital markets and financial institutions active in housing finance,” said Caroline Cerruti, World Bank’s Senior Finance Specialist and Task Team Leader for the Project

“Better housing conditions are also linked to improved health and education outcomes,” the World Bank statement noted.

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.