The Tanzania Mortgage Refinance Company (TMRC) and Habitat for Humanity International (HFHI) recently released the 2023 Housing Microfinance in Tanzania report.
HFHI and TMRC collaborated with Altair Consultancy and Advisory Services Ltd (Altair) to conduct specialized market research involving consumers and key stakeholders in Tanzania’s housing microfinance (HMF) sector.
The research aimed to evaluate the current status of the HMF market, investigate the demand for new HMF products, and provide HFHI and TMRC with insights into how local financial institutions (FIs) can both create and participate in Tanzania’s emerging HMF market.
The study operated on the premise that the optimal target audience for HMF products in Tanzania comprises low- and middle-income households with monthly earnings ranging from 80,000 TZS ($34) to 1,500,000 TZS ($630).
The research employed a combination of desktop review of existing secondary data and primary research methods, which included interviews with stakeholders, focus group discussions with potential users, and a quantitative household survey.
Low- and middle-income Tanzanian households face a number of housing challenges, including insufficient housing supply, overreliance on insecure, inadequate self-build informal housing, rising building materials costs, irregular income making it harder to plan for housing-related spending and/or access housing finance, and difficulties servicing outstanding loans.
Generally, financial institutions in Tanzania lacked prior awareness of HMF. However, two had past experience in providing an HMF product, both of which could be used for the purposes of incremental housing construction, and were capped at 10,000,000 TZS ($4,267).
One of the products could also be used for renovation of improvement of an existing home. The loans differed in their duration, interest rate, application fees (or lack thereof) and some other characteristics. Overall, both institutions were satisfied with the performance of the loans, but were unable to meet demand due to lack of long-term affordable funding.
Respondents highlighted a number of risks and challenges involved in developing the HMF market. Lack of financing was the most mentioned, but others included: difficulties in accessing credit risk, the possibility of title fraud or loan diversion, and lack of delivery capacity.
Despite these, most respondents were enthusiastic about the future potential of HMF in the Tanzanian market, noting the high demand for housing solutions and the compatibility of HMF with the prevailing culture of incremental self-build
The Tanzanian housing demand is estimated at 200,000 houses annually and a total housing shortage of 3 million houses.
The Tanzanian housing sector’s fast-growing demand is mainly driven by strong and sustained economic growth with GDP growth averaging 6-7% over the past decade, the fast-growing Tanzanian population, which is estimated to more than double by 2050, and efforts by the Government in partnership with global non-profit institutions and foreign Governments to meet the growing demand of affordable housing.