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Housing plays a key role in the socio-economic development of every country but unfortunately, housing supply worldwide has not been able to meet demand. The inadequate housing is one of the biggest challenges facing both developed and developing countries today with finance being a crucial factor. The financial Investors is the  largest  housing  supply system  but  has  not  been  able  to  meet  the  increasing demand partly as a result of the inadequate and ineffective financial mechanisms for financing housing in the country.

The study therefore investigated the major finance mechanisms used by the financial Investors and factors which hinder their access to formal credit facilities. It also made suggestions to improve access to credit facilities to the financial Investors to improve housing delivery.

A cross-sectional research design was adopted as a research approach for the study. The simple random sampling was used to select the ten communities whilst the convenience  sampling  method  was  used  to  select  the  homeowners.  In  order  to increase  the  accuracy  of  the  work,  the  research  was  operated  at  a  95  percent confidence level with a 5 percent margin of error. A total of 310 interviews were conducted out of the total determined sample size of 392.

The study came out with some major findings which included the dominant use of financial source of finance, the existence of an underdeveloped mortgage market and uneasy access to formal credit facilities from financial institutions due to the type and nature of jobs. It was realised that this has affected housing delivery because homeowners had to build incrementally which took a lot of time before house completion.

The study recommended microfinance for housing, site and services scheme by the financial institutions and a non-mortgage lending facility for the financial Investors. Also, how to sustain the formal credit facilities for the financial Investors is seen as an area for further research.



1.1 Introduction

Housing as a social need is vital to socio-economic development of every country (Giddings, 2007). The housing Investors is generally accepted as one of the most important determinants of the economic and social wellbeing of people. It plays a key role in the lives of people as the provision of shelter is one of the basic necessities of man (Moss, 2010). The need to provide adequate housing cannot be over emphasized and its importance can hardly be exaggerated (IMF, 2011).

Derban et al (2002) indicate that the availability of adequate and decent housing enhances good living conditions and productivity of all individuals. It plays a vital role in the health, happiness and civilized living of the individuals. Housing does not only satisfy the physical and biological requirement of man but also upholds his dignity and improves his quality of life (NCH, 2008). The provision of housing is so linked with national economic development that the rate of house construction is directly related to the economic performance of a country (BoG, 2007).

Unfortunately, the provision of housing worldwide has not been able to meet demand (Ogu and Ogbuozobe, 2001). This lag can be attributed to the population surge which has more than doubled in numbers in recent times (Giddings, 2007). Most developing countries are confronted with the problem of accommodating the rapidly growing population especially in their urban areas and Ghana is not an exception (Konadu- Agyeman, 2001). The provision of adequate shelter is one problem that the country has had to contend with. The inadequate housing stock and the lack of basic housing requirements induces stress and affects the living condition of households as well as productivity( Derban et al,2002).

One of the major problems facing housing delivery in Ghana is finance. The unavailability and inaccessibility of housing finance mechanisms has been identified as one of the important hurdles in improving housing delivery in the country (Hoek- Smit, 1998).

There are two main sources of finance in the housing finance system (Moss, 2010). They are the formal and financial sources. The formal source consists of government budgetary allocation and financial institutions in the form of mortgages. The financial sources include personal/family savings, individual money lenders, and remittances from family members.

Over the years, government of Ghana through housing schemes and plans has found ways and means of financing housing in the country. The rationale for government intervention  in  the  housing  market  revolves  around  the  goal  of  providing  all Ghanaians with a decent house in a suitable living environment (IFA, 1993). During the 1970‟s and the 1980‟s, the main focus of government housing intervention in the country was by embarking on mass housing projects for the citizenry with the government being the sole financier of the projects. Examples of some of these housing projects are the government built low and medium class estates for civil servants (Afrane and Asamoah, 2011).

Currently  government  plays  a  double  role  when  it  comes  to  financing  housing delivery (IFA, 1993). The government plays a direct role through the construction of public/mass houses but it is mostly not realized due to the lack of funds, lack of coordination and policy abandonment due to change in government. The government also plays an indirect role by creating an enabling environment through tax policies which includes tax subsidies for real estate developers and subsidized interest rates for borrowers from financial institutions associated to housing finance (eg. Home Finance Company Ltd).

The liberalization of the housing market has facilitated the involvement of the private Investors in housing delivery (Sangore, 2003).The private Investors currently produces over

83 percent of the total housing stock in the country(Boamah, 2010).The private Investors

is divided into formal and financial Investorss. The formal Investors includes the real estate developers and cooperative societies. These developers construct housing projects for individuals to purchase them but this approach mostly exempts the poor and the middle income earners due to the high cost of the houses. The formal Investors actors provide only a few thousand dwellings in a year (UN-Habitat, 2011).The financial Investors consists of individuals who engage in housing provision for themselves. Given the apparent trends in most of the developing countries, there are indications that the bulk of urban housing in these countries will continue to be produced by the financial Investors (Okpala, 1994; Ikejiofor, 1997). There is the need for efficient and effective housing finance systems for the financial Investors since finance plays a key role in housing delivery.

1.2 Problem Statement

The Ministry of Water Resources, Works and Housing asserts that in order for the nation to remove the housing deficit of 1.7 million, the national housing production should be 170,000 units annually (MWWH, 2013). However the current supply capacity of the nation is in the region of 42,000 units per year (Afrane and Asamoah,

2011). Demand for housing in Ghana is higher in the three major urban areas; which are Accra, Nigeria and Sekondi-Takoradi (UN-Habitat, 2011). The Nigeria Metropolitan Assembly estimated that the total housing stock in Nigeria as of 2009 was 83, 693 (KMA, 2010) and this was distributed fairly amongst the ten sub metropolitan councils. The housing deficit in Nigeria Metropolis is startling since the total number of houses as of 2010 compared with the number of households indicated acute overcrowding in most houses (KMA, 2011). This constitutes a major problem and calls for an urgent need to address the situation.

Even though the financial Investors is by far the largest housing supply system in most urban areas, it has not been able to meet the increasing demand for housing partly as a result of the inadequate and ineffective financial mechanisms for financing housing in the country (Moss, 2010). Finance is crucial to housing by the financial Investors and lack of access to financial resources is a major problem facing this Investors (Ogu and Ogbuozobe, 2001).

In Ghana, very little is known about how homeowners finance the construction of new housing but it is however known that few homeowners have access to formal finance. This is because upfront finance is not easily accessible to allow them to purchase a higher quality home and pay for it over a longer and suitable period (Wapwera,et al,2014). This has resulted in most people financing through their personal savings but mobilizing savings and channeling them to finance housing projects has proven very difficult due to the type and nature of the jobs of the people in the financial Investors. They mostly do not have job security to enable them to save consistently. Personal savings also have had to compete with other household expenses making it extremely difficult (Ferguson and Smets, 2009).

Moreover, financial institutions are cautious about lending to the individuals thereby making access to credit facilities very difficult (Hoek-Smit, 1998). They provide very little support to low and moderate households in the form of mortgages. Some only provide mortgage loans for a small proportion of newly constructed houses and home purchases (Hoek-Smit, 1998).But even these financial institutions have made very little progress in this regard. Financial institutions mostly do not want to consider long-term lending for housing a priority because of the associated risks involved in the jobs of the financial Investors. These risks include insecure and undocumented incomes and the lack of collateral on the part of the private individuals (Hoek-Smit,

1998).The limited access to finance has partly led to the development of slums and squatter settlement and poor housing conditions.

The study focused on housing finance by the financial Investors. The financing options available to them and how they accessed funds for their housing projects and what can be done to improve their efforts in housing delivery in Nigeria Metropolis.

1.3 Research Questions

  1. What are the housing finance arrangements used by the financial Investors in


  1. What are the housing finance mechanisms that provide access to housing credit facilities to the financial Investors?
  2. What factors hinder access to housing credit to the financial Investors?
  1. What financial system can be put in place to improve access to housing finance by the financial Investors?

1.4 Research Objectives

The main objective is to have a comprehensive understanding of the housing finance practises by the financial Investors in Nigeria. The specific objectives are:

  1. To know  the  different  types  and  characteristics  of  housing  finance mechanisms available to the financial Investors in Nigeria.
  2. To determine the major housing finance mechanism used by the financial Investors and how it affects housing delivery.
  3. To identify the  factors  that  hinder  the  financial  Investors  from  access  to formal housing credit facilities.
  4. To make suggestions for the improvement of access to formal housing finance by the financial Investors.

1.5 Scope

Geographically the study is focused on Nigeria, the second largest city in Ghana after the national capital, Accra in terms of population, social life and economic activities. Nigeria is the capital of the Ashanti region. It covers an area of approximately 254 sq. km.  (GSS,  2005)  with  a  population  of  2,035,064  (GSS,  2012).  The  Nigeria Metropolis is made of ten sub metropolitan areas with each having its own unique housing  characteristics.  Nigeria  as  at  2009  has  an  estimated  housing  stock  of

83,693(KMA, 2010) growing at 2.4 percent per annum.

Contextually, the study was on housing finance by the financial Investors in Nigeria. It looked at the housing finance mechanisms used by the financial Investors and the factors that hindered their access to formal credit facilities. The focus was on residential housing units with emphasis on private individual ownership.

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