The project's development objective is to develop the housing mortgage finance market through the provision of medium and long-term liquidity to mortgage lenders. The objective will be achieved through the creation of a mortgage liquidity facility, a possible housing microfinance fund and a program of technical assistance and capacity building.

Tanzania, as many other African countries, suffers from a severe shortage of good quality housing. The shortage is growing every year, compounded by lack of long-term housing finance, lack of a formal residential housing construction sector, difficulties with land rights and rapid population growth and urbanization.

'By strengthening access to housing finance, this loan will promote equitable economic growth, which in turn creates jobs and reduces poverty,' said John Murray McIntire, World Bank Country Director for Tanzania, Uganda, and Burundi. 'Housing has historically been a powerful force for poverty reduction by raising living standards, creating jobs and increasing the public resources available for social spending.'

Long-term financing for housing is scarce at present, in part because lenders do not have reliable access to sources of term finance on terms that could help them to mitigate the associated business and lending risks. Developing access to housing finance will therefore help improve affordability and construction standards, and encourage the private sector to take a greater role in the provision of housing.



The timing of the project is supported by recent significant improvements in the environment of lending for housing. The passing of the Mortgage Finance (Special Provisions) Act No. 17 of 2008 has created a strong momentum in Government for the development of housing finance and has also generated a high level of expectations.

Other legal changes, such as the passing of the Unit Titles Act No. 16 of 2008, as well as reforms to the titling process, have significantly improved prospects for mortgages. The Bank of Tanzania (BOT) prudential framework for microfinance institutions gives these institutions a solid base for becoming more active in the financial sector, benefiting the population at the lower end of the income distribution. Moreover, there is a keen interest of commercial banks and regulatory authorities in developing a mortgage market. Many of the banks in Tanzania are in the process of developing a strategy for mortgage lending.



“The mortgage market in Tanzania excludes the vast majority of the country's population from accessing housing finance to improve their housing opportunities. This highlights the need for appropriate housing finance products that meet the needs of those who cannot afford mortgage finance for complete houses,” stated Michel Noel, the World Bank Task Team Leader for the project. “By improving access to longer-term housing finance and improving the affordability of housing, the project will also contribute to social equity,” he added.

The Housing Finance Project cuts across the urban and financial sectors with benefits for the development of the financial system and in the housing sector. Specifically, this project addresses the area of deepening reforms in the financial sector and enabling environment for private sector activities under Cluster I of MKUKUTA, Tanzania's poverty reduction strategy.

The project has drawn lessons from the implementation of similar projects the Bank supported in other countries such as Egypt and Jordan. Specifically, the project recognizes the need to not only address the long term funding issue, but also to improve the wider environment for mortgage lending. A substantial amount of training and capacity building is included in the project to help build up the skills necessary in the banking sector.

This is the third operation to be approved by IDA for Tanzania during fiscal year 2009/2010, bringing total IDA approvals this fiscal year to US$ 250 million. In total, the World Bank's currently active country portfolio includes 24 operations with a net commitment of US$ 2,512.38 million. The largest share of resources is allocated to infrastructure (US$ 634.5 million), followed by human development, including health, education and social protection (US$ 557 million).