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KAMPALA, Jan 6 2010 (IPS) - Few Ugandans are able to find a bank willing to loan them money to buy a house; in a culture where every man is expected to own his house, moves by Stanbic Bank to provide financing for home and auto purchases are welcome.
A story making the rounds in Kampala begins with a man proposing marriage to his sweetheart.
“Do you have a house?” she responds. When he responds no, she says, “Try me again when you have grown up.”
Robert Okumu, a property consultant in Kampala, says jokes not withstanding, the property market is in distress.
“The fact is that everybody – be it a woman or man – would wish to have a house but very few can afford it,” says Okumu, who runs Ideal Home Property Consultants.
In the past every man was able to own his home – albeit a hut with a thatched roof – but today’s homes, brick and mortar and indoor plumbing at least for the upwardly-mobile middle class, are prohibitively expensive.
Almost half of urban residents stay in rented accommodation; the global economic downturn has rendered many people homeless because they cannot afford the rent.
Even for people with stable, well-paid jobs, few Ugandans are able to take out a mortgage in order to buy a house. A fall in the country’s levels of savings has led to a lack of liquidity for most banks, who consequently do not offer long-term financing. Of the few banks that do offer home loans, many have drastically reduced the lending amount.
The experience of Kampala resident Moses Mukasa is typical.
“I was told by my banker to get a letter of undertaking from my employer on top of letters from my local councilor, which I did. But still I could not get the mortgage.”
Mukasa says that his bank, Barclays Bank of Uganda, later told him that the facility of home loans was being stopped save for the staff at the bank.
While access to home mortgages remains difficult government is concerned that a housing crisis looms.
Ugandan Minister for Housing, Michael Werikhe, says there could be 2.5 million homeless people in urban centres by 2020; one million could be without shelter in Kampala alone. Werikhe is convinced that the country can only avert a crisis if drastic measures are taken to accelerate the pace of growth in the housing development sector.
The recent issuance of a long-term bond by Stanbic Bank, part of South Africa’s Standard Bank, could be the beginnings of change in the financial sector.
The bond – for about 15 million dollars – is to be used for long-term liquidity and capital management purposes. It means the bank will have money at its disposal for more Ugandans to access credit; buy homes and cars; and to start businesses and other ventures.
The Stanbic Bank bond is the first long-term bond on the Uganda Securities Exchange (USE). It could mean that more people would be able to gain access to home loans.
Stanbic Bank intends to move into the home, asset and vehicle financing areas, which most financial institutions have abandoned.
Anne Aliker, head of Stanbic’s Investment Banking division in East Africa, says once the bank raises the money they should be in a position to lend to people seeking long-term loans for housing as well as short-term loans.
Financial analyst Frank Katusiime says this is one of the largest corporate debt issues in the country and will spur the nascent bond market on the USE which has seen no activity for a long time, as the share price for listed companies continue to fall.
Simon Rutega, executive director of the USE, says that by Stanbic coming on board means they have confidence in the exchange and the public. This, he says, is good for the country’s economic growth.
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