By Anthony Kivumbi-Business Development Manager- Strategic Partnerships at HFB
Drive out of Kampala on any road you like. Take the one to Naggalama, where I went to school. Somewhere past the last trading centre you will pass a plot with a ring beam and no roof. The blocks are good blocks. The windows are bricked up against thieves. Grass is growing where the sitting room will be.
We look at that plot and we call it a stalled project. I have come to see it differently. That house is not stalled. It is on a payment plan — one the owner designed himself, and one no bank in this country wrote for him.
He bought the plot with three years of savings and a sale of a piece of family land. He did the foundation the year his kikuubo business was good. He walled it the year after. The roof is waiting for a school-fees term to pass. Ask him when he will finish and he will tell you, without embarrassment, “we are still building.” He will be building for eight years. At the end of it he will own a house outright, with no mortgage, no default, and no bank in the story at all.
This is how the great majority of Ugandan houses are actually built. Not by developers. Not by mortgages. By households, in stages, over years, out of income that arrives when it arrives.
We built a system for a market that barely exists
Uganda’s housing deficit is put at about 2.4 million units. We produce roughly 60,000 units a year against demand of about 200,000. Those numbers get quoted at every conference, usually just before someone announces a new estate of two-bedroom units at $60,000 a piece.
Now look at the finance side. Mortgage lending in Uganda has hovered under one percent of GDP for years. Rates sit in the high teens. A mortgage requires a registered title, and around 80 percent of our land is held under customary tenure. It requires a payslip, in a country where most working people do not have one. It requires a fifteen-year commitment from a borrower whose income horizon is closer to fifteen weeks.
So the formal housing finance system serves the sliver of the population that has a title, a payslip and a long horizon. Everyone else is served by the hardware dealer in Nateete who lets them take twenty bags of cement now and pay at month-end. That dealer is Uganda’s largest housing financier and he has no banking licence.
For a long stretch of my career I sat on the bank’s side of that desk and said no to people whose only fault was that their money arrived in the wrong shape.
What changes when you finance the stage instead of the house
Over the last few years I have worked on lines of credit dedicated to what the sector calls incremental housing: small loans, mostly unsecured or lightly secured, of a size a household can retire in twelve to twenty-four months, tied to one construction stage. The roof. The plaster and floor. The two-room extension that turns a home into a rental. The water tank. The connection to the grid.
One such facility was implemented by Housing Finance Bank, utilizing both our own branches and the Microfinance Department for deployment. It reached over 8,400 households. The average tenor was about eighteen months. Roughly a quarter of the borrowers were women. Some of it was placed through a boda-boda association, whose members are exactly the customers bank credit policies were designed to keep out.
Two things about that portfolio changed how I think.
The first is repayment. People pay back money that is sitting over their heads as a roof. The delinquency on this kind of lending has been consistently, sometimes embarrassingly, better than on the more “bankable” parts of the book. Risk we assumed was there was largely an artefact of how we were measuring it.
The second is speed. A shilling lent on eighteen months comes back and goes out again. The same money housed several families in the time a single mortgage would still have been in its early amortisation. If the objective is households sheltered per shilling deployed, incremental lending is not the poor cousin of the mortgage. It is the more efficient instrument.
Three things we should stop arguing about
Underwrite the cash flow, not the payslip. A boda rider’s earnings are more visible today than a civil servant’s were twenty years ago — mobile money records, fleet platform data, sacco statements, supplier ledgers. We have the data. What we lack is the willingness to accept it as evidence of income. Every bank in Uganda says it wants to serve the informal sector. Very few have changed a single line in the credit policy that excludes it.
Let the collateral match the loan. A four-million-shilling roof loan should not need a land title and a valuation report that costs a tenth of the loan. Regulation, credit committees and provisioning rules still push us toward secured, long-dated, large-ticket lending. Until the treatment of small unsecured housing credit reflects its actual performance, the pricing and the appetite will stay wrong.
Stop selling houses and start selling stages. Developers and materials manufacturers keep waiting for a mass market that can buy a finished unit. It is not coming at the scale we need. The market that exists wants a roof this year and a floor next year. Whoever builds a proper stage-by-stage product — materials, delivery, technical supervision and credit bundled together — will find demand already waiting.
The unglamorous truth
We will not close a 2.4-million-unit deficit with ribbon-cuttings in Kira. We will close a good part of it by getting behind the millions of quiet construction projects already underway across this country and finishing them faster.
That means our banks, our regulator, our development partners and our housing policy all making peace with an unglamorous fact: in Uganda, a house is not a purchase. It is a process. Our job is not to replace that process with a foreign one. It is to shorten it.
The man on the Naggalama road does not need us to build him a house. He is already doing that. He needs six million shillings for eighteen months, so that the rain that comes in October falls on iron sheets instead of on his ring beam.
