The role of microfinance as an innovative strategy for low-income housing delivery in developing countries
Bondinuba, Francis Kwesi
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One of the greatest challenges faced by post-independence Developing Countries (DCs) is an immerse backlog, shortages and unsatisfactory conditions of housing for the poverty-stricken and lowest socioeconomic groups of their population. Governments and their development partners have previously embarked on many ambitious housing programmes by engaging in mass delivery of urban housing in fulfilment of the vision of adequate housing for all as reflected in many international housing policy frameworks. However, over a million of the lowest socioeconomic groups in DCs are still living in housing poverty. This is as a result of rapid urbanisation outpacing the effectiveness of most housing policies. Moreover, rapid urbanisation has led to lack of employment and lack of access to low-income housing finance among low-income groups to meet their housing needs. To address such challenges requires alternatives and innovative financial mechanisms such as Housing microfinance (HMF). Moreover, despite many microfinance institutions (MFIs) operating worldwide, there are only a few that operate within the low-income housing market. There is also little evidence in the literature about the role and motivations of such institution's involvement in the provision of HMF to low-income groups, particularly in Ghana. This study investigated the role of microfinance as an innovative strategy and modelled the motivations behind MFIs intention to enter the low-income housing market. The primary aim of the study was to explore the role of microfinance as an innovative strategy and the motivation behind MFIs’ and individuals in low-income group’s’ intentions to supply or demand HMF in Ghana. The study adopts a mixed method research approach involving in-depth interviews with three Housing Microfinance Institutions and focus group discussions with 36 low-income groups in the Greater Accra and Ashanti regions in Ghana. A total of 200 survey questionnaires were also distributed to MFIs of which 135 questionnaires were returned, and 125 were usable. The qualitative data was analysed using Nvivo Version 10. The Statistical Package for Social Sciences (SPSS) Version 22 and Partial Least Square Structural Equation Modelling (PLS-SEM) Version 3.0 Software were also used to analyse the quantitative data. A model of MFIs’ intention to enter the low-income housing market was subsequently developed and analysed. The results show that existing Housing Microfinance Institutions motivations are the social, economic and sustainability incentives for being in the low-income housing market. It further emerged that risks and appetite for profit are the strongest demotivating and motivating factors that can deter or attract new MFIs into the low-income housing market. The provision of construction and technical assistance as part of HMF packages will serve as a moderating factor between both demotivating and motivating factors. The barriers and constraints in the supply and demand for HMF include indigenous, industry capacity, credit and managerial, economic and finance issues, low-income and stringent HMF eligibility requirements. On the other hand, the risk factors identified were behavioural and relationship, economic and financial issues. Others are lack of institutional and regulatory framework, collateral and security issues, socio-cultural and construction risks. Furthermore, low-income groups are motivated to use HMF for new construction and land acquisition due to their desire for individual home ownership rather than renting. The model of intention shows that the motivating factors were more significant in predicting intention than the demotivating and moderating factors. However, together with their latent variables and factors, they explained 45% of MFIs intention to enter the low-income housing market in Ghana. The study, therefore, recommends the establishment of a national housing authority and a separate supportive and financially inclusive regulatory environment for HMF delivery. The development of any HMF programmes by the government, donor partners and MFIs should take into account the motivations behind the decisions of those in low-income groups to use HMF, rather than their effective demand for housing. Housing Microfinance Institutions should be more efficient, innovative, sustainable and viable by making their products simple, accessible and transparent. Furthermore, the future of the low-income housing market in DCs should be responsive to the 12-factor model of intention, and especially the demotivating factors vis-a-vis those from the low-income groups’ perspectives. The study provides stakeholders in the two sectors with a set of prioritised factors for making rational decisions concerning the supply and demand for HMF to low-income groups to meet their housing needs. The study demonstrates the role and usefulness of HMF and the motivations behind MFIs’ and low-income groups’ intentions to supply or demand HMF in Ghana. It has uncovered the barriers and risks associated with the provision or demand of HMF in a developing country context. Moreover, it has also re-contextualised the Push-Pull-Mooring model of human migration in a new context of demotivating-motivating-moderating factors. Hence, the study offers a foundation for other researchers to use as a follow-up for future research. Notwithstanding, further studies are required to investigate and establish the varying levels and segmentation needs of both markets.