Levine (2004) examine a broad cross-country sample of 58 developing countries and find that financial development (as measured by the ratio of private sector financial intermediation to GDP) reduces income inequality by disproportionately raising the incomes of the poor. Moreover, Singh and Huang (2011) find that poverty is inversely related to financial deepening. In addition, financial deepening reduces absolute levels of poverty, but does not affect income inequality to a significant degree in African countries.

# **3. Stylized Facts on Housing Finance in SSA**

## **3.1. Data**

To develop our stylized facts and econometric analysis, we examined a sample of 54 African countries with data from African Development Indicators (ADI), the Financial Development and Structure Database (FDSD), and the Housing Finance Databases of the World Bank. The database summary and description is presented in the appendix. The analysis is limited to 2000-2012 to ensure more up-to-date results. Housing market and finance policy data are drawn from the newest housing finance databases of the World Bank.

## **3.2. Benchmarking the SSA housing market and finance policy: Typology and characteristics**

Benchmarking the SSA housing market and finance policy along with a comparative approach is essential to have a clear picture of what has been done to date and what remains to be done. The following subsection presents a general perspective applicable to all SSA countries and is followed by a presentation of countryspecific views, which vary based on fundamental characteristics such as wealth, legal origins, political stability, regional context, and oil resources.

## **_SSA housing market and finance policy: A general point of view_**

Overall, the banking sector in Africa has been growing since liberalization two decades ago when African governments adopted new legislation for financial institutions and institutionalised private banking systems, in some cases ending state monopolies in this sector. SSA countries’ financial systems are growing rapidly and becoming increasingly integrated into the global financial system. At the core of the systems are banks, followed by pension funds. The regular Financial Sector Assessment Program (FSAP) implemented in those countries has generally confirmed that the banking system is well capitalized, liquid, and profitable.

However, few commercial banks clearly offer their customers housing loans in the form of mortgages. The majority of banks in Africa finance housing acquisitions, not via housing loans specifically, but as private investments or standard consumer loans. These latter products generally have high interest rates with short repayment periods.

Some African countries have opted to establish specialized single-purpose nonbank mortgage lenders, or “monoline” lenders. Most notable is Kenya, which has housing finance companies. Nigeria also has primary mortgage institutions, and South Africa has financial service providers specializing in mortgage lending. Typically, these institutions have a narrow banking license limiting their activities and, in particular, restricting deposit collection. This means that they are usually reliant on wholesale funding on the liability side of their balance sheets. These institutions are particularly vulnerable during crisis periods because their funding costs rise to a much greater extent than those of lenders with a deposit base.

The banking and the financial system in most SSA countries remains underdeveloped compared to other developing regions. The ratio of private sector credit to GDP is less than 20 percent for some countries and financial access is lower (there is only one branch per 100,000 adults in some countries). The small size of 6