The Informal Sector and Mortgage Financing in Ghana

Abstract

The increasing cost of building materials coupled with other challenges hinder the ability and desire of people to own houses. Over the years, accessibility to mortgage financing has become more skewed towards the formal sector to the neglect of the informal sector based on perceived and real challenges with informal sector financing. These notwithstanding, the need for innovative mortgages for the informal sector cannot be  overemphasised as more than 60% of employees within that sector cannot afford to own a decent accommodation. The Case Study Approach was employed to gather data from about 30% of construction artisans in  Ashanti Region. The study revealed that 6 out of the 8 basic eligibility  criteria were exclusion factors to the informal sector. These were the proof of address, proof of employment and income, ability to service the loans, the loan duration and the deposit. The paper recommends that there should be a financing mechanism that is flexible in terms of repayment. There should also be short term repetitive loans with some increment prior to first payment completion and flexible collateral that the borrower can afford. Finally, mortgage loans can be in the form of building materials

KEYWORDS: Informal Sector, Mortgage Financing, Accessibility, and Eligibility Criteria