The ability to acquire mortgage loans for the construction or purchase of houses is an essential element of a well-functioning housing market. Whereas the pursuit of an increased access to mortgage finance by most advanced countries was one of the triggers for the global financial crisis, it is equally an important element in solving the housing deficit situation in many countries.
The importance of stable and regular income streams in mortgage financing cannot be overemphasized. Sadly, 8 out of 10 Ghanaians work in the informal sector with irregular and unstable streams of income. This implies that majority of Ghanaians cannot easily access loans for the purchase and construction of homes in Ghana as most banks and financial institutions require some assurance from borrowers in terms of their ability to pay back loans acquired from them. Due to this, banks and financial institutions tend to require huge down payments and interest from borrowers. This has made mortgages highly inaccessible to low-income earners and some middleincome earners in Ghana.
The situation necessitates the development of an alternative arrangement to promote an increased access to housing finance in Ghana. Collective housing groups or housing cooperatives could potentially augment financial institutions in increasing access to housing finance. This article briefly touches on the collective housing groups and how they work
What are housing cooperatives?
Housing cooperatives are collective groups that adapt self-help and financially inclusive approaches towards the achievement of housing objectives. The housing objectives could be working collectively towards the construction of houses for members or the acquisition of finance for the purchase or construction of a house. The focus of this article is on collective groups that are geared towards increasing access to housing finance.
How do Housing Cooperatives Operate?
While there exist several variations of housing cooperative arrangements in various parts of the world? The very common ones in African societies take the form of credit unions, community groups and staff organisations. These groups which are usually affiliated to governmental organisations, NGOs and international bodies increase their credibility to acquire loans from financial institutions through the formation of good partnerships and the involvement of the right expertise. Members of these cooperatives make regular contributions to the cooperatives towards the purchase of a home. Collectively, these self-help groups are able to acquire housing finance easily with their regular contributions and the help of partners.
With the right management in place, housing cooperatives represent a viable alternative for increasing access to housing finance in Ghana. This is a workable arrangement for African societies as such arrangements are not new to the African society.