Cameroon’s Housing Sector
Excerpt from Africa Housing Finance Yearbook 2014
Cameroon is a low to middle income Sub-Saharan African country with a population of 23 million and an annual population growth rate of 2.64 percent. Cameroon is a fairly stable country with a multiparty democracy, and two official languages (English and French). It is at the junction between West and Central Africa, and the gateway into Central Africa and the Gulf of Guinea. It shares borders with six countries – Nigeria, Chad, Gabon, Equatorial Guinea, Congo Republic and Central African Republic. Cameroon is the most important market in the Economic and Monetary Community of Central Africa (Communauté Économique et Monétaire de l’Afrique Centrale, or CEMAC), accounting for half of its population, about half of its financial assets and 30 percent of the regional GDP.
Cameroon has a stable macroeconomic environment. The country achieved a ranking of 168th in the World Bank’s 2014 Doing Business Report for ease of doing business. Growth recorded in 2012 was consolidated in 2013, with an annual 2013 real GDP growth rate of 4.7 percent, the same for 2012, up from four percent in 2011 which was a further recovery from a low of three percent in 2010. This was lower than the projected five percent for 2013, which was based mainly on the strength of internal demand, notably domestic consumption. Economic growth and a growing population, 62.5 percent of which is made up of young people below 25 years, have created a growing middle class with a strong demand for products and services, including housing.
Cameroon’s primary sector accounts for 21 percent of GDP. Because of its rich mineral resources and favourable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in Sub-Saharan Africa. The country has natural resources such as petrol, gas, diamonds, aluminium, uranium, bauxite, timber, hydropower and iron ore. It produces agricultural products including rubber, cotton, banana, cocoa, pineapple, coffee and palm oil. Over the last five years, growth in the economy has been driven strongly by the oil and agriculture sectors, which account for 50 percent and 25 percent of exports respectively. The mining industry is experiencing a boom with the discovery of new mineral deposits. New exploration and mining licences have been issued, with new opportunities for construction and the provision of subsidised, affordable housing.
The secondary sector accounts for 33 percent of GDP, and has contracted in recent years, amongst other reasons, due to the saturation of electric energy supply capacity, the depletion of the main oil wells and the low competitiveness of agro-industries. An increase in the value add of this sector will require huge investments in building infrastructure and in enhancing the business environment. This is being addressed by the government with ongoing projects to increase electricity supply through the construction of new hydroelectricity power plants and the incentives offered by the government to encourage private sector investment in specific manufacturing sectors.
The tertiary sector accounted for 49 percent of GDP in 2013, up from 46.4 percent in 2011 and 43.2 percent in 2010. It is the most dynamic sector of the Cameroon economy, and has grown at six percent on average since 2007. The growth is due to good performance in business and mobile telecommunications, but also the recovery of the construction and transport sectors, as well as retail trading, hotel and catering industries.
Access to finance
Though Cameroon’s financial system is the largest in the CEMAC region, it is still in its infancy. There are 14 commercial banks, 11 non‐banking financial establishments, 652 microfinance institutions, an increasing number of foreign exchange bureaus and the Douala Stock Exchange, which was established in 2002 but only began trading in 2009. Government accounts for only 10 percent of the social capital of banks, while the private sector accounts for the other 90 percent. The banking sector is highly concentrated and dominated by foreign commercial banks; six out of the 11 largest commercial banks are foreign owned. The five largest banks now hold about 50 percent of the total assets in the financial system.
Access to financial services is limited. Only five percent of Cameroonians have access to a bank account. According to the IMF’s Financial Access Survey, there were only two bank branches for every 100 000 adults in 2012, up from 1.66 in 2011. This means the degree of bank penetration is extremely weak. According to the World Bank’s 2014 Doing Business Report, Cameroon ranked 109th in terms of ease of getting credit, down from 104th in 2013, which is partly due to a private bureau and public registry coverage of adults of zero percent and 8.9 percent respectively. Mobile banking has been identified as one way of increasing financial accessibility – up to 75 percent of the population has access to a mobile phone – and the government is being encouraged to invest in it, following its success in countries like Kenya.
The Bank of Central African States (Banque des Etats d’Afrique Centrale, or BEAC) regulates the banking and MFI sectors through the Central African Banking Commission (COBAC), with authority to take disciplinary action. Both COBAC and the Cameroon Ministry of Finance and Budget must licence banks, and there are special regulations for small‐scale credit co-operatives. The system is bank-centred, and the commercial banks in the country mainly fulfil traditional banking functions, with a tendency to prefer dealing with large, established companies and medium to high net worth individuals. With a focus on short-term lending, the long-term credit market remains underdeveloped. The distribution of banks is heavily skewed towards the main urban centres. Some 80 percent of all bank branches are in the main cities of Douala and Yaounde, with a significant part of the country denied access to any formal banking facilities.
Access to housing finance is extremely low and available mainly to government employees through the government agency Crédit Foncier du Cameroun. Only about two percent of Cameroonians have access to mortgage finance from the formal banking system. The government is trying to inject more funds into Crédit Foncier and to institute other reforms to make it easier for middle income Cameroonians to access housing finance. There are a number of property developers and other private equity funds with money that are looking for local partnerships to provide end-user financing for housing. This will help make it easier for people to acquire bonds. Title deeds are attached to only a very small percentage of land in the country. This is because implementing the legal provisions of the 2005 institutional framework on land ownership has been impeded by jurisdictional disputes. In Yaounde, for example, title deeds are attached to less than 10 percent of the land. People who have title deeds to their land could use them as collateral to access finance. In 2012, the country made amendments to the Organisation for the Harmonisation of Business Law in Africa (OHADA) Uniform Act on Secured Transactions that broadened the range of assets that can be used as collateral. This will make it easier for people to access finance.
Despite excess liquidity in the banking system, the granting of credit by banks is far below the level required to satisfy the financial requirements of individuals and the private sector. The limited availability of credit to individuals and the private sector stems from the narrowness of the market, the high proportion of bad debts, the difficulties banks have experienced in realising guarantees and enforcing court decisions in litigation cases, non-existent private bureau coverage and very low public service registry. Foreign banks have good solvency ratios. Domestic banks, however, are in a weaker position, with a capitalisation below the average of banks in the CEMAC region and profits of about two percent compared to 20 percent for foreign banks. This is partly explained by high levels of non-performing loans, which reached 12 percent in 2007 and 10 percent in 2010. As a result, banks hold large amounts of excess reserves as a percentage of deposits with large unutilised liquidity. The World Bank’s 2014 Doing Business Report shows some improvement on the legal rights of borrowers/lenders, and in accessing credit.
Microfinance in Cameroon is mainly managed by associations, or savings and credit co-operatives (80 percent). According to the National Institute of Statistics, the microfinance sector has 438 establishments that are recognised by the Ministry of Finance, with a portfolio of about 1.5 million Cameroonians, total savings of US$800 million, and over 1 000 branches spread across the country. Of these, 187 are independent, while 178 belong to the largest network of MFIs, the Cameroon Cooperative Credit Union League (CAMCCUL). It has 55 962 active borrowers and a gross loan portfolio of US$156.9 million. CAMCCUL split in May 2013, however, and a new network of MFIs called Renaissance Cooperative Credit Unions (RECCU-CAM Ltd) was registered in the same month. Like commercial banks, most MFIs are concentrated in Douala, Yaounde, Bamenda and the western region. In 2000, MFIs granted only 4.3 percent of the total loans made by financial institutions. This figure has increased considerably by now, though accurate statistics are not available.
The microfinance sector has become increasingly important, but its development has been hampered by a loose regulatory and supervisory framework for MFIs. Recently the sector has seen some financial scandals relating to poor corporate governance in some major institutions in Douala, Yaounde and Bamenda, as well as incidences of corruption and embezzlement, lack of resources and administrative incivility, all of which threaten the viability of the sector. In 2013, some 34 microfinance institutions (MFIs) were suspended by the Minister of Finance for operating without valid licences.
Liquidity is a problem for the microlending sector, and many MFIs are only able to satisfy up to five percent of their customers at any time. To address this, the government is planning to establish a wholesale fund, financed by the African Development Bank (AfDB). The fund is worth CFA Francs 21 billion (US$40 million) and will go a long way to help usher financial reforms into the sector. To make this sector more viable and increase the financial inclusion of poor people, a national strategy was adopted in May 2013 with the support of the UNDP, the International Fund for Agricultural Development (IFAD) and the United Nations Capital Development Fund (UNCDF). The strategy has identified three main areas of intervention – improving the regulatory framework, improving professionalism and client protection.
The conditions to carry out microfinance activities are defined at the sub-regional level by CEMAC. There are three categories of MFIs: those that deal only with their members (associations and co-operatives), those that offer financial services to third parties (they must be a public limited company) and those that offer only credit. The most popular kind of credit institution in Cameroon is what is called njangi by the English speaking population, and tontines by the French speaking population. This type of rotating savings model has been in existence since the colonial period and is usually made up of people of the same social class, same community or same cultural affiliation who have almost the same income or who are engaged in similar activities. Two types are commonly used for housing purposes, rotating funds, and savings and loans funds.
Rotating funds involve groups of individuals who come together on a regular basis (weekly, bi-weekly or monthly) with agreed fixed sums of money. At each meeting, the money is given to one of the group members in a lump sum. The member who receives the money is agreed in advance by consensus among the group, and the number of members determine the loan period. The money received is interest free. A slightly different rotating savings model, made up of individuals with different income brackets, is more flexible. The money collected is auctioned and those who have not yet received a loan may bid for it. The person with the highest bid gets the loan.
Savings and loans funds allow members to contribute more than the agreed regular sum of money into a savings fund that is then loaned to other members who are in need. Interest of 10 to 15 percent is charged on this loan. The saver may withdraw the money but only after sufficient notification has been given to the association. This money often earns interest for the saver.
According to the Cameroon Household Survey (Enquête Camerounaise auprès des Ménages, or ECAM), poverty affected 39 percent of the population in 2007, having dropped by almost 13 percent between 1996 and 2001, from 53 percent to 40 percent. The official unemployment rate is 30 percent, with 39.9 percent of the population below the national poverty line according to the 2014 Human Development Report. The national Gini-index for Cameroon stood at 0.38 in 2010, down from 0.390 in 2007, 0.416 in 1996 and 0.404 in 2001, suggesting relatively high, though improving levels of inequality. The GDP per capita in 2012 was US$2 400, and remained the same in 2013. Most people are employed in the informal sector. Only a small percentage of urban adults are employed by the state and the formal private sector. Some 70 percent of the labour force is involved in mostly subsistence agriculture and some form of small to medium scale trading.
Building costs in Cameroon are fairly high. In this low middle income country with a conservative banking system and slow government reforms, it has been difficult to build houses at a cost accessible to most of the population. This has resulted in a discrepancy between production costs and purchasing power of the potential buyers. Very few banks provide end-user housing finance which is affordable to the middle and lower income groups. Access to credit for housing is therefore very limited. This situation will improve as government and some private sector players are looking at opportunities to inject more liquidity into the system and make finance more affordable and accessible.
Government is trying to reduce housing production costs in an effort to make housing more affordable. It has established agencies to encourage the use of local materials and also to reduce the price of land and inputs such as cement and sand, and has stepped up funding for government agencies in this sector. The government has decided to roll out projects to construct affordable housing in all 10 regions of the country. The model is for individuals to provide 20 percent as their equity investment upfront and then take a loan for the remaining 80 percent, which government guarantees. Government regulation of the sector, the injection of funds and the crackdown on unlicensed MFIs will help to make the sector more accessible to lower to middle income earners in terms of acquiring housing finance.
Since 2006, Solidarity Actions of Support to Organisations Supporting Freedom, known by its French acronym ASSOAL, has been working with the National Network of Inhabitants of Cameroon (RNHC) to develop new ways to improve access to affordable housing and to advocate for their application. Housing co-operatives have been set up and credit is provided to such co-operatives to build affordable housing through a national revolving fund that is overseen by a board of directors, a technical secretariat and a committee responsible for monitoring and tracking the use and final destination of funds. They use local materials and labour to build standard houses with basic necessities. This helps to lower costs and improve access to finance and affordable housing. Pilot projects have now been completed, with three houses having been built in Yaounde and Douala respectively. The objective is to roll out this plan countrywide and build up to 1 500 houses. The plan has the support of municipal and national government authorities. Discussions are also under way to use the model to build 10 000 social housing units. In 2003, ASSOAL set up pilot projects on participatory budgeting based on the Brazilian model, and 19 such projects for neighbourhood improvement have been rolled out. This process helps to prioritise access to housing as a major concern of dwellers.
With an annual population growth rate of 2.64 percent, and an annual urbanisation growth rate of 6.5 percent, Cameroon is 58 percent urbanised. Housing therefore presents a challenge and an opportunity. The challenge is how to provide housing in the cities and towns to this growing and urbanising population, almost half of which live in informal dwellings and settlements. The opportunity is to establish partnerships across the housing value chain to meet the increasing demand for both high-end and affordable housing. In Cameroon, an estimated 53 percent of households own their own homes, 30 percent are tenants and 11 percent are accommodated free of charge.
Cameroon’s housing backlog is significant. The government is looking for ways to overcome the housing deficit of close to 100 000 units a year. Government estimates that up to one million homes need to be built in the next five to ten years to adequately house the growing population. Of these, 300 000 are needed in Douala and Yaounde. Demand for housing in the lower and upper ends of the market increases by up to 10 percent annually, fed by decreasing family sizes at the bottom end, a growing middle class and substantial demand from the diaspora at the top end. The current housing stock is supplied by households – mostly through self-build initiatives – by government agencies, private developers (still in their infancy) and public private partnerships. Government has used the public private partnership approach in its project to build new social housing units countrywide, and should now be very open to this model, as it realises that it cannot solve the housing challenge on its own.
Cameroon’s housing market is not well developed, but has both public and private players. The main players include the state-owned Cameroon Real Estate Corporation (Société Immobilière du Cameroun, or SIC), founded in October 1952 as a centrally funded company responsible for solving the public housing problem. SIC is in charge of social housing and developing the real estate market for government. It also works in partnership with local and foreign private construction companies to handle large-scale projects and train the local workforce of engineers and technicians. SIC aims to build 100 000 homes in the next five to 10 years. Crédit Foncier du Cameroun, a building and loan association, is the top mortgage bank and provides funds for social housing in all cities in the country. It also provides funds to developers. The National Investment Corporation of Cameroon (Société Nationale d’Investissement du Cameroun) invests government funds in profitable projects in different sectors.
A government agency, Maetur, acquires and develops parcels of land to be used by other players in the value chain. These are transferred to them at affordable prices. Mipromalo, the local material promotion authority, develops local materials for use by construction companies. The number of private developers in the market is increasing. One such is Options for Homes in Cameroon, which is a Canadian company with a local subsidiary. It is currently involved in a mixed-use development in the coastal city of Limbe. Most private developers build and sell houses to the upper middle income and high-end market through the BOT (Build, Operate and Transfer) model. Private developers also partner with municipalities to build affordable housing for people in the municipal areas.
There are, however institutional problems. Although the country has developed catalytic real estate institutions in the areas of housing production, land management, housing finance and municipal public works financing, these state institutions are suffering from dwindling public finance, and new strategies are urgently needed for the effective functioning of these institutions. In Yaounde, for example, the land system is poorly regulated, title deeds are attached to only 10 percent of the land and there is a significant housing deficit.
To this end, government together with its partners (local councils, energy utility company Actis/AES-Sonel (now called ENEO Cameroon), the National Water Supply Company of Cameroon, SIC and Crédit Foncier), launched a project in Douala and Yaounde in December 2009 to provide 10 000 houses for low income earners in all major towns. The partnership has completed Phase I with the provision of about 6 000 new low cost houses.
The first phase of a project started in Douala aiming to build more than 1 000 social, affordable and private houses along with community, commercial, retail and leisure facilities in the Mbanga-Japoma area of the Douala III council, at a cost of CFA Francs 122.23 billion (US$264 million). On completion, it will consist of 50 buildings, comprising 300 apartments with one parlour and four bedrooms, and 700 apartments with one sitting room and three bedrooms. The inclusion of an enhanced public open space will be of huge benefit to the surrounding areas. There has been large interest in this project from local residents and Cameroonians in the diaspora. The city council of Douala is also in charge of a project to deliver 2 500 social and affordable houses in the Bonamatoumbe area. It is hoped that these efforts will help to alleviate the need for housing in urban and semi-urban areas. Planning for the first phase of this project is complete with construction due to start before the end of 2014.
Government policy has placed exclusive emphasis on home ownership. The reality of the contemporary world and changing demographics, however, means that a significant proportion of the population will seek out rental housing sometime in their lives. Rental housing is not simply a common alternative to ownership; it is a crucial part of the housing equation. There is a shortage of 400 000 to 600 000 housing units. This indicates that rental has increasingly become the norm, rather than ownership. The government must recognise both the benefits of regulating and supporting rental markets to complement ownership.
Three cement companies have set up in the country in the last two years – German firm G Power Cement, Nigeria’s Dangote group and Moroccan house builder Addoha group. This will help to increase the supply of cement to the local market, which currently stands at one million tonnes a year, short of the required four million tonnes a year. It will also help to drive the current boom in affordable housing, as cement costs form a key component of the cost to build a house.
The formal real estate market is concentrated in the urban and peri-urban areas, and churn is concentrated in the higher value market. Because supply lags behind demand, which emanates from the growing middle class, Cameroonians in the diaspora, expatriates, and local and foreign companies, there is a constant increase in house prices – both for ownership and rental. On average, it takes a month to find accommodation in Douala, Yaounde and other main cities – although it can take as much as three months – given the undersupply. It costs about CFA Francs 120 000 (US$240) a month to rent a standard three-bedroom house in Douala and Yaounde, and in the same cities may cost up to CFA Francs 10 million (US$20 000) to build a standard three-bedroom house, excluding the cost of land. The cost is less in the semi-urban areas.
Policy and regulation
Land tenure in Cameroon is characterised by the coexistence of a traditional or customary land tenure system, which is in a state of transition, and a modern land tenure system, which is written and was introduced during the colonial era to promote individual land ownership. Three different land tenure systems were introduced by each of Cameroon’s colonial powers, France, Britain and Germany. With the unification of the country in 1972, a land reform programme was introduced in 1974 to unify the legal land systems used. Since then, Ordinance No. 74/1 and 74/2 of 6 July 1974 established rules governing land tenure and state lands respectively, and laws and decrees to amend and implement them. Law No. 85/09 of 4 July 1985 relates to expropriation for public purposes and conditions of compensation, and constitutes the regulatory framework for cadastral survey and land management in Cameroon. Decree No. 2005/178 of 27 May 2005 organises the Ministry of State Property and Land Tenure (MINDAF), while Decree 2005/481 of 16 December 2005 amends and supplements some provisions of Decree No. 76/165 of 27 April 1976, which lays down conditions for obtaining land certificates. These decrees constitute the institutional framework for the implementation of land legislation in force. However, implementing these legal provisions has been impeded by jurisdictional disputes within the administration which are yet to be resolved. The delay in implementation of this framework is the main reason for the chaotic nature of land reform and the fact that title deeds are attached to only a small percentage of land in the country.
Geodetic infrastructure is characterised by the absence of a reliable and single geodetic database. Land stakeholders suffer the consequences of the absence of a single referencing system in Cameroon. The physical description of real property as the object of a right is not reliable, which undermines the reliability of the entire land register. The intangibility of land certificates, and the irrevocability and finality of their issuance are no longer guaranteed. To seek a lasting solution to this problem, the government continues to implement the recommendations and proposals of a study carried out by the AfDB in 2009. There is an urgent need to support the ongoing efforts and initiatives to modernise the sector. To that end, the AfDB in 2009 made the following recommendations to the Cameroonian government. The recommendations are based on good practices with regard to cadastral and land management:
At the institutional level, clarify the role and missions of cadastral survey services, resolve jurisdictional conflicts which create confusion, disperse financial and human resources and provide a coordination framework that responds to the challenges of land issues.
At the technical level, set up a solid and reliable cadastral framework through the establishment and official recognition of a single and homogeneous national geodetic network covering all topographic, topometric and cartographic works, including survey works.
Equip MINDAF’s decentralised services with the required technical equipment and logistics, and provide them with qualified personnel for optimum use of the equipment.
With regard to state property, take appropriate measures to ensure the proper classification of records in land registries and assign land management specialists (to be trained) to such registries.
Take measures to maintain and update the cadastral framework and land documents using a control system.
Improving access to housing finance requires a multi-pronged approach. Key ingredients include sensible land use rules, efficient registration of property titles, legal frameworks for long-term mortgage markets, viable housing finance institutions, credit insurance systems for lenders and effective subsidy systems that reach the very poor.
Cameroon’s housing sector is ripe for investment and there is a huge need for housing in all segments of the market – the lower, middle and upper segments. The government should continue with land reforms as recommended by the AfDB. Better regulation will make it easier for people to get title deeds for their land, thereby enhancing security of tenure and additional investment. Also, financial market reforms should be continuously and speedily implemented. These should help to solve the problems related to lack of serviceable land, delays in issuing construction permits and property registration, undeveloped capital markets and an unresponsive banking sector. Government should also continue with reforms in the MFI sector, including building standards, product innovation and financial stability to help realise the potential of the sector and enable it to play a more significant role in the housing finance and housing development market.
With economic growth, a huge housing backlog, a growing middle class and capital inflows from Cameroonians in the diaspora and other investors, the housing market is destined for sustainable growth. Despite the demand for up-market housing and the current focus of developers on the high-end housing market as a result of affordability and easier access to finance, the focus should shift to the middle class and lower income groups, as this segment presents the biggest opportunity for development and financing in future.