The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, December 11 a US $20 million Trade Finance Line of Credit for the Company for Habitat and Housing in Africa/Shelter Afrique (SHAF) to boost the availability of Trade Finance (TF) instruments to small and medium enterprises (SMEs) involved in real estate and construction related activities in Africa. Thereby, this facility will contribute to addressing the critical shortage of building materials while creating jobs and income in the region.
Economic growth, exponential urbanization and a growing middle class are hampering the provision of adequate housing in Africa. The construction industry is growing at 20 per cent per annum, but this cannot sufficiently address the rising demand for housing partly due to a wide financing gap for construction and building materials. The public and private sectors have so far been unable to deliver sufficient resources to meet this expanding working capital requirement. Where funding is available, pricing remains prohibitive.
SHAF is the only pan-African organization devoted to financing the development of proper housing and human settlements in Africa. Created in 1982 and headquartered in Nairobi, Kenya, this pan-African housing finance and development institution addresses acute shortage of housing by providing financial and technical resources for sustainable housing and urban development. SHAF’s current shareholding comprises 44 African countries, AfDB and Africa Reinsurance Corporation (Africa Re). It is worth noticing that AfDB played a key role in the establishment of SHAF as the vehicle for supporting sustainable housing and urban development in Africa.
The AfDB’s four-year facility will allow SHAF to expand its Trade Finance Program, launched in June 2011, under a product diversification strategy to address the acute financing shortage facing real estate developers in Africa. SHAF will also partner with other financial institutions offering TF services to SMEs in real estate construction and building industry and those involved in trading/leasing of building materials and equipment. Through this contribution, AfDB would leverage SHAF’s market knowledge and networks across the continent and hence assist to alleviate some of the structural financing inefficiencies encumbering Africa’s real estate growth.
This facility, boosting the availability of affordable housing in Africa through financial institutions and SMEs involvement, will thereby enhance inclusive growth and private sector development as espoused in the AfDB Long Term Strategy for 2013-2022. Trade facilitation is one of the three strategic objectives of the Bank’s Regional Integration Strategy 2009-2012 as the AfDB seeks to mainstream and institutionalize its engagement in Trade Finance development in Africa.