Examining The Viability Of Secondary Mortgage Markets (Smm) In Rapidly Developing African Economies: The Case Of Rwanda

Mortgage markets in developing Sub-Saharan African (SSA) economies evince recognised inefficiencies attributable to a plethora of problems notably, the high-interest rates, short loan maturities and low LTVs. Consequently, mortgage finance accessibility in SSA is difficult and inadequate relative to the soaring demand for housing. In this paper, we consider the viability of a Secondary Mortgage Market (SMM) in Rwanda and its potential to ensure sustainable access to housing finance, taking cognizance of the economic and institutional transformations the country has witnessed over the last two decades. We do so by exploiting primary and secondary data, utilizing structured questionnaires and interviews to obtain information from commercial banks, the National Bank of Rwanda, Development Bank of Rwanda and the Capital Market Authority. The findings reveal that the mortgage market in Rwanda is burgeoning rapidly. We observed, in the primary mortgage market, a high willingness on the part of banks to grant mortgage loans, albeit, they are constrained by lack of access to long-term funding and limited risk-bearing capacity. The macro-economic environment was evaluated with regard to the prerequisites of a viable SMM and was found to be robust to support an SMM. Further, the Rwanda capital market is adequately prepared for Mortgage-Backed Securities (MBS) with a well-founded regulation for asset-backed securities in place and high discipline in the market. The study reveals that the securities of many reputable companies on the Rwanda Stock Exchange (RSE) are currently over-subscribed suggesting a high potential demand for new, innovative securities. Finally, we observe that the legal and regulatory framework is strong enough to support an SMM. The mortgage law, foreclosure procedures and systematic land title registration, promise adequate title security to collateralised properties. In light of these observations, we submit that there is a reasonably high prospect that an SMM would be a success in Rwanda.