Land Informality and Financial Exclusion Contributing to The Mortgage Dilemma in Uganda’s Housing Sector

The limited availability of affordable housing is one of the top development priorities in Uganda. The country has a total deficit of 2.4 million housing units. Approximately 70% of those who suffer from housing insecurity in Uganda fall within the low-income bracket. While mortgage financing options could help a number of people purchase houses, Uganda’s mortgage market remains underdeveloped. The mortgage market contributes to less than 1% of GDP, and is largely inaccessible to low-income earners. The primary constraints include the high interest charges (16% - 24%), a lack of secure land tenure systems, widespread informal employment (which involves over 75% of the entire labour force), and low financial literacy levels. The purpose of the study was to understand the accessibility of mortgage financing to low-income people in Uganda and to identify whether land tenure systems and socioeconomic issues affect exclusion from the market. The study employed a desk-based qualitative approach to document a review of academic literature and policy developments, to understand the institutional, legal and economic obstacles to achieving inclusive housing finance. Overall, the findings noted that policies on land tenure continue to reflect historical as well as current patterns of social exclusion, as ongoing challenges with Mailo and customary tenure continue to stop people from accessing land titles securely. This encourages banks to step away from providing credit. Formal housing generally remains unattainably expensive due to speculative development and constraints on affordable. New concepts to help low-income people may include micro-mortgages, digital credit scoring and incremental loans.