Harnessing Blended Finance to Develop Affordable Housing in Africa

In Africa, the demand for housing far exceeds supply, and across the continent, only a small fraction of the population can afford the homes that exist-leading to a significant gap between current demand and the existing housing supply, with estimates pointing to a shortage of over 50 million units (CAHF 2023).To close the affordable housing gap and achieve one of the major objectives of Sustainable Development Goal (SDG) 11, which calls for adequate, safe, and affordable housing by 2030, greater investment in these same sorts of housing projects is essential.

Ultimately, housing development involves substantial capital required by developers and other stakeholders in the housing value chain that is often inaccessible in local capital markets, and local sponsors often face capacity and track record constraints that make accessing international capital markets unfeasible.

From the standpoint of many institutional investors, the lack of credit-worthy deals accessible through capital markets instruments is a binding factor in deploying capital at the kind of scales required to adequately address the problem.

In an attempt to develop a scalable solution in the affordable housing space, MiDA Advisors, acting as the lead transaction advisor, collaborated with Bank of America Securities, Brean Capital, The Bank of New York, and Cross-Boundary to establish an innovative blended finance solution in partnership with the local mortgage refinancing company, Caisse Regionale de Refinancement Hypothecaire de l’UEMOA (CRRH).

The solution provided CRRH with long-term financing at scale, allowing the institution to offer loans to member mortgage banks, which in turn on-lend in the form of long-term mortgage loans.

The financing package included a 17-year, $217 million Eurobond issued via a U.S. trust and a 36 billion CFA Franc ($64 million) domestic bond. The U.S. International Development Finance Corporation (DFC) provided a financial guaranty for the international bonds, while the U.S. Agency for International Development (USAID) and Prosper Africa contributed technical assistance funding to both de-risk the transaction with advisory support and reduce some early-stage transaction costs for CRRH. The highly rated U.S. bond issuance (AA rated by Moody’s) attracted new international investors to the region, pricing at yields below the region’s lower-rated Eurobonds trading in the international capital markets with similar tenors.

Of course, the impact of this transaction extends to the impacted communities. Through its collaboration with USAID-INVEST Project, MiDA Advisors engaged third-party, Finactu Groupe, to carry out an on-the-ground assessment of the impact of the transaction. Finactu’s estimates suggest that the transaction will generate over 8,935 new housing loans, benefiting more than 53,610 individuals across the UEMOA zone.

“At MiDA Advisors, we have been demonstrating how Africa can mobilize significant capital through blended financing solutions to address major challenges in social infrastructure such as affordable housing. The needs are great, and our expertise is enabling financing to be deployed at unprecedented scale with enhanced sustainability.”
– Aymeric Saha, CEO, MiDA Advisors

Of these loans, 55% are expected to finance affordable housing (valued at less than 15 million CFA, or approximately $25,000), and 40% will support middle-income housing (valued between 15 million CFA and 60 million CFA, or around $25,000-$100,000). Notably, over 86% of the mortgage applicants are expected to be first-time homebuyers. The benefits of these homes will be profound, and like housing generally, have far-reaching impacts on residents’ security, health, education, and financial stability, all of which align with several SDGs.

Importantly, this type of transaction has proven adaptable across regions and regulatory contexts. In early 2024, MiDA Advisors announced a $700 million blended financing deal with Acorn to finance the largest portfolio of student housing in Africa. In this transaction, DFC is providing a commitment of $180 million that will unlock over $500 million in local financing from Kenyan pension funds and financial institutions.

The funding provided from the transaction will facilitate the construction of 35 new affordable student housing facilities (totaling 48,000 beds) and create an estimated 50,000 new jobs in the local market. All buildings will be certified green under the IFC EDGE program, offering 20% energy, water, and material efficiency compared to conventional structures. Importantly, these buildings offer an affordable alternative to unsafe, unregulated, informal housing options for students. This is particularly relevant to female students who make up the majority of residents, since safe housing plays a significant factor in girls’ ability to access education and eventually graduate.

Most recently, MiDA Advisors announced a $228 million blended finance transaction for mortgage refinancing in Nigeria, partnering with the Nigeria Mortgage Refinance Company (NMRC) and Stanbic IBTC Bank.

Supported by a $200 million DFC commitment, the deal will allow NMRC to refinance loans, allowing banks to originate new loans with refinancing. In total, 20% of proceeds will benefit mortgage borrowers from informal market segments, and an estimated 40% of mortgages will be issued to women as primary borrowers or co-borrowers.

When looking at the details, these three transactions offer a compelling tale about how well-structured blended finance solutions with risk mitigation tools offered by U.S. development agencies like the DFC, Prosper Africa, and USAID, can mobilize substantial private capital towards the achievement of development objectives.

Through these three initiatives alone, MiDA Advisors has arranged close to $1.2 billion in investments, mostly from institutional investors, to support the construction of housing for over 100,000 individuals across Africa—impacting over 250,000 people in the impacted communities through the development of social infrastructure, direct construction jobs, and supporting goods and services. And importantly, these transactions lay the foundation for these institutions to build their track record and access capital markets again in the future at a comparable or greater scale.

Even now, although these transactions are quite sizeable, and will be highly impactful in the markets reached, they merely represent the start of a longer journey to supply the 51 million affordable housing units that the continent needs. Of course, for MiDA Advisors, which originated from the 2016 U.S. Government Initiative for Mobilizing Institutional Investors to Develop Africa’s Infrastructure (The MiDA Initiative), the best way to eat an elephant is one bite at a time, and from our point of view, within the past two years these have been significant bites.