In recent years, banks, as well as other financial institutions, have fostered inventive developments to support individuals and families in attaining homeownership.

Among these developments, is the ease of access to mortgages; however, these are in most cases geared towards the formal sector.

Accessibility to mortgage financing by those in the informal sector, though accessible, remains somewhat ‘invisible’ and hence challenging. 

The informal sector (workers who are mostly self-employed), earn a living through self-employment and are in most cases not on payrolls. How flexible can homeownership be for those in this sector?

Romeo Ngabo, Principle Sales Agent at Century real estate says people in the informal sector can access mortgages just like those in the formal sector as long as they have the required credentials.

The requirements however depend on the bank, he says, adding that banks usually check a person’s credit score; how much you earn and how much you can raise per month before offering the mortgage.

"They have to check whether you have the capacity for the asset you want to buy. They look at the level of the income, because this is normally your bank and hence they have your transactions and finance history. Banks don’t ask for security, they look at how much you earn, the house itself and the value. And usually they don’t give more than 75% of the value.”  

Ngabo recommends looking at different banks when seeking for a mortgage such that one can compare and see which one has the best charges.

Other options according to the sales agent, include going for a construction loan in case one has a plot or one can even borrow collateral and mortgage it and that person who owns the collateral signs for them in accessing mortgage. 

Sustainability 

Bonaventure Ntabwoba, Head of Branch Business at Bank of Kigali highlights that when deciding whether to grant a mortgage loan to any individual, the lending process starts by evaluating the key borrower information. 

All customers are required to have an account with the bank, in this case, Bank of Kigali- to start channelling their income on their account in case they are not already banking with it.    

The bank looks at the client’s income, their capacity to pay back the loan (depending on their income), savings, monthly debt payments such as credit card charges and other financial obligations, as well as the collateral (house) to make sure that the client has the means to take on a mortgage comfortably.  

Ntabwoba also highlights that the mortgage requirements for those in the informal sector to access mortgages are the same as those for the formal sector clients, except that the bank evaluates their income differently by checking their account performance. Business registration is not required as long as they are known at sector or district level with proof.  

However on the side of clients, what they should consider before getting a mortgage is the sustainability of their businesses (in the long term) in order to ensure that they will be able to service the mortgage loan, the value (current and future) of the house to be purchased and the location, according to Ntabwoba.

"They should also be aware that bank comes in as a partner, therefore a down payment /contribution to buy the house is needed from them as well.”

Lina Higiro, Chief Executive Officer, NCBA Bank Rwanda says they consider 50% of monthly net income; so the individual has to raise a contribution of 20% of the total cost of the house.

She explains that for those in the informal sector to access mortgages, they need a positive credit history and permanent/regular income that can pay monthly instalment. 

With this, she recommends maintaining a bank account that can evidence regular deposits that can be meeting the monthly instalment; having savings to cover the required contribution and if possible, register the business activity with Rwanda Development Board as individual business.

"Other options available for owning homes can include through individual regular savings and saving through schemes which can lend a certain percentage of saved amount,” she adds.