i
DECLARATION
I declare this research report is my own unaided work
It is submitted in partial fulfillment of the Degree of Master of Science in Property
Development and Management in the School of Construction Economics and
Management, University of the Witwatersrand.
It has not been submitted before for any degree or examination in any other University.
(Signature of Candidate)
Day of (year)
ACKNOWLEDGEMENTS
ii
I wish to forward my heartfelt gratitude to the almighty God for having given me the
strength to pull through this one.
I would like to say many thanks to the following people without whose support this work
would not have been a reality;
Firstly my parents Joel and Mathabang Rakoena. They stood by me and prayed for when
the chips were really down. Secondly the unmeasured gratitude is forwarded to my
Brother Thabiso, his wife Limpho Rakoena and her; Nthabiseng Mofana for their great
support during a daunting task of primary data collection, not forgetting my cousin Katiso
Mosaase who greatly assisted me in the task. ?Together we walked the dusty streets of the
study villages in Maseru in search for information?!
I would also like to thank my friend Matthew Smart who eliminated some ?windy?
English that characterized most parts of this document. ?You are really smart man?! The
list of people to be thanked is endless, however it would be great injustice not to thank
the following; Lekhoa Rajake, Thabang Maharasoa, Thabiso Maboee, Mokela Nkokoto,
Thabo Ntitsane, Makali Lekhotsa-Nathane.
Many thanks also to people at Nedbank, Lesotho Bank (1999) limited/Standard Bank as
well as the Housing Department and Lands, Survey and Physical Planning Department in
the Ministry of Local Government for affording me the interviews.
Very special gratitude goes to my supervisor, Bode Akindele, for leading me by the hand
like a good manager. ?Let us produce more term papers in future because the sky is the
limit Sir?!
Abstract
iii
Most governments in developing countries are unable to assist in the ever-growing
housing needs of the informal sector, which constitutes the major part of most economies.
The two reasons for this state of affairs are (i) the ever-shrinking resource base of
countries, which makes the provision of subsidies impractical; and (ii) the fact that this
sector is normally characterized by irregular incomes, which makes provision for loans
by financial institutions difficult. This situation is particularly true for the Kingdom of
Lesotho. Due to their unfortunate predicament, the informal sector has become
innovative in addressing their housing needs. Various informal credit methods are
widely employed to finance their houses, which are built progressively. This research
therefore investigates the possibilities of linking the progressive housing investment to
bank housing finance, using Maseru - Lesotho as the research focus.
In order to achieve the above aim, a household survey was conducted coupled with
structured interviews. The structured interviews were held with the commercial banks as
well as the government housing authorities. These interviews were mainly to elicit their
views about the option of Microfinance of housing. It was established that the
respondents as well as the government authorities were not aware of this option. The
banks were equally unaware of it and in addition to this, the perceived risk led to
skepticism. As such these made Microfinance of housing impractical in the short-run.
However it would be advisable to mobilize the formation of a revolving fund to which
the commercial banks could on-lend, as a solution to the lack of housing finance.
Keywords: Progressive Housing; Microfinance of housing; On-lend; informal savings association; Maseru.
TABLE OF CONTENTS
DECLARATION?????????????????????????.i
ACKNOWLEDGEMENTS?????????????????????.ii
iv
ABSTRACT??????????????????????????...iii
TABLE OF CONTENTS?????????????????????...iv
LIST OF FIGURES???????????????????????...vii
LIST OF TABLES???????????????????????...viii
1. INTRODUCTION Page
1.1 Background to the Problem??????????????????1
1.2 Problem Statement?????????????????????..4
1.3 Research Question?????????????????????..4
1.3.1 Sub-Question??????????????????????......4
1.4 Hypothesis????????????????????????..5
1.5 Research Objectives????????????????????...5
1.6 Research Methodology???????????????????..5
1.7 Data Collection and Analysis????????????????....6
1.8 Research Limitations??????????????????.?....6
1.9. Conclusion???????????????????????.....6
2 LITERATURE REVIEW
2.1. Defining the Progressive Housing.??????????????..7
2.2. Current Housing Needs in Lesotho??????????????..7
2.3. Overview of the Macroeconomic Environment against
the Housing Sector????????????????....???..10
2.4. Assessment of the Role of Government in Provision of Housing.??.13
2.5. The State of Capital Market????????????????....14
2.6. The Banking Sector????????????????????.15
2.7. Overview of Institutions with Potential for Lending to Housing?........17
2.8. Microfinance Products in Lesotho??????????????..18
2.9. Best Microfinance Practices Elsewhere ? Successful Case Studies?..19
2.10. People?s Initiatives towards Shelter Delivery in Maseru?????...21
2.11. Overview Of Land Administration In Lesotho?????????..23
2.12. Two Regional Case Studies ? RSA Experience?????????.25
v
3. METHODOLOGY OF RESEARCH
3.1. Introduction???????????????????????.28
3.2. Initial Observation of the Areas to be studied?.???????.?...28
3.3. Data and Information Sources relevant for the Study???????..29
3.4. Logistics for Conducting the Household Survey????????.....29
3.5. Determination of the Sample Frame???????????.??...30
3.6. Choosing the Appropriate Sample Size????????????...30
3.7 Actual Data Collection???????????????????31
3.8 Structured Interviews???????????????????...33
3.9 Justification for All Methods Applied in the Study????????.34
3.10 Presentation Of Data???????????????????....34
4. DATA ANALYSIS AND INTERPRETATION
4.1 Introduction???????????????????????...35
4.2 Data Collection and the Response Rate?????????????.35
4.3 Demographic Characteristics of Respondents?.????.????.....36
4.3.1 Analysis of the Demographic Variables of the Three Villages??.??36
4.4 Description of the Three Villages Geographically?????????52
4.5. Evaluating the Extent to Which the Availability of Credit affects
the Pace of Construction in the Three Villages Studied??????...55
4.6. Evaluating the Views of People especially the Low-Income Groups
to Microfinance of Housing???????.?????????..56
Evaluating the Extent to which the Banks Are Accommodative of the
Microfinance of Housing as a Viable Option for Limited Incomes in
Lesotho?????????????????????????.57
4.8. Land Administration Problems to the Process of Housing
Finance?????????????????????????..59
4.9. The Role of Government in the Provision of Housing???????..60
4.10. Peoples Initiatives towards Shelter Delivery???????????.62
vi
5. CONCLUDING REMARKS
AND RECOMMENDATIONS???????????..64
5.1 Concluding Remarks????????????????????.64
5.2 Recommendations?????????????????????.68
REFERENCES/BIBLIOGRAPHY?????????...71
APPENDIX 1 Specimen Questionnaire to the households????..77
APPENDIX 2 Specimen Questionnaire to the Commercial Banks?.80
APPENDIX 3 Specimen Questionnaire to the Housing and Land
Authorities in the Ministry of Local Government?????????.82
APPENDIX 4 Map showing the study areas?????????...83
APPENDIX 5 Legend for the map?????????????..84
LIST OF FIGURES
4.1 Ha Tsolo ? Levels of Education against Income Levels of Respondents
4.2 Ha Matala ? Levels of Education against Income Levels of Respondents
4.3 Ha Foso ? Levels of Education against Income Levels of Respondents
vii
4.4 Pictorial View of Ha Tsolo Settlement, Sealong. (A House Built Incrementally)
4.5 Panoramic View of Ha Matala Phase I & II.
4.6 Type of Landscape of Ha Foso Settlement
4.7 Participation of Respondents in Informal Savings Associations across the Three
Villages
LIST OF TABLES
4.1 Respondents relative to the Three Villages
4.2 Age Groups of Respondents relative to the Three Villages
viii
4.3 Distribution of Type of Dwellings relative to the Three Villages
4.4 Education Levels vs Income Levels of Respondents
4.5 Income Levels vs Monthly Investments on Construction of Respondents
4.6 Types of Employment vs Income Levels relative to the Three Villages
4.7 Delays in Construction of Dwellings relative to the Three Villages
4.8 Experienced delays in construction vs availability of formal credit relative to the
Three Villages
4.9 Attitudes of Respondents towards Bank Loans relative to the Three Villages
4.10. Percentage of Bank Account Holders relative to the Three Villages
4.11 Participation Level in Informal Savings Associations
4.12 Attitudes of Respondents towards Informal Savings Associations
4.13 Interest Rate Level in Informal Savings Associations relative to the Three
Villages
4.14 Types of Tenure held by Respondents relative to the Three Villages