Purpose This study aims to examine why Ghana has English legal origins (hypothesised as a legal framework that promotes financial development) but has not developed a well-functioning mortgage finance market. Design/methodology/approach The authors adopt the institutional autopsy approach developed by Milhaupt and Pistor (2008). This study is not a cross-country study but a historical examination of Ghana’s mortgage finance regulatory framework. The institutional autopsy framework considers the iterative process of change in a system and allows for context-specific system analysis. Findings The authors note that for a long period of about 68 years (1940-2008), some of the legal rules regulating mortgage finance were not typical of the hypothesised characteristics of the English common law tradition. These rules, including, interest rate controls, excessive entry barriers, loan default guarantee discriminations and complex foreclosure procedures, tended to inadequately protect creditors. In the context of the history of military rule and law-making, judicial discretion that could have promoted legal efficiency and strengthened contract enforcement was also limited. During this period, the legal system demonstrated a concentrated and coordinative character. New legislation in the form of the Home Mortgage Finance Act 2008 (Act 770) attempts to resolve some of these bottlenecks and improve creditor rights protection. Research limitations/implications The study focuses solely on how the legal institution affects creditor protection and mortgage finance in Ghana. Practical implications Policy-wise, the study deepens the understanding of the channels through which the law affects the development of mortgage finance. Originality/value To the best of the authors’ knowledge, the methodology used (institutional autopsy) is novel in the context of analysing mortgage finance.
Weak housing creditor protection, accentuated by weak landed property rights and underdeveloped credit information systems constitute major constraints to housing finance development in many developing countries. Improving housing creditor protection require further institutional development and financial innovation. As a trigger of financial innovation, regulation has spawned pension reforms leading to the global shift from defined benefit to defined contribution pension schemes, which has created new opportunities to improve housing creditor protection and thus engender housing finance innovations. This paper considers how pension assets-accumulated benefits and associated personal, employment and contribution information-has provided a basis for collateralized lending and an additional avenue for credit information system development. The paper proposes a pension asset-backed creditor protection model that utilizes defined contribution pension assets to improve housing credit allocation, and thus, housing finance development. Pension assets represent alternative or complementary collateral assets for securing a housing credit (mortgage). And as depositories of information, the information content of pension assets and institutions could also be used alternatively and complementarily to assess the capacity, character and contribution (equity) of potential borrowers in the credit underwriting process. Future applied research may consider how the proposed model could be integrated in existing credit underwriting systems and the operational challenges that could emerge.
Purpose The purpose of this study is to explore the mortgage affordability problem in Ghana, an issue that has been associated inter alia with high mortgage rates, which results from the high cost of capital, an unstable macroeconomy and unfavourable borrowers’ characteristics. Concurrent improvements in both the macroeconomy and borrowers’ characteristics have rendered the identification of the most problematic mortgage pricing determinant difficult, consequently making the targeting of policy interventions problematic. Design/methodology/approach This research sought to resolve this aforementioned difficulty by providing empirical evidence on the relative importance of mortgage pricing determinants. A data set of mortgage rates of selected Ghanaian banking financial institutions from 2003 to 2013 was examined and analysed by applying Fisher’s model of interest rates and an ex post analysis of the standard regression coefficients. Findings The risk premium factor emerged as the most important determinant in Ghana compared with the inflation premium and the real risk-free rate, although all are statistically significant and strongly correlated with mortgage rates. Originality/value This study provides an insight on the relative importance of mortgage pricing determinates and subsequent macro-economic guidance to support policy interventions which could reduce mortgage rates/enhance mortgage affordability. The paper specifically aims to engender wider debate and provide guidance to the Ghanaian Government and/or private enterprises that seek to provide affordable mortgages. Further research is proposed which could explore ways of reducing mortgage rates as a means of engendering social equality and adopt innovative international best practice that has already been tried and tested in countries such as South Africa and the USA.
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