Institute for the Advancement of Developing Economies


Date of this Version


Document Type



Journal for the Advancement of Developing Economies 2018 Volume 7 Issue 1, pp 41-58

doi 10.32873/unl.dc.jade7.1.4


Copyright © 2018 JADE


Rapid urbanization in Rwanda has considerably increased housing demand and the need for a dependable mortgage market. Unfortunately, the capacity of most people to afford to own homes from their own incomes is still a challenge as mortgages products are available at outrageous conditions making mortgage finance unaffordable. For better market readjustment, the effects or mortgage market factors on housing affordability in any locality should be properly evaluated. The objective of this study is to determine how mortgage finance market affects the affordability of housing in Kigali, the capital city of Rwanda. To attain this objective, data was obtained from primary and secondary sources and analyzed using applicable statistical techniques. The research findings revealed that the adopted loan amortization schedule (even total payment), the risks caused by the absence of secondary mortgage market, and the dominance of short-term financial institutions reduced mortgage finance affordability and therefore only 15% of Kigali City households could afford housing from 2006 to 2016. It is noted that, this said affordability is only purchase affordability without repayment affordability. The study also highlights that, if (i) the secondary mortgage market is properly developed to reduce the risks that caused the high interest rate, (ii) flexibility on loan amortization is adapted, and (iii) long-term financial institutions participate in the market with favorable legal framework, the mortgage finance market can contribute a lot in alleviating the issue of housing affordability in Kigali City.