As a significant amount of funds that have the potential to further develop the formal housing sector, pension funds are an important savings vehicle and a way for people to receive assistance in home purchase or construction with loans or asset-backed securities. The Nigerian National Housing Fund was created with the aim to encourage public sector workers to save towards mortgages, making a monthly contribution (often 2.5% of income) that is matched by employers for a minimum amount of time. This fund then earns interest and serves as the basis of eligibility for a housing loan – or it is refunded at a later date as a pension.
Though pension funds represent potential growth for the formal housing market, they are limited in their use for housing finance for a variety of reasons: low coverage (only 2-15 percent of labor force), lack of institutional capacity, underdeveloped capital markets, and a lack of experience in low-income housing markets for fund managers.
Source:
World Bank Group. (2015) Stocktaking of the Housing Sector in Sub-Saharan Africa: Challenges and Opportunities. World Bank, Washington, DC.