The mortgage is dead: Why traditional housing finance has failed the Global South

This 8-part series explores how housing, finance, and innovation can rise to meet the challenge. You’re reading Part 1.

The greatest housing crisis in history is not confined to New York, London or Sydney. It is also exploding in Lagos, Dhaka and São Paulo, the fastest-growing cities in Africa, Asia and Latin America.

Emerging Markets and Developing Economies (EMDEs) are urbanising at breakneck speed. Every month, millions of people move to cities seeking opportunity, security and stability. Yet for the majority, especially those with informal or unpredictable incomes, the dream of homeownership is completely out of reach.

It’s not because people don’t work hard enough. It’s not because they lack ambition. And it’s not simply a story of poverty.

It is a system failure.

The traditional mortgage, built for salaried workers in post-war Western economies, is structurally unfit for the realities of EMDEs. And as it fails, it traps hundreds of millions in insecure housing and perpetuates intergenerational poverty.

Mortgages do not work in EMDEs

Across Sub-Saharan Africa, fewer than 3% of adults have a mortgage. In Nigeria and Uganda, penetration is less than 1%. The Centre for Affordable Housing Finance in Africa (CAHF) finds that in most countries mortgages are either inaccessible or unaffordable for the average household.

The reasons are systemic:

• Informal incomes: Over 85% of Africa’s workforce earns informally, through small businesses, daily labour, or gig work. This income is irregular, intermittent, and undocumented, so traditional credit scoring automatically excludes them.

• High interest rates: Mortgage rates over 25% are common, driven by currency depreciation and macroeconomic instability. Compare that to the 3% to 6% in developed markets.

• Short tenors: With capital scarce and expensive, many mortgages are 5 to 10 years, pushing monthly payments far beyond the reach of low- or even middle-income households.

• Deposit barriers: Large down payments and collateral requirements shut out most families.

• Currency mismatch: Where local capital is insufficient, some banks offer only dollar- or euro-denominated loans. For borrowers earning in local currency this is a potential financial time bomb.

The result is predictable: in Nigeria, a country of over 200 million people, fewer than 500,000 mortgages exist.

The capital problem

Even if mortgages were more inclusive, there is simply not enough capital to meet demand.

• The African housing finance gap is over $1 trillion.

• Pension funds and banks face regulatory limits, short-term liabilities and a lack of long-term, affordable funding.

• Many central banks discourage mortgage lending altogether, steering capital toward government debt.

The problem is not just in Africa. From India to Brazil, formal mortgage systems fail to meet the scale or structure of demand.

Rent-to-own: A model built for real lives

The question is not whether people will pay for their homes, after all everybody needs a place to live and most want the security of their own home. The question is whether we can create housing finance that suits how they actually earn.

Rent-to-own is one such model. It allows families to move into a home while paying rent and contributing on a variable basis toward eventual ownership, without the rigid requirements of a mortgage.

When designed to meet the needs of consumers, developers and investors, rent-to-own:
• Requires only a small upfront rental deposit.
• Aligns payments with variable and intermittent income patterns.
• Is used as a savings/investment tool instead of debt.
• Keeps fixed monthly costs in line with market related rents.
• Uses distribution channels closer to the communities served.
• Places the financial risk on the appreciating asset, not the “borrower’s” income stream.

In other words, it is finance aligned to market needs, perfectly suited for EMDE realities. 

Technology as an enabler

The barrier to scaling rent-to-own is not demand, but capital and distribution. Long-term, affordable funding is scarce locally and hesitant internationally due to currency volatility.

This is where new financial technologies, such as blockchain, can play a transformative role. By enabling transparent, low-cost, and verifiable transactions, it can connect both local and global capital directly to affordable housing finance in EMDEs. For example, stablecoin-based structures can mitigate exchange rate risk, giving investors confidence and contributing to affordability.

Technology alone will not solve the housing crisis in EMDE’s. But combined with consumer-aligned models like rent-to-own it can unlock scale and efficiency previously impossible.

Stop patching a broken system

The global housing crisis in EMDEs is not a gap to be filled with more mortgages. It is a call to design an entirely new system, one that works with the income realities, risk profiles and aspirations of the people it is meant to serve.

That means:

• Moving beyond rigid individual credit scoring based on non-existent data to a more holistic risk assessment supported by technology.

• Designing financial products around actual earning patterns rather than imported Western models.

• Aligning the interests of capital providers, developers and consumers from the outset.

The mortgage is dead in the Global South. It’s time we acknowledge it and built something better in its place.

The choice is stark: continue to defend a model that was never built for these markets, or embrace innovation that delivers financial inclusion, economic stability and the dignity of a home for hundreds of millions.

The world cannot afford another decade of inaction.

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