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Table of Contents 

Executive Summary .................................................................................................................................. 5 

A.  Introduction ......................................................................................................................................... 7 

B.  Background ......................................................................................................................................... 8 

B.1.  About Angola ................................................................................................................................... 8 

B.2.  Existing Access to Microfinance in Angola ..................................................................................... 10 

B.3.  Land Security in Angola .................................................................................................................. 10 

C.  Overall Results of the Market Assessment ....................................................................................... 11 

C.1.  Socio‐Economic Profile of the Sample ........................................................................................... 11 

C.2.  Household Income ......................................................................................................................... 13 

C.3.  Housing Quality .............................................................................................................................. 14 

C.4.  Enterprise Characteristics .............................................................................................................. 14 

C.5.  Availability of Informal Financing .................................................................................................. 15 

C.6.  Effective Demand for Formal Financial Services ............................................................................ 16 

C.7.  Potential Demand for Individual Loans .......................................................................................... 17 

C.8.  Potential Demand for Home Improvement Loans ......................................................................... 18 

D. Variations by Type of Employment................................................................................................... 19 

E.  Regional Variations ........................................................................................................................... 22 

F.  Gender Variations ............................................................................................................................. 25 

G. Market Opportunities ........................................................................................................................ 26 

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Table of Figures  Figure C‐1: Type of Employment ................................................................................................................. 11 

Figure C‐2: Sectors of Employment ............................................................................................................ 12 

Figure C-3: Educational Level .................................................................................................................... 12 

Figure C-4: Average Household Income and Repayment Capacity ........................................................... 13 

Figure C-5: Sources of Informal Loans ...................................................................................................... 15 

Figure C-6: Types of Formal Loans ............................................................................................................ 16 

Figure D-1: Categories of Employment ...................................................................................................... 19 

Figure D-2: Sectors of Employment by Type ............................................................................................. 20 

Figure D-3: Household Income and Repayment Capacity by Employment Type ...................................... 20 

Figure D-4: Use of Financial Services by Employment Type .................................................................... 21 

Figure E-1: Household Income and Repayment Capacity by Region ........................................................ 23 

Figure E-2: Use of Financial Services by Region ....................................................................................... 24 

Figure F-1: Use of Financial Services by Gender ....................................................................................... 25 

4

Currency Equivalent

Exchange rates for the Angola Kwanza (KZ):

U.S. Dollar (US$) = 75 KZ (Average rate for Oct – December 2008)

Acronyms

DIG Development Innovations Group GDP Gross Domestic Product KX KixiCrédito RoSCAs Rotating Savings and Credit Associations SACCOs Savings and Credit Cooperatives BFA Banco do Fomento de Angola BPC Banco de Poupanca e Credito DIG Development Innovations Group DRC Democratic Republic of Congo DW Development Workshop KZ Angolan Kwanza IDP Internally Displaced Person LUPP Luta Contra Pobreza Urbana Program (Urban Poverty Alleviation Program) MFI Microfinance Institution MPLA Popular Movement for the Liberation of Angola NBFI Non-Bank Financial Institution NGO Non-Governmental Organization OPEC Organization of the Petroleum Exporting Countries UNDP United Nations Development Program UNITA National Union for the Total Independence of Angola

5

Executive Summary The following report presents the results of a market demand assessment conducted in Angola to survey the landscape of financial markets in low-income communities with a particular focus on housing finance for the poor. The survey—conducted between October and December of 2008—considers the employment, geographic, and gender variables representative of Angola’s low-income population. Based on the survey results, the report provides an analysis of the types and nature of financial services that are currently available, effectively used, and potentially in demand; while at the same time examining current housing conditions and areas where appropriate financing can help support the development of this market. The survey was designed by the Development Innovations Group (DIG) and conducted in association with KixiCrédito (Angola), S.A. The market demand assessment for housing finance in Angola helps to shed light on both the effective and potential demand for financial services among the low-income population in general, as well as their particular needs and requirements for housing finance given the current housing situation in the country. The survey examined a range of economic agents, which included micro entrepreneurs, low-income salaried employees, and non-contract employees. By drawing respondents from a diverse range of urban settings the survey has based its results on a representative sample that takes into account several social and economic factors. A typical survey respondent is a 33-year-old head of household with four dependents living in the same house. The economic agent generally supplements his income with contributions from other family members, thus rendering the household’s cash on hand, after expenditures, on average in the amount of KZ 23,115. Additionally, the effective monthly repayment capacity is estimated at KZ 12,508, which could be used to gauge the amount of monthly loan repayments in order to meet current and future housing needs. In general, loan assessments involving monthly loan repayments up to this value reduce the risk of non-repayment among potential clients due to debt overburdening. Among the micro entrepreneurs in the sample, the majority are new business owners who have been running microenterprises for an average of five years. Microenterprises are predominantly sole proprietorships, typically with no hired labor. Mainly, they buy goods and raw materials in cash, seldom using supplier credit, and selling their goods in cash, with exceptional cases of micro entrepreneurs extending credit facilities to their clients. The most challenging problems reported by micro entrepreneurs are weak demand and infrastructure problems. Largely, respondents meet their current financing needs through the informal financial sector, primarily relying on family and friends, or in some cases employers or even money lenders, to borrow for a few months at a time. Some respondents reported participating in Rotating Savings and Credit Associations (RoSCAs) referred to as Kixikilas in the Angolan context. The vast majority of respondents have never requested a loan from a formal financial institution while more than half of the sample expressed a desire for formal loans. Of those very few who do have access to formal bank loans, about one-fifth used the loans for home improvement. There is, however, a much more dynamic market penetration by formal institutions when it comes to savings mobilization, with half of respondents holding a savings account. While the potential demand for financial services clearly exists, it has not been effectively translated into access to formal finance. This is due in part to a general unfamiliarity with and a lack of experience navigating the formal financial sector, as well as fears about the ability to repay and successfully meet financing requirements. The real barrier, however, largely resides in the lack of supply of suitable formal financial services and the inadequate delivery methods adopted by the traditional financial institutions.

6

For the most part, respondents were interested in undertaking some sort of housing improvement in addition to building or acquiring new homes in several cases. While there was a considerable interest in business and personal loans, it involved much smaller amounts. There are, of course, variations in the differing uses of and demand for financial services, particularly when examining different types of employment groups and regions. Among the most important variations are the differences in the repayment capacity, which is higher among employees than micro entrepreneurs, with laborers having the lowest repayment capacity of all groups. At the same time, employees have exhibited less use of formal loans. That said, when employees do borrow they have the highest loan amounts, making them a very interesting potential target market for housing finance. Employees demonstrated more use of savings services in banks than micro entrepreneurs and non-contract employees. This is likely due to the salary payment system that relies on direct bank deposits. In addition to assessing the potential demand for existing financial services among low-income earners, this study begins to identify opportunities for new financial products that can be developed to meet the specific needs of this market segment. When examining the housing sector niche in particular, this study clearly shows that there is ample room for expansion and growth. By assessing existing and potential housing loan demand, this study sheds light on the nature of this demand, giving specific indications with respect to the size, terms, conditions and costs of individual loans that respondents would be willing to take to meet their ongoing housing needs. Financial service providers who are willing to better understand the specific characteristics of low-income clients and the nature of their economic activities will be extremely successful in penetrating this new market. In particular, financial service providers should look at the estimated monthly repayment capacity, as a key indicator of the loan amounts and monthly repayment rates that on average could be afforded by the group.

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A. Introduction The Development Innovations Group (DIG), under a contract from the Bill and Melinda Gates Foundation, is undertaking an “action research” program in the area of housing finance for the poor in several countries around the world including: India, Indonesia, Mexico, Morocco, Pakistan, Angola, and South Africa. The program aims to provide donors, policy makers, and development finance practitioners with a better understanding of the housing markets in these countries to help shape future investments and efforts toward the promotion of housing finance for the poor in the developing world. As a part of the applied research strategy, DIG is conducting a series of assessments of low-income communities in select countries, with a particular focus on housing finance. These market assessments look at the variety of formal and informal financial services currently available, how they are effectively used, and the potential demand for additional products and services given existing and desired housing conditions. This market assessment report presents the results of the demand survey conducted in Angola. The survey was designed and conducted between October and December of 2008, in association with KixiCrédito (Angola) S.A , and covered a number of areas of enquiry ranging from an assessment of household income and expenditures, current access to financial services, and potential demand for housing specific financial products. The survey sample was constructed to take into account differences in employment categories, geography, and gender variables representative of Angolan low-income earners, which are viewed as significant determinants of variations within the population. The survey was conducted in the Angolan cities of Huambo and Cabinda.

Angola Map: Locations Where Assessment Conducted

KixiCrédito is the first non-bank microfinance institution (NBFI) in Angola. Since its inception in 1999, KixiCrédito quickly become the leading provider of microfinance in the country with an initial focus on solidarity group lending that has evolved in the past few years to also include a range of individual lending products for business capital, home improvement, household consumption as well as a loan targeted exclusively for government salaried employees. KixiCrédito targets low-income clients, with a

8

specific focus on women, in the urban and peri-urban areas of Angola1. Prior to its registration as a NBFI, KixiCrédito was registered as a commercial microfinance institution (MFI) in 2004 after transformation from its initial legal status as lending activity under the Development Workshop, the largest Angolan non-governmental organization (NGO). KixiCrédito is governed by a Board of Directors comprised of members from both the private sector as well the non-governmental (or non-profit) sector. KixiCrédito is a wholly owned subsidiary of the Development Workshop.

B. Background

B.1. About Angola

Angola is located on the western cost of Africa, bordering the Democratic Republic of the Congo (DRC) in the north and east, Zambia further in the east, Namibia in the south and the Atlantic Ocean in the west. The country is divided into 18 provinces and 163 municipal administrations. The province of Cabinda is an enclave, separated from the rest of the country by the DRC. The capital of the country is the city of Luanda located in the province with same name.

The nearly three decades of civil war that Angola experienced following its independence from Portugal in 1975 had far-reaching and devastating consequences. Fighting between the Popular Movement for the Liberation of Angola (MPLA) led by Jose Eduardo Dos Santos and the National Union for the Total Independence of Angola (UNITA) led by Jonas Savimbi, among various other factions, resulted in the deaths of half a million Angolans and the internal displacement of up to 3.7 million more.2 Another 500,000 refugees were forced to flee into neighboring countries, mostly to the DRC, Zambia, and Namibia and some also to Botswana and South Africa.3 Peace for Angola was declared in February 2002, following the death of UNITA leader Savimbi. Six years later, in September 2008 President Dos Santos held the nation’s first legislative elections in 16 years and announced plans for presidential elections in 2009. However, the new peace highlighted multiple and serious challenges previously obscured by the immediate demands of war. For example, after routinely allocating significant portions of the Angolan national budget to defense and security over the course of

1 Until late 2008, KixiCrédito operated from five branch offices located in the municipality of Luanda as well as two branches in the central highland municipality of Huambo. As part of their rapid growth expansion for 2009-2010, KixiCrédito is opening five new branch offices in the cities of Huambo (January 2009), Kuito (January 2009), Benguela (February 2009), Cabinda (February 2009), and Soyo/Zaire (March 2009). 2 Jamal, A. and Stage, O. (2001, May). UNHCR’s program for internally displaced people in Angola, a joint Danita/UNHCR review. United Nations High Commissioner for Refugees Evaluation and Policy Analysis Unit (8). Retrieved February 12, 2009 from http://www.unhcr.org/research/RESEARCH/3b13a0f91.pdf. 3 Angola Humanitarian Country Profile. (2007, March). IRIN. Retrieved February 12, 2009 from http://www.irinnews.org/country.aspx?CountryCode=AO&RegionCode=SAF.

General Overview Economic Overview

Government: Republic GDP ($billions) 95.95

Capital City: Luanda Agriculture: 9.20%

Population (millions) 12.5 Industry: 65.80%

0‐14 years 43.6% Services: 24.60%

15‐64 years 53.6% GDP Growth (%) 15.00

65 years and over 2.7% Labor Force (millions) 7.29

Area (sq. km.) 1,246,700 Imports ($ billions) 15.25

Currency: Kwanza Top 3 import partners Portugal, USA, China

Exchange Rate: $1 = 75 Exports ($ billions) 72.58

GDP per Capita ($): 9,100 Top 3 export partners USA, China, France

*official exchange rate

9

the civil war, the government was left with precariously low levels of financial capital.4 Furthermore, the war had prevented the state from acting accountably and distributing resources equitably. The ensuing lack of confidence at the national level regarding transparency, stability and coherence adversely affected institutional development, carrying negative implications for the supply and demand of financial services. Although institutional regulation and supervision have significantly increased in the years since the war (at the Finance Ministry, most notably), the outside perception of Angola’s ability to govern effectively remains skeptical. Moreover, much of the country's infrastructure remains damaged or undeveloped from the war and millions of Angolans still lack access to financial markets.5 During the war, impediments in getting to the markets and securing sources of food pushed households previously hovering above the poverty line into situations of deprivation and distress. Between 1995 and 2000 alone, the number of “extremely poor” households in Angola increased from 11.3 to 24.7 percent.6 In 2005, the government began utilizing a $2 billion line of credit, since increased to $7 billion, from China to rebuild Angola’s public infrastructure, and several large-scale projects were completed in 2006. Angola also has large credit lines from Brazil, Portugal, Germany, Spain, and the European Union. Nonetheless, two-thirds (66 percent) of the population in Angola currently lives below the poverty line and a quarter (26 percent) lives in extreme poverty.7 The predicament has thus worsened since the end of the war. This is incongruous with Angola’s status as one of Africa’s top oil exporters. Despite oil production-driven real growth of 15.1 percent8, Angola remains one of the poorest countries in the world. Furthermore, the majority of the population has, at best, precarious access to basic services: 59 percent of Angolans lack access to potable water, 60 percent are without sanitation, and 76 percent do not have access to healthcare. Twenty-two percent of the population requires some degree of food aid while 13 percent suffer from malnutrition.9 Additionally, although 98 percent of internally displaced Angolans have been resettled and approximately 68 percent of the refugees have returned, of the latter, only 22 percent have been fully resettled.10 The Development Workshop reports that informal settlements in Angola’s urban and peri-urban areas grew with successive waves of refugees fleeing the countryside. In Luanda, the population doubled to 4 million inhabitants in the 10 years following the mid-1990s.11 Sixty percent of Angola now resides in its cities with 75 percent of those residents living in the musseques (informal settlements) and almost completely lacking in basic services. The overwhelming majority of musseque-dwellers are self employed in the informal sector. Seventy-eight percent of these households have at least one member working in the informal sector. Over half of the households comprising the musseques are headed by women and 83 percent of these are engaged in trade.12 4 For example, the IMF estimated that 36% of the 1997–8 budget was spent on defense. Colliers, Jackie and Christian Dietrich, Eds. (2000). Angola's War Economy: The Role of Oil and Diamonds. Pretoria, South Africa: Institute for Security Studies. 5 Nagarajan, Geetha. (1998). Developing MF Institutions in Conflict-Affected Countries: Emerging Issues, First Lessons Learnt and Challenges Ahead. ILO, Geneva. 6 Angola government 2000 Household Income and Expenditure Survey. 7 Extreme poverty in Angola is measured using calorie intake as a proxy for well-being and can be defined as a recommended daily allowance of 2,200 kilocalories, as set forth by the Food and Agriculture Organization. Renner, S. and Simeon, H. (14 September 2004). How to define and measure extreme poverty? Retrieved 12 February 2009, from http://www.undp.org.my/uploads/How%20to%20define%20and%20measure%20extreme%20poverty.pdf. 8 Real Growth Rate: 15.1% (2008 est.) 9 Diagnosis of Fiscal Decentralization in Angola, UNDP (August 2006) 10 Angola Millennium Goals Summary, UNDP (2005) 11 Development Workshop (2005). Terra- urban land reform in post-war Angola. Development Workshop Occasional Paper No 5, Luanda 12 UNDP. (2000). Poverty Alleviation Policy in Angola: Pursuing Equity and Efficiency

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In an effort to alleviate such circumstances, donor funds for humanitarian aid flooded into Angola directly in the aftermath of the conflict. Ironically, the funds served to further reduce the need for local resource mobilization and contribute to hyperinflation. For example, the influx of funds during Angola’s brief respite in fighting between 1994 and 1998 contributed to peak inflation of 3,783 percent in 1995.13 Due to government efforts, however, the consumer inflation declined from 325 percent in 2000 to 13 percent in 2008. Nonetheless, the stabilization policy has put pressure on international net liquidity. Angola became a member of Organization of the Petroleum Exporting Countries (OPEC) in late 2006 and in late 2007 was assigned a production quota of 1.9 million barrels a day.14

B.2. Existing Access to Microfinance in Angola In 2004, the United Nations Development Program (UNDP) estimated that around 530,000 potential microfinance borrowers in Angola did not have access to financial services.15 To date, NGO microfinance initiatives in Angola (aside from KixiCrédito and DW) have reached a minimal number of clients and have focused primarily on agricultural lending in rural areas. Some NGOs have partnered with commercial banks, notably (1) Acção para Desenvolvimento Rural e Ambiente (ADRA) and Banco Sol, (2) Cooperative League of the USA (CLUSA) and Banco Sol, and (3) World Vision and BPC. In regards to the formal banking system, it does exist in Angola but it is highly concentrated in the capital and on the wealthiest segments of the population. There are currently less than 500,000 bank accounts and 15,000 outstanding loans in all of Angola.16 The lower segment of the market is primarily serviced by low income initiatives from commercial banks seeking to further expand their activities and relatively small scale NGO lending.17 It is noteworthy to mention that UN Habitat is establishing a national office in Angola. Responsibilities for the office will include encouraging international cooperation to implement the Habitat Agenda in the country, cooperate with regional and international organizations, national government, local authorities, civil society institutions and private sector and promote the implementation of UN-HABITAT global programs and global campaigns in Angola.18

B.3. Land Security in Angola

All land in Angola, in principal, belongs to the state under the constitution drafted upon the country’s independence from Portugal in 1975. In practice, citizens have surface occupation rights and can become effective owners through long-term, renewable concessions. Until the passage of a new land law in 2004, the legal framework for land rights was, in practice, largely ignored as the real estate system was more or less paralyzed by the war.19 The Land Law of 2004 intended to establish a three-year window within which occupants must register their land and acquire formal title in order to protect their assets.20 The opportunities to formally obtain a building lot from the government, however, are very limited. Of the 300 applications that the authorities receive in Luanda every month, only about 30 are processed. The 13 Wilson, Tamsin. (March 2002). Microfinance During and After Armed Conflict: Lessons from Angola, Cambodia, 14 Oil Production is 85% of Angola’s GDP. (CIA World Fact Book; www.cia.gov) 15 UNDP, Angola Enterprise Program, Microfinance Component, 2004 16 Government of Angola: United Nations Development Program. (2007). Angola Enterprise Program: Microfinance Component. 17 KixiCredito Business Plan for 2008-2010 18 www.unhabitat.org (March 2009) 19 SOS Habitat. (May 2007). They Pushed Down the Houses: Forced Evictions and Insecure Land Tenure for Luanda’s urban Poor, 19(7). 20 Cain, Allen. (2007). Housing microfinance in post-conflict Angola. Overcoming socioeconomic exclusion through land tenure and access to credit. International Institute for Environment and Development, 19(2), 461-390

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13

More than half of respondents reported owning their homes (53%) while more than a third of the sample indicated occupying rentals (37%) and a small percentage of respondents have free of charge housing (10%). Additionally, the majority of homeowners reported holding registered title deeds (58%), however this percentage seems to be high based on the fact that many homeowners hold land security in Luanda, enumerators could have combined both title deeds and land security. Some homeowners reported holding an agreement between two parties (7%), or a registered sales contract (8%). Lastly, more than a quarter (25%) holds no ownership documents, (Table A18). Interestingly, the vast majority of homeowners reported having built the house. Also, it is important to highlight that the vast majority of dwellings were built or purchased using personal savings (93% and 90%, respectively). Of those who constructed their homes, a very small percentage (2%) used formal loans, whereas none of those who reported purchasing their homes used formal loans (Table A18).

C.2. Household Income In general, households were comprised of a head of household (the main income earner) who supports an average of four dependents. The average monthly income generated by the respondent from his/her primary source of income was KZ 39,305 (KZ 30,000 median), and KZ 3,682 (0 median) from a secondary source of income. Some respondents reported an average supplementary income from their spouse’s activities of KZ 10,834 (0 median), from other sources of KZ 719 (0), and/or from other family members of KZ 2,277 (0 median). The gross household income averages KZ 56,367 (KZ 46,000 median) with total household expenses averaging KZ 33,732 (KZ 30,475 median). These figures yield a net household income after expenses of KZ 23,115 (KZ 12,837 median), (Table A3). Using these figures we can calculate an estimated monthly repayment capacity (based on one-fourth of total gross income) equal to KZ 14,091 (KZ 11,500 median). To get a more conservative figure, we calculate the effective repayment rate by comparing the estimated monthly repayment capacity with the net household income after expenses and taking the lower amount of the two. This yields an effective monthly repayment capacity for the sample of KZ 12,508 (KZ 10,000 median), (Table A3 and Figure C-4). The household effective monthly repayment capacity is indicative of the minimum cash on hand available within the household after netting out all expenses. This excess liquidity could be drawn upon to cover the costs of any emergencies or to service a potential debt. The monthly installment on any future loan should not exceed the value of this available cash.

Figure C-4: Average Household Income and Repayment Capacity

56,367

33,732

23,115

14,091

12,508

0 20,000 40,000 60,000

Monthly Income 

Monthly Expenses

Monthly Net Income

Monthly Repayment Capacity

Effective Repayment Capacity

14

C.3. Housing Quality

Respondents reported having an average of four rooms for five inhabitants in their houses (Table A18). The vast majority of the respondents (78%) stated that their homes have a roof. Kitchens are typically inside the home (69 %) and bathrooms are often outside (69%). Walls are usually unstable (70%), only 30 percent of the walls are made of concrete. Very few homes are connected to public or private water connections (14%) or a local water line (4%), while the majority of the homes are connected to a water tank (33%) or have access to a local water well or truck (43%). Slightly more than a third of the respondents reported having access to formal electric supply (37%), two-fifth of the homes are self-generated (43%), while a considerable percentage (13%) reported living in houses with no electrical wiring (13%) (Table A18).

C.4. Enterprise Characteristics More than half of the respondents identified themselves as entrepreneurs or self employed (53%), (Table A1). On average, these microenterprises have been in operation for about five years, having started with an initial investment of KZ 68,360 (KZ 12,000 median) and now owning physical assets with a present market value of KZ 48,739 (KZ 5,000 median), excluding land and buildings (Table A4). Additionally, micro entrepreneurs pay on average KZ 803,328 (KZ 45,220 median) annually to cover their various operational expenses, (Table A4). The low medians of the physical asset value and operational expenses indicate a large variation among entrepreneurs and in the scale of their operations. Similar to entrepreneurial activities in many countries, start-up funds for businesses in Angola are largely self-financed by the entrepreneur (69%) from their own savings (Table A6). A very small number of micro entrepreneurs reported taking loans from Rotating Savings and Credit Associations (RoSCAs) known as KixiKila in Angola (2%) or from friends and family members (12%). It is important to highlight that none of the entrepreneurs borrowed formally to establish their business (Table A6). The majority of businesses are solely operated by their owners (83%) with no other employees. Those who have hired labor reported an average annual labor cost (both part and full-time) of KZ 52,681 (KZ 26,500 median), (Table A4). Additionally, the majority of microenterprises are proprietorships (98%), with only a few partnerships (2%). Moreover, only one-third are registered businesses (31%) (Table A5). More than half of the micro entrepreneurs indicated renting the business location (53%), while almost a quarter own the business site (23%), and yet a few are home owners and operate their businesses out of their homes (14%), (Table A5). All micro entrepreneurs reported purchasing raw materials or goods for their businesses. The average annual value of these purchases reached KZ 539,991 (KZ 240,000 median), (Table A7). All respondents reported paying in cash (100%) while a very small percentage of entrepreneurs reported using supplier credit (2%), paying in advance (1%) and purchasing on consignment in addition to cash payment transactions, (Table A8). The average annual value of sales among microenterprises is KZ 776,970 (KZ 391,000 median), (Table A9). Similar to their purchasing arrangements, micro entrepreneurs sell their goods on a cash basis (100%) (Table A10). However, almost one-fifth of the entrepreneurs (18%) reported extending credit for goods as well, which is a common mechanism used by micro entrepreneurs to promote their sales. Consignment (6%) and advance sales (1%) were not commonly reported among the sample (Table A10). The primary business challenges that the micro entrepreneurs reported in the survey include: weak demand (21%), weak surrounding infrastructure (10%), domestic competition (8%), unavailability of

15

financing sources (8%) and various supplier problems (7%). C.5. Availability of Informal Financing

(1) Effective Demand for Informal Loans

Respondents were asked about their general use of alternative financial services to reflect how low-income economic agents are able to meet their demand for financial services outside of the formal financial sector. Almost half of the sample (47%) reported having requested a loan at some point in the past from an informal source including friends (37%), family (35%), employers (25%), and moneylenders (2%), (Figure C-5 & Table 12). Therefore, while most start-up businesses reported to be self-financed, it is clear that informal borrowing is a rather widespread financial management practice that is used by a fairly sizable percentage of households within the low-income group. When asked about the use of informal loans over the past 12 months, slightly less than half of the sample (44%) reported using such loans, again validating a relatively active demand for loans by the low-income group that is currently being supplied by informal providers (Table A12). These informal loans were typically disbursed within four days. The average value of these loans is KZ 22,106 (KZ 12,000 median) with an average interest rate of 3% (0 median) and a three-month repayment period due to the fact that only 29 percent of those receiving informal loans actually paid interest. The average effective interest amounted to 11 percent (6 percent median). Clearly this is significantly dependent on the source of informal loans. The average value of collateral used as a percentage of the loan amount was 35 percent (0 median). The variation in the value of collateral as a percentage of the loan amount was due to the fact that only 30 percent of borrowers were required to present collateral. These informal loans were used for a variety of purposes, including largely personal (61%), business (33%), and housing (6%) (Table A12).

Figure C-5: Sources of Informal Loans

(2) Participation in Informal Groups

In addition to individual loans from friends and family, other informal savings and credit channels such as Rotating Savings and Credit Associations (RoSCAs) play an important role in household financial management among low-income households. In Angola, RoSCAs are known as Kixikilas. The survey indicates that many respondents (12%) reported participating in informal savings and loans groups or money transfer schemes. These groups are generally comprised of 9 members and have been in operation for an average period of 9 months (4 months median), (Table A16). On average, the members of the group make three monthly contributions of KZ 6,786 (KZ 5,000 median) which amounts to a yearly contribution and payout of KZ 214,842 (KZ 120,000 median), (Table A16).

25%

37% 35%

2% 1%0%5%

10%15%20%25%30%35%40%

employer Friends Family Money Lender

Other

16

Additionally, many respondents (15%) reported saving with informal collectors at an average amount of KZ 111,013 (KZ 44,675 median) annually, (Table A16). Contributions with pension funds are relatively common as one-fifth of respondents (20%) reported making regular contributions from their salary. Although remittances are common among the low-income population worldwide, only a small group of the sample (9%) reported receiving remittances at an average of KZ 103,669 (KZ 84,000 median) annually, despite the fact that 27% reported sending and receiving money transfers domestically via Western Union, Banks, and others (Table A16).

C.6. Effective Demand for Formal Financial Services

Respondents were also asked an array of questions regarding the availability and use of formal financial services in order to better understand the obstacles that low-income groups face in accessing the financial sector. Not surprisingly, the vast majority of respondents (90%) reported never having requested a formal loan from a bank or other formal financial institution (Table A13). The main reason for not applying for a formal loan is fear of the inability to repay (33%), followed by a lack of bank relations (15%), and a perception of high interest rates and fees (11%), (Table A13). This trend of self-selection from the formal credit market by low-income groups in Angola is not unique and is similar to the behavior exhibited by low-income earners around the globe. Of the total sample, only a small percentage (1%) reported being denied access to formal loans. The main reason for rejection was the lack of required financial documents (60%), followed by lack of business registration (20%). Very rarely (1%), respondents reported not collecting an approved loan from the bank due to fear of being unable to repay (Table A13). Of the few respondents (8%) who reported taking a formal loan over the past three years (Table A14) the majority (67%) used them for business purposes, while the rest reported using the loans for home improvements (16%) and for personal purposes (17%), (Table A14 and Figure C-6). The majority of this sub-sample with formal loans (81%) is currently repaying a loan. The bulk of these loans were provided by KixiCrédito S.A. (69%), and the remainder were distributed among various banks; BPC (17%), Banco Sol (7%), BIC (5%), and BFA (2%), (Table A14).

Figure C-6: Types of Formal Loans

The average size of formal loans used by the respondents over the past three years was approximately KZ 130,129 (KZ 72,950 median) with an annual interest rate of 13 percent (15 percent median) (Table A14). The average installment value was KZ 10,023 (KZ 8,662 median) associated with 15 installments (10 median) and an average 12-month term (9 months median). The borrowers typically provided up to 58 percent (100 percent median) of the loan value as collateral (Table A14). In fact, a quarter reported not

67%

17% 16%0%

0%

20%

40%

60%

80%

Business Loan Cash/Personal Loan

Home Improvement 

Loan

Mortgage Loan

17

presenting any kind of collateral while a variety of different types of collateral were provided including inventory (22%), employment letter (19%), land (10%), and houses (9%), (Table A14). The average monthly payment is in line with the effective repayment capacity. And the loan characteristics are reflective of the existing KixiCrédito loans’ parameters since 69% of the surveyed borrowers are previous or current KixiCrédito clients. It is important to highlight that while there is limited use of formal loans among low-income earners, almost half of the respondents (44%) reported holding a deposit account with a bank (Table A15). Typically, each respondent holds on average one account.

C.7. Potential Demand for Individual Loans

Informal social structures and formal financial institutions provide an array of mechanisms which can be used by low-income economic agents to meet their financing needs. The survey identifies the current use of these alternative financial services as “effective demand” given that it is based on the real transactions in the market. However, the survey also goes beyond this demonstrated demand in an attempt to identify the terms, conditions and services, which are either currently unavailable or perceived to be so by the target population, which if available would spur latent or potential demand for financial services. Of the respondents who were asked about their interest in accessing a loan from a bank, slightly more than half (53%) of the sample responded positively (Table A17). Those respondents reported an average loan amount of KZ 5,939,601 (KZ 150,000 median). The high variation is due to the fact that 12 percent of these respondents (44 observations) reported their desire to receive large loan amounts. Further analysis was performed on the sample to examine the related data by loan amount category. Therefore, the 44 observations were omitted in order to better understand the demand of low-income groups for individual loans as well as the favorable terms and conditions that suit their repayment capacity. Among those who expressed interest in accessing individual loans with a limit of one million KZ (47%), the highest demand was for business loans (82%), followed by personal loans (25%). Respondents interested in taking business loans reported desired potential loan amounts of KZ 207,460 (KZ 130,000 median) with a 16-month (12-month median) average repayment term (Table A’17). Lastly, respondents interested in accessing personal loans in the future reported being interested in average loan amounts of KZ 317,202 (KZ 200,000 median), and an average loan term of 17 months (13 months median), (Table A’17). Respondents interested in taking an individual loan for a variety of purposes reported a willingness to pay an average annual interest charge of 6% (4% median) with processing fees of 4% (2% median) for an average loan amount of KZ 236,182 (KZ 150,000 median) with a monthly installment of KZ 19,747 (KZ 11,250 median). Additionally, respondents reported that they could provide various types of collateral including fixed assets (36%), salary guarantees (24%), guarantors (9%), jewelry (5%), bank accounts (4%), furniture, vehicle, machinery and others. Lastly, when asked about their preference for requesting a formal loan from a bank or a micro lender, the majority of the respondents (59%) preferred taking a loan from a microfinance lender, more than a third (37%) reported their preference to access a loan from the banking sector while a very small percentage of those respondents indicated being interested in requesting a loan from the government (3%) or a cooperative (1%), (Table A’17).

18

C.8. Potential Demand for Home Improvement Loans More than one-third of the sample (36%) reported having undertaken home improvements over the past five years, (Table A19), and spending an average of KZ 120,730 (KZ 53,500 median). These improvements included activities such as painting (67%), flooring (50%), fixing windows (49%) and doors (46%), fence construction (35%), room addition for household purposes (33%), ceiling rehabilitation (32%), internal electricity installation (27%), and home registration (25%). The majority of households reported having financed these improvements with personal savings (86%), while few (8%) used formal and informal loans (1% and 4% respectively) or relied on government subsidies (6%) and family assistance (2%), (Table A19). When respondents were asked specifically about their plans for future home improvements over the next five years, more than one-third of the respondents (37%) reported an interest in undertaking a home improvement (Table A20) indicating a much lower level of interest than when asked about generic purpose individual loans. The vast majority of the respondents (71%) indicated that they would use the funds for painting, while many would repair their floors (59%) and doors (39%), build additional rooms for household and business purposes (35% and 29% respectively), fix the internal water system (31%) and electricity (32%), build a fence (32%), and register their homes (32%). On the whole, they estimated an average cost of improvements totaling KZ 117,873 (KZ 75,000 median). Some respondents (13%) suggested that they could complete the work without hiring labor and thus save on labor costs. Respondents reported having an average value of KZ 35,978 (KZ 15,000 median) in savings that they could use towards home improvements. Few respondents reported an interest in formal or informal home improvement loans (8% and 7% respectively). These respondents indicated that they would be able to make average monthly loan installments of KZ 13,828 (KZ 8,000 median) to repay the home improvement loan which is in line with the average effective monthly repayment capacity (Table A20). The survey further investigated the interest of homeowners, landowners, and renters, in acquiring or constructing a new house. About one-fifth of homeowners (19%) indicated a willingness to move to an existing house or build a new house. However, this group estimated that a house costs KZ 6,779,084 (KZ 750,000 median), (Table A22). The high variation is due to the fact that 9 percent of these homeowners (27 observations) reported elevated housing costs. These respondents were omitted from the study to facilitate the assessment of low-income groups’ housing needs and demand. The remainder of the original sub-sample interested in moving to or building a new house, amounts to 12% of the homeowners, (Table A22). These respondents indicated an average housing cost of KZ 624,545 (KZ 475,000 median). The vast majority of these homeowners (98%) are planning to build the new house. Few respondents are willing to build it with family and friends (9%) in order to save the construction cost. Respondents would be willing to repay an average monthly installment of KZ 27,232 (KZ 18,750 median) to repay an average housing loan of KZ 534,556 (KZ 475,000 median) over a 28-month repayment period associated with an average interest rate of 7% (5% median) with processing fees of 7% (3% median). Lastly, homeowners who were interested in moving to a new house reported an average resale value of their present house of KZ 513,522 (KZ 475,000 median) and an average savings value of KZ 45,238 (0 median) that could be used towards the cost of the new house, (Table A22). The majority of homeowners not interested in future housing loans indicated being satisfied with current housing (67%), while few respondents reported their preference to save money that could be used in the future for new housing acquisition, (Table A22). Of those who currently rent (37% of the total sample) or live free of charge (10% of the total sample), more than half (57%) were interested in acquiring land to build a house, (Table A21). But this figure went down to 37% since 33% of this subsample who reported large housing loan amount (60 observations) were eliminated from the study, (Table A’21). The average cost of the new house averaged KZ 558,273 (KZ 375,000 median). The majority of these respondents (96%) are planning to build the new house rather than purchasing a completed one. For those who do not own land for this purpose

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19

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20

When examining the sectors of employment, significant differences arise. While the vast majority of entrepreneurs are concentrated in the trade (95%) sector, employees and non-contract employees are highly concentrated in the services sector (85% and 79% respectively). Figure D-2 depicts the variations in types of employment across economic sectors.

Figure D-2: Sectors of Employment by Type

Among the three employment categories, it is interesting to note that there is little difference in total average monthly income from the main economic activity between employees (KZ 40,937) and micro entrepreneurs (KZ 40,921) who both earn close to two times that of a non-contract employee (KZ 23,109), which yield significant difference for non-contract employees who indicted a lower household monthly income (KZ 35,406) than micro entrepreneurs (KZ 56,985) and employees (KZ 60,502). Thus, micro entrepreneurs and employees have a marked higher effective monthly repayment capacity (KZ 12,597 and KZ 13,517 respectively) than non-contract employees (KZ 7,753), (Figure D-3).

Figure D-3: Household Income and Repayment Capacity by Employment Type

95%

0%5%

0%6% 8%

85%

1%8% 10%

79%

3%0%

20%

40%

60%

80%

100%

Trade Manufacturing Services  Agriculture

Entrepreneurs Employees Non‐Contract Employees

56,985

32,771

24,571

14,246

12,597

60,502

37,269

23,984

15,125

13,517

35,406

24,402

11,050

8,851

7,753

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Monthly Income 

Monthly Expenses

Monthly Net Income

Monthly Repayment Capacity

Effective Repayment Capacity

Non‐Contract Employees Employees Entrepreneurs

21

D.2. Housing Quality

Across the various types of employment, respondents reported similar housing conditions. The vast majority of homeowners among the three employment groups reported having used savings as the major source of financing for current home acquisition. Non-contract employees, in particular, live in the most run-down type of housing; many reported residing in houses with mostly unstable walls, with bathrooms and kitchens outside the house, and have no access to electric power supply. While more than one-third of micro entrepreneurs (34%) and employees (42%) undertook home improvements over the past five years, only one-fifth of the non-contract employees reported having undertaken basic home improvements, mainly connection to an outside water line or electric power supply.

D.3. Use of Financial Services The use of and demand for financial services from the informal and the formal sectors varies to some degree by type of employment (Figure D-4). While the trends generally are not too diverse, there are some variations especially in the use and access to particular financial services.

Figure D-4: Use of Financial Services by Employment Type

Results of the survey indicate that over the past year, micro entrepreneurs have had a slightly higher rate of borrowing (51%) from informal sources than employees (44%) and non-contract employees (44%). However, non-contract employees indicated loan amounts that are smaller (KZ 14,836) than those of other employment types (KZ 24,112 for micro entrepreneurs and KZ 21,182 for employees). This is mirrored in the non-contract employees’ lower repayment capacity. At the same time, friends and family are the predominant sources of informal loans for all respondents regardless of the type of employment.

44%

11%

27%

15%

54%

44%

14%

41%

51%

6%

70%

10%

38%

31%

9%

36%

44%

5%

27%

6%

40%

25%

9%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Informal Loans Formal Loans Savings Informal Groups Demand for Individual Loans

Potential Home Improvement

Demand for Housing Loans 

for Homeowners

Demand for Housing Loans for Non‐Owners

Entrepreneurs Employees Non‐Contract Employees

22

When it comes to borrowing, most respondents do not see the formal financial sector as a source of financing to meet their personal and business needs. This is demonstrated by the low participation rate in the formal credit markets over the past three years. The reasons for not requesting a formal loan vary among the respondents; the reason most noted by entrepreneurs and non-contract employees was the fear of being unable to repay the loan (46% and 42% respectively), while one-third of the employees (33%) noted they had never needed a loan. However, self-selection outside financial markets varied to some degree by type of employment in Angola; two-thirds of the respondents (39 observations out of 58 borrowers) who had access to a formal loan in the past three years were micro entrepreneurs (67%). Though, employees borrowed higher loan amounts averaging KZ 237,325 (KZ 165,740 median), followed by micro entrepreneurs at KZ 94,757 (KZ 71,250 median), and non-contract employees at KZ 18,250 (KZ 18,750 median). Micro entrepreneurs reported paying the lowest interest rate at 11 percent, while the interest rate paid by employees and non-contract employees was 16 percent. Not-surprisingly, the majority of employees (70%) reported holding deposit accounts with banks while only a quarter of micro entrepreneurs (27%) and non-contract employees (27%) hold deposits in banks and formal financial institutions. Potential demand for individual housing loans from the formal sector is relatively high across all types of employment. Business loans were the most in demand across all employment types, with almost all micro entrepreneurs reporting demand for business loans (99%), followed by non-contract employees (68%) and employees (51%) who expressed a higher demand for personal loans (55%) than non-contract employees (32%) and micro entrepreneurs (5%). Although entrepreneurs reported an overwhelming demand for business loans, employees reported much high business loan amounts averaging KZ 290,931 (KZ 225,000 median) compared to micro entrepreneurs at KZ 191,355 (KZ 100,000 median) and non-contact employees at KZ 143,676 (KZ 112,500 median). Across all types of employment, respondents expressed a higher interest in undertaking home improvement than moving or constructing a new house. This interest was quite higher among micro entrepreneurs (44%) compared to employees (31%) and non-contract employees (25%). Additionally, employees were willing to pay the highest cost to complete potential home improvements (KZ 134,790) followed by micro entrepreneurs (KZ 111,738), and finally non-contract employees (KZ 93,193). For those who currently rent their homes or live for free, the potential demand for housing loans was relatively insignificant among non-contract employees (3%) while micro entrepreneurs and employees expressed a marked higher demand for housing loans (41% and 36% respectively). This would seem to be mirrored by their low repayment capacity. Finally, homeowners’ new housing demand was not deeply rooted across all employment groups. However, it was higher among entrepreneurs (14%) than employees and non-contract employees (9% both). E. Regional Variations

Respondents in the survey were selected from two urban areas in Angola, namely Huambo (58% or 401 observations) and Cabinda (42% or 291 observations). Given the vast distances between and the diversity among these different geographic areas, it is not surprising that there were considerable regional variations that need to be taken into account.

23

E.1. Socio-Economic Despite the fact that monthly expenses were higher in Cabinda, the average total monthly income for the respondents was higher in Huambo. Thus, the effective repayment capacity of the respondents was relatively lower in Cabinda (KZ 11,263) than Huambo (KZ 13,419). The sectors and type of employment do not vary significantly. Nonetheless, employees were more concentrated in Cabinda (46%) than Huambo (33%) whereas micro entrepreneurs are more predominant in Huambo (59%) than Cabinda (42%). Also, it is noteworthy to mention that all the manufacturing and agriculture activities are concentrated in Cabinda. This would seem to be related to the nature of the economic activities of the area.26 Examination of household income and expenses sheds further light on household cash flows and the differences in net income across the regions. Some of the indicators across the two regions are depicted in the following chart (Figure E-1).

Figure E-1: Household Income and Repayment Capacity by Region

Results of the survey show that home ownership varies widely throughout the two different areas. The majority of the respondents in Huambo are homeowners (71%) while slightly more than a quarter own their homes in Cabinda (28%) where more than half of the respondents (56%) reported renting their houses.

E.2. Housing Quality The study reported some variations in the housing conditions across the two urban areas. More than one-third of the houses in Huambo (36%) have no stable roof, while the overwhelming majority in Cabinda (94%) reported living in a house with a stable ceiling. Additionally, access

26 Cabinda produces hardwoods, coffee, cocoa, crude rubber and palm oil. And the product for which it is best known, however, is its oil.

58,628

31,647

27,316

14,657

13,419

53,252

36,604

17,327

13,313

11,263

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Monthly Income 

Monthly Expenses

Monthly Net Income

Monthly Repayment Capacity

Effective Repayment Capacity

Cabinda Huambo

24

to a formal power line is very limited in Huambo (16%) while two-thirds of the houses in Cabinda are connected to a formal electric supply. Moreover, the kitchen and bathroom in Cabinda are likely located outside the house (47% and 89% respectively), whereas a considerably higher percentage of the respondents in Huambo reside in houses with kitchens and bathroom inside the house (80% and 45% respectively). When looking at the home improvements, slightly more than a quarter of the respondents in Cabinda (27%) undertook home improvements over the past five years, while two-fifths of the respondents in Huambo (41%) carried out construction and refurbishment works in their houses.

E.3. Use of Alternative Financial Services The use of financial services varied to some degree across the two regions (Figure E-2).

Figure E-2: Use of Financial Services by Region

Results of the survey showed that participation in informal groups varied and was markedly higher in Cabinda (23%) than Huambo (4%). Whereas there was a similar trend in the large use of informal loans in Huambo and Cabinda, the use of formal loans was almost absent in Cabinda (1%). Access to formal loans in Huambo was relatively higher (14%). This would seem due to the fact that the majority of the borrowers were existing KixiCrédito clients (40 of the 58 respondents) who were located in Huambo. Also, more than half of the respondents in Huambo (53%) hold at least one bank account, while less than one-third of the sample in Cabinda reported holding deposits with banks. In contrary with effective use of formal loans, demand for individual loans was higher in Cabinda. The demand for business loans was higher than the demand for personal loans across the two different areas. However, respondents in Cabinda reported higher demand for business loans (88%) than the respondents in Huambo (76%). The high demand in Cabinda was associated with higher business loan amounts averaging KZ 266, 705 (KZ 150,000 median) compared to KZ 145,000 (KZ 93,000 median) in Huambo. However, respondents in Huambo indicated that they could pay higher monthly installments associated with lower loan amount values. This could seem to be mirrored by the higher repayment capacity of the

48%

14%

53%

4%

42%

51%

9%

38%

46%

1%

30%23%

53%

18%22%

37%

0%

10%

20%

30%

40%

50%

60%

Informal Loans

Formal Loans Savings Informal Groups

Demand for Individual Loans

Potential Home 

Improvement

Demand for Housing Loans 

for Homeowners

Demand for Housing Loans 

for Non‐Owners

Huambo Cabinda

25

respondents in Huambo. Finally, the interest in undertaking home improvement is markedly higher in Huambo (51%) than Cabinda (18%). However, respondents who do not own a house were highly interested in accessing a housing loan in both cities (38% in Huambo, 37% Cabinda), while homeowners’ new housing demand varied and were higher in Cabinda (22%) than Huambo (9%). This corresponds with a period of extensive post-war repair and reconstruction in Huambo where the housing stock was severely damaged during the conflict. The conflict did not reach Cabinda municipality in any serious scale. F. Gender Variations

Some variations are observed while examining the data by gender. First of all, the majority of women respondents (60%) were entrepreneurs while less than one-third were employees (29%) compared to men who were approximately equally divided between entrepreneurs (46%) and employees (45%). Women respondents were significantly more concentrated in the trade sector (63%) than men respondents (46%). Additionally, women were more likely to operate from their houses (15%) compared to male respondents (7%) who were more concentrated in construction sites and offices (38%). Not surprisingly, women reported lower primary income (KZ 32,419) than male respondents (KZ 44,155). However, this is not reflected in the repayment capacity figures since both groups reported roughly similar household income and expenditure trends. When looking at the use of alternative financial services (Figure F-1), it is surprising that the female respondents reported a limited but larger use of formal loans (11%) then men (6%). However, men borrowers reported higher formal loans amounts (KZ 177,269) than women respondents (KZ 91,828). Similar to the loans borrowed over the past three years, male respondents desired higher business and personal loans amounts. When it comes to housing finance, more women seek formal loans to move or build a new house.

Figure F-1: Use of Financial Services by Gender

47%

6%

46%

10%

46%

37%

11%

34%

48%

11%

41%

15%

47%

37%

13%

42%

0%

10%

20%

30%

40%

50%

60%

Informal Loans

Formal Loans Savings Informal Groups

Demand for Individual Loans

Potential Home 

Improvement

Demand for Housing Loans 

for Homeowners

Demand for Housing Loans 

for Non‐Owners

Male Female

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G. Market Opportunities The market demand assessment for housing finance in Angola helps to shed light on both the effective and potential demand for financial services among the low-income population in general, as well as to give insight into their particular needs and requirements for housing finance. By looking at a range of economic actors (including micro entrepreneurs, low-income employees and non-contract employees) across two different urban areas, the survey is able to provide results that reflect the characteristics of a representative sample of low income earners in Angola, taking into account social, economic, and regional factors. From the survey we can build a profile of the typical respondent:

• A 33–year-old head of household with a family of four, living in their own home. • He earns roughly KZ 39,305 from his primary income activity and supplements from other

sources, bringing total income amounts to KZ 56,367. • He has an average of KZ 33,732 in household expenses leaving the household with an average of

KZ 23,115 cash on hand, yielding a KZ 12,508 effective monthly repayment capacity, which could be used to pay for loans to meet current and future housing needs. In general, a loan assessment involving monthly loan repayments up to this value would not induce risk of non-repayment among potential clients due to debt overburdening. 

• He relies on informal financial sources for loans and has never requested a formal loan in the past.

For the most part, respondents meet their current financing needs through the informal financial sector, having largely either self-selected themselves outside the formal lending market or do not have access to a formal financial structure. They participate in Kixikilas (especially women) or rely on family and friends, or employers, to borrow for a few months at a time amounts that hover around KZ 22,106. Most of this financing is used for personal expenditures, or consumption purposes, with a portion used for home improvement or for home purchase. The vast majority of respondents reported never having requested a formal loan and almost half of them expressed a desire to apply for formal loans. However, it seems that these figures have more to do with psychological barriers to formal finance reinforced by a general lack of information on potential products and services than real demand. When asked specifically about their plans for future home improvements, more than one-third of the respondents expressed an interest in carrying out home improvement works. Those few that have had access to formal lending (8% of the survey sample) borrowed typically around KZ 130,129, repaid over a 12-month period. There is, however, a much more dynamic market penetration by formal institutions when it comes to savings mobilization, evidenced by the considerable number of respondents holding a savings account. The diagram below summarizes both the use of informal loans and participation in informal groups, as well as the use of formal loans and savings accounts offered through the financial markets in Angola. Additionally, it presents the interest in future individual loans, and specifically housing loans.

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Figure G-1: Use of Financial Services

While the potential demand for financial services clearly exists, it has not been effectively translated into formal access to finance. This is due in part to a general unfamiliarity with and lack of experience navigating the formal financial sector, as well as fears about the ability to repay and successfully meet the financing requirements. In spite of the general reluctance to take a formal loan, when asked more specifically about meeting their housing needs, there was a much larger response in favor of these types of loans. The majority of respondents were interested in undertaking some sort of housing improvement including building or acquiring new homes. While there was a significant interest in business and personal loans it involved much smaller amounts that could be repaid in monthly installments, in line with their estimated repayment capacity calculated at KZ 12,508. There are, of course, variations in the differing uses of and demand for financial services, particularly when examining different types of employment groups and regions. Among the most important variations are the differences in the repayment capacity, which is higher among micro entrepreneurs and employees than non-contract employees. At the same time, entrepreneurs have more access to formal loans than employees and laborers. However, when employees do borrow, they have the highest loan amounts, making them a potential target market for longer term housing finance products. Employees, on the other hand, use much more savings services in banks than micro entrepreneurs and laborers. This is likely to be the result of the salary payment system that relies on direct bank deposits. Finally, higher demand for formal individual loans could be seen in Cabinda. In addition to assessing the potential demand for existing financial services among low income earners, this study attempts to identify opportunities for new financial products that can be developed to meet the specific needs of this market segment. This is particularly the case when examining the housing sector niche, which offers ample room for expansion and growth. By assessing potential housing loan demand, this study begins to shed light on the nature of this demand, giving specific indications on the size, terms, conditions and costs of individual loans that respondents would be willing to take to meet their ongoing housing needs.

47%

8%

44%

12%

47%

37%

12%

37%

0%5%

10%15%20%25%30%35%40%45%50%

Informal Loans

Formal Loans Savings Informal Groups

Demand for Individual

Loans

Potential Home

Improvement

Demand for Housing Loans for

Homeowners

Demand for Housing Loans for

Non-Owners