housing finance in developing countries

8/3/2019 Housing Finance in Developing Countries

1/39

Policy,Planning, ndResearchWORKING PAPERS

Office f heVicePresidentDevelopment conomics

The WorldBankDecember1989WPS 347

Background aper or the 1989WorldDevelopmentReport

HousingFinanceinDevelopingCountriesATransaction Cost Approach

RobertM. Buckley

Reducing ransaction osts n the housing ectorwouldmakefi-nancialsystemsmore efficient ndreduceeconomicdistortionsin mostdevelopingcountries.

The Policy, Planninig and Reearch Canplex distributes PPR Working Papers o disseminate the findings of work in progress and toencourage he exchange of ideasamong Bank staff and all others interested in development issues. These paperscarry the names ofthe authors, reflec ondy heir views,andshould be used and cited accordingly.The findings, interpretations,and conclusionsau theauthors'own. They should not beatuributed o theWorld Bank, its Boardof Directors. its management, or anyof its manbercountics.


2/39

Poicy, Planning, nd Research

In most developing countries, relatively little cant gains from reducing these costs, institu-mortgage credit is supplied voluntarily, mainly tional reforms may help realize them.because of the high transaction costs associatedwith enforcing contracts. In the lowest-income countries, the before-contract transaction costs of providing hou'TihgIn most countries, the supply of mortgage credit finance are probably high enough per loan dollaris restrained more by the cost of post-contract that low levels of demand explain the relativegovemance than by the cost of producing smallness of the housing sector.contracts. In most other developing countries, housingThis distinction is important because before- finance systems could grow more spontaneouslycontract costs are dictated by technological con- and rapidly if there were more effective post-ditions - that is, the nature of the production contract enforcement procedures. This growthfunction - so little can be done to clhange hem. would improve the efficiency of financialThe costs of govemance, on the other hand, are systems and reduce distortions in the economymore amenable to change. If there are signifi- - so the economic benefits of reducing housingtransaction costs are likely to be significant.

This paper, a background paper for the 1989World Development Report, is a productof the Office of the Vice President, Development Economics. Copies are availablefree from the World Bank, 1818H Street NW, WashingtonDC 20433. Please contactthe World Development Report office, room SI 3-060, extension 31393 (34 pageswith figures and tables).

The PPR WorkingPaperSeries disseminates he findingsof workunderway in the Bank'sPolicy, Planing, and ResearchComplex.An objectiveof the series is to get thesefindings out quickly,even if presentations re less than fully polished.T'hefindings, interpretations,nd conclusions n these papersdo not necessarilyTepresent fficial policy of the Bank.

Producedat the PPR DisseminationCenter


3/39

Housing Finance in Developing Countries:A Transaction Cost ApproachbyRobert M. Buckley

Table of ContentsI. Introduction 1II. Housing, Housing Finance, and the Economy 2

A. Housing Finance and the Financial Needs of Other Investors 3B. Transaction Costs and Housing Finance 6III. Housing Durability 8

A. The Mortgage Repayment Tilt Problem 9IV. Housing's Collateral Efficiency 12A. Borrower Concerns with Housing's Collateral Efficiency 15B Lender Concerns with Housing's Collateral Efficiency 16C. The Policy Response to Housing's Collateral Efficiency 17

V. Trarnsaction Costs and Housing Finance in India 18A. Reconsidering the High Ex Ante Cost Explanation 18B. Bridging Informal Norms and Formal Finaneial SectorRequirements 21

VI. Conclusion 23EiguresFigure 1 25Figure 2 26TablesTable 1 27Table 2 28Bibliography 29Footnotes 32

* Senior Economist, The World Bank This was prepared as a background paper for the1989 World Develomnt Report. Anupam Dokeniya provided excellent research inputfor this paper. Discussions of the topic and comments on earlier drafts by Bela Balassa.Warren Coats, Alan Gelb, Millard Long, Steve Mayo, Louis Pouliquen, Bertrand Renaud.Bob Vogel, and Alan Walters were very helpful. Susan Woodward's comments, Inparticular, were clarifying.


4/39

I. TTRODUCTIONIn most developing ountries elatively ittle mortgage redit

is voluntarily upplied. The main reason is the high cost of enforcingcontracts, a form of transaction cost of the sort discussed byWilliamson (1985). In most countries,it is the cost of post-contractgovernance rather than the ex ante cost of producing contracts thatexplains the restrained upply f mortgagecredit. This is an importantdistinction because etz ante costs are dictated by technologicalconditions .e., the nature of the production unction, nd consequentlylittle can be done to change them. The costs of governance, n theother hand, are more amenableto change. Hence if there are significantgains from reducing these costs, institutional eforms may help realizethem.

The second topic of this paper is a discussion f the whetherthere are significant ains for the economy and the housing sector ofreducing these transactioncosts. The central conclusions of thisdiscussion are three: (i) in the lowest-income ountries, he ex antetransaction osts of providing ousing financeare probably sufficientlyhigh per dollar of loan that low levels of demand explainthe relativelysmall size of this sector; however, (ii) in most other developingcountries, housing finance systems would be able to grow morespontaneously nd rapidly if there were more effective s-postcontractenforcement procedures; and (iii) this growth would improve theefficiency oE financial systems and reduce the distortions in theeconomy. Hence the economicbenefits of reducing transaction osts inthis sector are likely to be significant.


5/39

-2-

The plan of the paper is as follows. Section II brieflydiscusses the role of housing and housing finance in the economy. Itshows that in most developing countries relatively little mortgagecredit is supplied by formal financial intermediaries. It alsoillustrates hy the transaction ost approach suggests a much strongerrationale for improving ousing financesystems in developing ountriesthan does what might be termed the traditional conomic perspective nfinancial olicy.

Sections III and IV each consider particular qualities ofhousing investments that Section II suggests have a bearing on thedemand for and supply of housing finance. The qualities re housing'sdurability, nd its potential trength as collateral. A fifth sectioncompares the role of ex post and ex ante transaction osts in explainingthe kinds of housing finance systems that are observed *n developingcountries uch as India.

II. HOUSING, OUSING INNCE, MUD HEECONOKYHousing investment ypically mounts to 3 to 8 percent of GDP

and 15 to 30 percent of gross fixed capital formation. It is usuallythe largest single form of household wealth and accounts for betweenone-quarter and one-half of the capital stock in developed anddeveloping countries.]1 However, the share of housing investment hatis financed by formal financial ntermediaries n almost all developingcountries is very small, and housing finance accounts for only a smallshare of financial ssets.

Table 1 presents estimates of the ratio of net new mortgagelending from the formal financial sector to the level of housing


6/39

-3-

investment in a number of developing and developed economies. Itindicates hat in developing countries a much greater share of housinginvestments omes from internally enerated unds. The average ratio ofmortgage credit supplied y the formal sector to housing investment asless than 22 percent in developing ountries if Colombia, ith its veryeffective housing finance system, is excluded as being atypical ofdeveloping ountries he averagefalls to 16 percent), r less than one-fifth of the level the OECD countries.

In none of the countries surveyed did home mortgages accountfor a significant share of financial assets. They certainly did notaccount for more than 20 percent of financial ssets as they did at thebeginning of the century in the countries examined by Goldsmith(1969).21 While it is difficult o quantify the availability f formalhousing finance in developing ountries n simple but definitive ummarystatistics, orld Bank reviews of housing and financial ector reportsare consistent ith the Table i.e., the formal sector suppl of housingfinance is almost ubiquitously ery small.

A. Housing Finance and the Financial eeds of Other InvestorsHousing is the only investment in which an individual is

usually also the single largest consymer of the services roduced y theinvestment. The good is imperfectly ivisible o that the return on theinvestment annot easily be parceled out and sold in units of varyingsizes (although t is often subdivided). It is also lumpy, eaning thatthe annual expenditures on it account for a significant hare of allhousehold expenditures. As a result, at least in most developingcountries, nvestors n housing are essentially nvesting n a good thatthey will lease to themselves for a long time.3/ Finally, the most


7/39

- 4 -

obvious ervice rovided y housing s consumption,he flow f imputedrental ncome.

Encouraginghe developmentf a financial ervices ndustryto provide finance to what after constructionill be a capital-intensive,onsumer-goodsndustry as quite easonablyot been of highpriorityin development inance policy. Because housing financefacilitatesnvestment n a good that does ot directly roduce uchifany additional utput or non-beneficiaries,t is not surprising hathousing finance improvements ave been largely ignored by thedevelopmentinance iterature,r until ecently y World ank loans.4/

However, the transaction ost perspective uggests thathousing inance mprovementsan have significanteneficial ffects nthe economywithout mbitious eal output objectives. As long ashousing finance innovations an be expected to help significantlyimprove he arrangements f household ncome nd consumption treams,they are desirable ven when there is complete gnosticism s to theappropriate evel of housing roduction r the effects hat improvedhousing inance olicy ight ave on it.

If such innovationsre not necessarilyntended o haverealoutput ffects, major issue s why theycan be expect- to be able toimprove ouseholds' bility o arrange heir incomeand consumptionstreams. The answer, s shown elow, s that in the appropriateegalenvironment,ousing an be one of the bestforms f collateral. s aresult, he cost of borrowing gainst ousing ill be one of the lowestcost forms of debt available. At the margin, all nor--corporateborrowers, ot juat households, ill want to rely on this form offinance or their major expenditures. Farmers ould rather use a


8/39

mortgage o finance nputsthan they would a loan collateralizedychattel. Similarly, mall nterprise. ouldprefer o borrow gainstthe value of the owner'sproperty han against he probability fsuccess f a new enterprize.

The argument or greater ccess o market-rateousing inanceis really broader rgument hat implies hat greater ecognitionepiven to the costs of relying n the directed redit systems hat

racterize he financial ystems f almost ll developing ountries.A major onsiderationhen, nd one that ousing inance nnovationsanhelpaddress, s the costof mispricing redit isks. Targeting rediton particular utputsas has been done (e.g.,agriculture, ocialhousing, r even justnew housing) nd away from other, unproductive"investments,liminates he financial ystem's bility o price andallocate isks. It causes any borrowers o have to rely on much morecostly ubstitutesnd as a consequenceffects any of the most basiccosts hat onfront on-corporateorrowers. s is discussed elow, heproximate esult f such ollateral ubstitutionan be a prohibitivelylarge increase n the cost of borrowing. The ultimate esult s thathousing inance olicy can be one of the most basic pricing oliciesthat overnmentsndertake.

Ironicall- financial regulationsdesigned to protectborrowers rom unscrupulous endersforeclosing n their propertiesoften prevent ousing rom being used as collateral. hese kinds ofprotections rise because, as Goldsmith(1987) says of premodernfinance, ...in the case of trade credit, ebtor and creditor rebusinessmennd the relationships a voluntarynd basicallyqual ne,whileconsumer redit s often he result f necessitynd the power f


9/39

- 6 -

the debtor,usuallya peasantor small artisan is much weaker than thatof the lender..." nfortunately, he consequences f such protection, sdiscussed in Section IV, are more risky investments by financialintermediaries, igher costs of borrowing or most families, nd verylikely less housing.

B. Transaction osts and HousingFinanceTwo characteristics f housing investment make its debt an

especially safe form of lending: its durability, and its real-denominated return. When properly constructed,housing is the mostdurable of fixed capital in the economy, and its value is one of themost impervious o use.5/ And, becausepeople need housing throughouttheir lifetime, and a house is often given as part of the bequestsfamilies leave to their heirs, housing accounts for a large part ofhouseholdwealth. Of course, the use of materialswith a short-life-time, as is often done in developingcountries, can reduce housing'sdurability.

Housing's durability also affects the demand for financing.When the long asset life of the investment s combinedwith the lumpy,largely non-pecuniary ervicesit provides, he result is that housingproductionoften needs financingin order to be undertaken. For suchfinancing o be most effective t should ave a maturitythat is similarto the asset life or the expectedlengthof the resident's orking life,that is, also be long-term. This kind of long-term ontractrequireaset of rules for determining ow the contractual bligations ight beadjusted or modified if the circumstances f the borrower or lenderchange during the course of the contract.


10/39

-7-

Because housing is a form of wealth that is highlyredeployable these rules can, from the lender's 'erspective, berelatively straightforward. If the loan is not repaid the house caneasily be transferred o another family without loss of value due to thetransfer. Moreover, even if the borrower loses his or her source ofincome, default on repayment is not'automatically he best strategy topursue, at least as long as the value of the house exceeds that of theoutstanding mortgage. Even if the outstanding debt does ezceed thevalue of the property, ouseholds often do not default because of theindirect costs to them of doing so--the loss in the value of theirreputation, tc. Consequently, he default risk of mortgage repaymentsshould be low, and the risk-adjusted orrowing ate should reflect thislower level of risk.'

Unfortunately, from the borrower's perspective, contractresolution in the event of a change in the ability to repay is anythingbut straightforward. Eviction is a difficult procedure to implementeven when it is seen as a fair and reasonable eaction to the behaviorof a borrower. When the eviction is of a poor family that has had badluck, it can easily become a political event in which the cost

forbearance y a public lender is overlooked. As a result, it is oftendifficult to supply the kinds of credible contracts hat would protectlenders from risks that they will be exploited if circumstancespermit. In such environments, ousing finance's inherent afety due tohousing's redeployability s more than offset by the lender's havinglittle recourse to remedies.

A second characteristic that affects housing's collateralstrength is its relatively stable real-denominated return. In


11/39

urbanizing conomies ith limited savings options, ousing is one of theprincipal savings vehicles. Because its return is in real (rather thanin nominal) terms it is less affected by changes in financialregulations, such as interest rate ceilings, than are otherinvestments. It also does not appear to be as adversely affected byunanticipated ncreases in the inflation ate as is the return to manyother investments.11 Finally, both theory and empirical evidencesuggest that housing's alue is likely to increase s economies rbanizeregardless f the efficacy f the financial ystem.81 Nevertheless, heprice and attractiveness f such real-denominated ssets depends veryfundamentally n the credibility nd breadth of the financial ystem, aswell as on the regulations nd infrastructure nvestments hat governurban land uses. When financialpolicies cause financial assets toyield negative real returns, households opportunistically void these"taxes on saving" by saving in the form of bricks and mortar. When thefinancial ystem is not credible nd/or the urban regulatory nvironmentis not flexible, the price of urban chelter can often become notaffordable.

III. HOUSING'S URABILITYIt is common to find houses in use in many countries hat were

built hundreds of years ago. Moreover, the fact that only a tinyportion of the housing stock of a country is very old does not mean thathousing depreciates r wears out at a particular ate. More commonly,housing is demolished because the land value has changed in such a waythat it becomes more economical and efficient to proride housingservices through a different type of structure, r to use the land to


12/39

- 9 -

provideother kinds of services, uch as office buildings. Hence, whileit may be difficult to determinehow long a house can be expected to'ast, it is likely to be one of the longest-livedgoods in theeconomy. Housing's durability has very basic effects on theaffordability f both housingand the debt that is neededto financeit.

A. The Mortgage epayment ilt ProblemMortgage debt affordability s an insidiousproblem because

unlikemost other sectors f the economy, changes in the inflation atecan make it less affordable. As a result housing can become lessaffordable ithout any change in real income or real prices. Inflationcan have such "real-side" ffectson the efficacyof mortgagecontractsbecause of the nature of long-termmortgage debt contracts ritten innominal terms. Even relatively ow rates of inflation edistribute ealmortgage repaymentstowardsthe early years of a mortgage loan, makingpayments out of income in those years more difficult.9! As is wellkvown, this change in borrowing osts is a redistribution f real costs,not an increase in costs. Unfortunately, t is a redistribution n adirection hat is oppositeto the one preferred y families hose incomecan keep pace with inflation ver the longer term.

Figure 1 looks at the implicationsof this "tilting,"or"front-loading," f real mortgage repaymentsfrom an aggregateratherthan individual erepective. It examineshow increasesin the rate ofinflation an affect the number of households ble to pay 25 percent offamily income to afford the same-priced house with the same-sizeddownpayment.

The income distribution figures are for urban family incomefor Turkey for 1985.1/ Point A represents the income level needed to


13/39

- 10 -

qualify for a house that costs 2.5 times the median urban family income,if the household were able to make a 30 percent downpayment nd couldfinance a 20-year fixed-interest ate loan. The interest rate on theloan reflects 6 percent real interest ate, and the slightly ess than9 percent inflation ate that characterized he 1950-74 period. Theincome needed to qualify is slightly ore than the median income level,the 60th percentile, because lenders are assumed to require thathouseholds spend no more than 25 percent of their income on mortgagepayments.I_/ Point B reflects the income level needed to finance afixed-interest ate loan that incorporates he higher inflation atesofmore recent years. Instead of a 15 percent nominal interest rate, theinterest ate is 36 percent. If the increase n inflation rom 9 to 30percent was anticipated,in the absence of contracts that adjust for

this change in the distribution f real repayments, t would have pricedhomeownership ut of the reach of all but the highest-income amilies.The absence of such contracts imposes a large cost of transacting n alarge number of families.The Policy Response to Mortgage ffordability roblems

Policy makers in developing countries have responded to themortgage affordability problems in two basic ways: through creditsubsidies r through redesign of the mortgage contract, sually throughsome form of indexation of repayments. The former approach will bediscussed in Section IV. Here the latter approach is considered.Indexation attempts to immunize the real value of mortgage repaymentsfrom the high and uncertain rate of inflation anticipated at loanorigination, which creates the severe cash-flow problem described byFigure 1.


14/39

- 11

In high-inflationountries, uch as those f Latin merica,mort-age ndexation as introduced o ameliorate ousing ffordabilityproblems. However, heseinstrumentsere not introducedo facilitatethe contracting ndertaken by two parties in an inflationaryenvironment,s has been suggested y a number of observers, .g.Friedman 1974). he movement way from the use of nominal-interestrate, level-paymentortgage schedules as occurred hile in 1959,Brazil n 1964, olombia n 1972, nd Argentina n 1976) as the resultof governments' elective credit policies rather than marketparticipantsmodifying their contractingmethods.121 While indexedcontracts erea cost-effectiveeans f restructuringayments o lowerpayments nd redistributehe high real initial osts, hey werenot aneffective eans of introducing he kinds of credible ontracts hatwould induce investors o be willingto share the risks posed byindexation. x post, n every ase xcept olombia, he approaches hathave een implementedave experiencederious roblems.

The main problem as been that loan repayments ere oftenindexed o wages rather than to prices and steady real wage growthstopped. When real wage reductions ccurred, he indexes roducedautomatic oan forgivenessather than loan forbearance. orgivenessapplied qually o those hose ages ut-performedhe general ndex ndthose hose agesdid not. In thisrespect, he indexes ere a form ofreal wage insurance ather than a mortgage ontract. It is of coursethe case that an indexed loan increases enders' xposure o realeconomic isks. However, he use of indexes hat utomaticallyiscountthe borrower'siability f average eal ages o not increase oes morethan increase he riskiness f such loans. If the real in.erest harged


15/39

-12 -

does not compensate or these additional isks, the loan terms create asituation in which the contract is not credible, and only publiclysupported nd implicitly ubsidized enders participate.

As a means of reducing ortgage ffordability oncerns (ratherthan housing affordability roblems), indexation as much to recommendit, particularly elative to credit subsidies. With indexed repaymentslong-term mortgages can be attractive investments to long-terminvestors. However, it is difficult o exaggerate ither the importanceof the credibility f the mortgage design to success of such efforts orthe likelihood that such instruments ill not perform in financialenvironments ir which inflation emains at extremely high and volatilelevels. Hence the costs and benefits f mortgage indexation epend verybasically n the design of the instrument.

Because of housing's urability ortgage esign must take realas opposed to nominal repayments nto account. Otherwise the cash-flowproblems of mortgage contracting, rather than rates of return oninvestment, will dominate decision-making with respect to housinginvestment. Equally important in mortgage design is the recognitionthat solving the mortgage cash-flow roblem through indexation xposesthe lender to another risk, i.e., that real wages will permit highernominal payments to be made. In some environments his risk is a largeone and failure to price or reward this kind of risk-taking ill resultin a contracting rocess that is not credible.

IV. IOUSINCS COLL&TEhl EFFICIENCYHousing can be a relatively strong form of collateral for

three reasons. First, its value after a household's lifetime


16/39

- 13 -

consumption f housing servicesis relatively igh, and the behaviorofthis value depends less on the skills of the occupants r, as shown inTable 2, the behavior of the economy than do the values of most otherassets. The simplicity and relative constancyof its yield makes itless likely that the value of the asset financed will fall below thevalue of the debt used to finance the asset. As a consequence, t isless likely that the borrower ill be willing to trade the house for themortgage, s occurs in a foreclosure.

Second, unlike other real assets that are durable and subjectto little value degradation ith use--e.g., old and diamonds, ousingis fixed-capital. It is not easy to abscondwith, which makes it saferagainst fraudulentpractices, and, it requires relatively few under-writing precautionsand relativelylittle diligence in monitoring thebehavior f the borrower.13/

Finally, housing can be a strong form of collateralbecausethe services it provides are generally,and in developing countriesincreasingly, emanded. While investment n, e.g., a steel plant willincur a loss if the venture fails,the houses occupiedby the employeesof the failed plant are less likely to lose as much value as is theplant. The plant is highly specialized nd can only producesteel; thehouse can be redeployedto provide housing services to the employees fother industries. It can be sold or rented to other workersof another,more successful venture. More importantly, he steel plant employees'skills are also more flexible than is the plant's capital. They canoften change jobs and continue to be able to repay their loan. Ofcourse, this is not to say that households will always have suchoptions. Rather it is to suggest that they are likely to have more ofthem more often than will specialized nvestors.


17/39

- 14 -

Besides eing less risky nvestment han is investment n asingle-use roject, uch s the steel lant, mpirical vidence uggeststhat housing is also less risky than is a general investment nequities. For instance, s Cunningham nd Hendershott 1984) haveshown, he interest ate adjustment eeded to compensate or the riskassociated ith default isk in the U.S. has been on the order of 1/2percent er annum for loans with loan-to-valueatios of 90 percent.This is a credit risk fee that is a fraction f the fee chargedpreferentialorporateorrowers.141

Table presents ata n the volatility f house rices is-a-vis that of an investment n equitiesn a number f countries. Thismeasure s helpful n assessing ousing's ollateral trength ecausethe risk that loans ill not be repaid s greatest f the value f theoutstanding ortgage xceeds he value of the house.-5/ Housing'srelativelyow volatility mplies hat therisk of households epayingmortgage loans should be lower than are the risks associated ithfinancing ore price-volatilessets.

The Table resents he coefficientf variation f time seriesdata on the real price of housing nd the stock market indices orvarious ypes of economies: developing ountriesith high inflationrates that have experiencedubstantialeal shocks, relatively ow-inflationeveloping conomy, high growth ate developing ountry nddeveloped ow and high inflation conomies. ith real interest ate ndincome changes eal house pri':es ell in allcases, sometimes airlysharply. However, n no case was the drop anything ike the reductionin stock market values. Italy experiencedhe highest elative ealhouse price volatility,nd this was less thanhalf the volatility fthe stock arket ndex.


18/39

- 1S

Of course since most homeowners an only own one house thecross-sectionalariance f the return to housing nd its covariancewith the returns n other assets is also very important n evaluatinghousing's ollateral fficiency. Sufficient ata do not exist withrespect o housing's ross-sectionalariance. owever, riedman 1985)has examined ousing's ovariance roperties. e concludes hat in theU.S. it is much less risky han are investmentsn debt, ither hort rlong-term, r equities. Hence ven if the return o housing as a highcross-sectionalariance, fall in house prices is likely to becontemporaneousith a smaller ecline n overall ealth than is thecase for a fall in the value of other formsof wealth. As a result,housing nvestmentsill tend to be safe relative ot only to specificinvestments ut to investments hat are diversified cross conomies.This collateral trength f housing mplies hat vailabilityf market-rate credit for this asset has implications or both borrowers ndlenders.

A. Borrower oncerns ith Housing's ollateral fficiencyBorrowers' oncerns ith housing's ollateral fficiency rise

because f the long-run ungibilityf credit. That is, over the long-run, households ttempt o finance heir investmentsith the lowest-cost credit. As has been stressed, f housing rovides he safestcollateral, ll other things eing constant, t should lso be one ofthe least ostly ays to borrow. This view was first ade ith respectto mortgage redit by Meltzer 1974). He showed hat over the 20thcentury he share of mortgage redit in household iabilities n theU.S. grew much more rapidly han did the share f housing n householdwealth.


19/39

- 16

The data in Figure 2, for a longer ime period, orroboratehis basic point: the rate of increase n the housing/wealthatio asnot as rapid as the increase n mortgage ndebtedness. he impliedloan-to-valueatio increased rom approximately 3 in 1805 to .6 in1978. While neither atio can be considered s excessive, he trendsuggests .S. households ave been using the relatively nexpensivemortgage redit o finance xpendituresther han ousing.

For borrowers n developing ountries, estrictionsn beingable to rely upon the collateral fficiency f housing s likely o bemore important han in developed ountries ecause here re fewer therways to collaterize he human capital hat will produce igher futureearnings. As a result, the cost implied y restricting ccess tomarket-rate ortgage redit s higher in these ountries han it is incountries here borrowers ave greater ccess o alternatives. f onetakes a life-cycle iew of consumer ehavior, t is clear that it isyounger ouseholds ho bear ost of the incidence f this estriction.

B. Lender oncerns ith Housing's ollateral fficiencyDeveloping ountry ender oncerns ith housing's ollateral

efficiency rise for two reasons. First, he technical nsolvency fsuch a large portion of developing country Development inanceInstitutionsndicates hat ex post these enders ave underpricedisksthey have assumed.16/ n important art of any restructuringtrategyfor these institutions hould be encouragement f safer lending.Housing's ollateral fficiency uggests hat correctly riced ortgagefinance an be part of this "flight o safety." This is particularlytrue of finaLncialystems hat are deregulatingnd removing ortfoliorestrictions. ess constrainedenders re by definition ble to take


20/39

- 17 -

more risks, and investing n market-rate ortgages an be part of arisk-temperingeregulationtrategy.17/

Second, inanciers f few other assets an reasonably ssumethat emand or assets hey are financing ill be income-elasticver awide range of development.-S/ ortgage ntermediationan be expectedto yield not only a safe positive eturn o savers, ut also a growingsource f safeincome ith which to mobilize he financial avings fthe household ector. By providing arket-rateortgage redit s wellas deposit-taking ervices intermediaries ay be able to moreeffectivelyobilize esources rom ouseholds.

C. The Policy esponse o Housing's ollateral fficiencyIn few developing ountries re lenders ble to exploit he

inherent ollateral afety f housing oans. When land tenure rightsare ambiguous, r foreclosure roceedings ncertain r interminable,what in principle s a low-risk oan in practice ecomes high-riskone. For example, n Indian overnment tudy howed hat it could ake"not less than ten years" to foreclose n a mortgage orrower ho hadnot made payments.19/

Such a basis of proceeding as to be both inefficientnd anencouragemento act in financiallyisreputableays. Similarly, hilepublic nvestment n land titling nd recordationystems ay appear obe a significantxpenditure,ack of such titles orces orrowers orely on their next most effective orm of collateral hich for manyborrowers re either on existent r much more expensive e.g., pawnshops). Recently n Indian ompany, he Housing evelopment inanceCompany f Bombay HDFC), as used an effective ay to circumvent hesekinds of contract nforcement roblems. In the next section heir


21/39

- 18 -

approach ill be contrasted ith what might be termedas ex antetransactionost explanationor the limited upply f housing inancein India.

V. TRANSACTIONOSTS AND HOUSINGFINANCEIN INDIAAccording to Morris (1985) s of 1980 formal ousing inance

in India was virtually on existent ven though the financial ystemwas highly eveloped. The explanationshat havebeen offered or thisstate of affairs correspondo what might be termed a traditionaleconomic xplanation or the relatively eak development f housingfinance ystems n most developing ountries. hat is, the systems renot observed ecause t existing rices hey have not beenwanted. Theex ante administrativeosts of the loans re too high, the affordableloan sizes too low to interest nvestors, r formal lenders annotcompete ith the lc4n terms ade available hrough he inter-familyrinformal oan market. lhe result, hen, is little or no supply offormal ousing inance ecause t the market rice hereis little r nodemand. According o this view, the technologicalonstraints reprohibitive. onsider he premises f thisline f argument.

A. Reconsideringhe High Ex AnteCost ExplanationThe high ex antecost explanationas two premises:(i) When

administrativeosts per mortgage oan are combined ith small loansizes, he effective orrowing osts are sufficientlyigh that demandfor credit is discouraged; nd (ii) Even if the first point isinaccurate,he proportion f income ouseholdsre willing nd able topay to service ortgage ebt payments s suchthat the aggregateemandforthis credit s not likely o be a major redit arket ctivity.ForIndia oth f these remises re dubious.


22/39

- 19 -

The high administrative ost argument is o. course correct inan absolute sense. There are some relatively fixed costs, call thesecosts F, associated with all lending, and amortizing these costs oversmaller loan sizes necessarily results in higher effective interestrates, F+R, where R is the risk free cost of funds. These higher rates,in turn, will reduce the demand for mortgage credit. However, theamount by which these higher administrative osts increase the totalcost of borrowing--where he total cost of borrowing =F+R+D, nd D is arisk premium for the loan's being repaid--is lmost certainly ess thanthe mount that housing's ollateral afety reduces the risk premium, ,that lenders require. For example, ortgage loans made by the HDFC ofIndia earn a spread of less than 3 percent over the cost of funds thathave a maturity similar to that of its mortgages. This figure is lessthan half the increase n borrowing osts on unsecured oans relative tosecured loans in India. Hence even if the fixed administrative osts onmortgages are absolutely high, the expected default costs are muchlower. When all the costs are taken together ousing should still be aninexpensive ay to borrow.201 The appropriate enchmark or consideringwhether these kinds of costs are likely to limit the growth ofintermediation n the sector is their size relative to the difference ntotal costs between borrowing n secured and unsecured oans.

The second ex ante line of argument as to why there is littleor no demand for housing financial services in developing countries--that household repayment capacity limits demand--is flawed for tworeasons. First, it focuses only on flows of income, and minimum housing

costs rather than on possible adjustments of household portfolios.Second, it understates demand by relying on expenditures on housing


23/39

- 20

consumption s a measure of how much peoplewould be willingto pay forhomes.

An example of the first type of argument is made by Mohan(1987). He estimates hat if householdsin India were willing to spendsome reasonable ortionof their income on mortgage repayments, ven 20to 30 percent,and the credit markets would accommodate hese demands,the aggregate share of credit market activity in mortgagecredit wouldnot reach significant evels over the near term because few householdscould afford the minimum housing unit.

This line of argument overlooks the fact that in 1978household oldingsof gold and precious etals in India were equal to 70percent of real estate holdings. By comparison, n the beginning f the19th century households in four of today's developed economies hadprecious metal holdings equal to less than 18 percent of their realestate holdings.211 Moreover,this latter ratio declined for the next100 years to less than 3 percent as financial ystemsdeveloped. Withincreased ccess to market rate credit one would expect Indian familiesto be willing to shift some of their current real-denominated ealthholdingsinto similarly eal-denominatedousing investments.

These kinds of potentially enormous portfolio shifts areoverlooked by mortgage demand estimates that focus only on householdincome levels compared to house costs.22/ A similar problem ofunderstating he likely demand for housing finance arises when analystsuse estimatesof how much households re willing to pay out of currentincome to consume housing services as renters to predict how much ofcurrent income they would be willing tv allocate to mortgage payments.This approach necessarily verlooks the savingsmotivationfor housing


24/39

- 21 -

demand. It will, as a result, overlook a source of demand thatcontributes o the observed high levels of house price-to-income atiosobserved in many developing ountries. The next section discusses wayin which the savingomotivation or housing demand has been exploited.The method relies on informal norms rather than legal contractenforcement emediesto assure that loans are repaid.B. Bridging Informal orms and Formal Financial ector Requirements

As stressed earlier, a contentious issue in many developingcountries is the development of a fair and efficient way to resolvemortgage repayment isputes etweenlower- and moderate-income orrowersand large financial nstitutions. The importance f this kind of issueunderstandably ncreases n countries uch as India, where lenders havetraditionally een large landowners ho lent at high real interest atesto borrowers ho were often landless easants living at near subsistencelevels.23/

The Indian nationalizationof the banking system and themassiveand highly subsidized xtension f commercial ank branches erepart of a policy response to this kind of economic nvironment, ith thestate replacing he wealthy as lenders. Unfortunately, he policy also

encouraged: ti) a banking culture that has tolerated xcessive efaultand delinquency ates the latter are in excess of 50 percent for manyagricultural enders;24/ nd (ii) according to the aforementioned hahReport (1978), a legal system that can require exceedingly lengthyforeclosure roceedings.

The Indian approach to financial developmentlent itself tobehavior in which people cannot be counted on to do what they said theywould that is, to repay loans as they promised hen they borrowed. Such


25/39

- 22 -

a hazardous formal financial environment is hardly hospitable to thedevelopment f market-oriented ousing finance for moderate- nd lower-income households. Nor is it conducive to the development of thefinancial system, because the low return on lending has consistentlyproduced egative returns on most financial ssets.25/

The Housing Development Finance Company of India (HDFC) hasnow operated for 10 years in this kind of environment,establishingbranches all over India, and making more than 200,000 mortgage loans atmarket interest rates. Remarkably, lthough the loans have been made tolower- and moderate-income ouseholds, nd have an average size of lessthan US$4,000, they have produced a delinquency rate of less than 1percent. This is a rate that compares very favorably with theexperience of lenders in more developedeconomies. For instance, theU.S. Federal Housing Authority, (FHA) experiences 7 percent defaultrate and a much higher delinquency rate on the unsubsidized oans itinsures.

HDFC has accomplishedthis record by circumventing ut notavoiding the formal mechanisms or dealing with loan disputes. Becauselegal regulations liminated the threat that a borrower could quicklylose his property in the event of a default, HDFC focused on incentivesand moral suasion outside of the legal system--in particular, onborrowers' concerns with their reputations. Third-party uarantees resought on almost all loans. The "third party" is always someone theborrower espects an older colleague r a relative, or example. Likethe borrower, the guarantor lso has to submit a financial tatement odemonstrate n ability to repay the loan in the event that:the orrowercannot or will not do so. If loans are not repaid promptly he borrower


26/39

- 23 -

is immudiately otified. If his response is unsatisfactory, he threatof calling on the guarantor for repayment is raised, and ultimatelyfollowed through on in the face of further recalcitrance on theborrower's art.

If such follow-up till produces no response, egal action isinitiated. Ultimately, either the borrower nor the guarantor's ightsare subverted by HDFC's appeal to informal values as way of inducingcontract fulfillment. However, neither has HFDC relied on the formallegal code to provide the basis for effective ontract governance. Thevalue that the borrower is protecting by repaying is not the value ofthe house; it is the value of his reputation.

HDFC's success is a result of bridging informal ultural ormsas to the reasonableness of fulfilling contracts with the formal

financial sector needs. Its excellent record of loan recovery andpayout to depositors provides the credibility essential to convinceformal sector financial investors (such as corporations and otherfinancial intermediaries) hat deposits in the corporation are safe.Its underwriting ractices epresent creative ay of avoiding he highcosts of enforcing contracts in the Indian legal system. Byestablishing a new "custom" of appropriate ehavior it has made suchactivities ttractive nvestments.

VI. CONCLUSIONThe role of better contract enforcement s a limiting factor

on the growth of housing finance systems has been stressed here,nevertheless, t is also clear that in some developing countries thereis relatively little demand for housing finance. For instance, if a


27/39

- 24 -

household wanted to spend only, say 5 percent of income, n housingservices, s might be the case in countries ith very low per-capitaincomes,61 if land titles were also unclear, and the administrativecosts of intermediation xceeded5 percent,formalhousing financewouldprobably not be in great demand. in this kind of environment, utualorganizationscan be expected to be very effective, offering theirmembers a way to share and thereby reduce the administrative osts ofintermediation. Even more importantly, hey can help develop crediblecontracts equiiringhat loans be repaid as long as the borrower s ableto do so.

On the other hand, in countries where the basic urban andfinancial nfrastructure lready existsand in which there is an attemptto accelerate he development f the financial ystems--that s, in mostdeveloping mountries--hovsinginancereformscan play an important olein reducing transaction costs.27/ Mechanisms that allow long-termcontracts o protectthe interests f both saversand borrowers--such sfair but efficient oreclosure rocedures, nd the appropriate ype ofmortgage instrument--can o much more than just contribute o a better-functioning ousingmarket.


28/39

- 25 -

s101T0AG3EFAThVTS9tTU DIFF3EMVTATOSOF INFLATIO.

-t -- - - - - - - S O.a.S.-.S.S.a

n IU

* "

tJ tO U1 X 4 3 U '6 U U'uc@MDEnLEu


29/39

- 26 -

FICURE 2

HOUSINGAND MORTGAGENDEBTEDNESSS ASIAII W~ULtll (U.Sd9 2X12-

10.4~~~~~~~~~~~~~~~I.-e .0

w- r , . .3 . .6 .4L

3 32

ins 1U0 IO 1o 1;12 13 333 1900 165 1973 373a iUngoL * 0COP* SOPIINCNOMsoum-,!s Coldakth (1985)


30/39

- 27 -

TABLE l: INCREASE N HOUSINGCREDIT (RC) AS A SAEa OFHOUSING INVESTMENT HI), SELECTED OUNTtIES

Country HC/HI Country HC/HIMexico .20 Kenya .11India -10 Tunisia .11Turkey .08 Korea .20Malaysia .50 Pakistan .11Morocco .15 Philippines .26Colombia .75 Portugal 20United Kingdom.58 Senegal .06Thailand .33United States 1.26Canada .76ORCD Average excluding U.S. and Turkey .85

Sources: Various World Bank Sector Reports and parti-cularly Renaud (1984); For the U.S.Anthony Downs; for the U.K., Building Society Gazette; OECDaverage is inferred rom Vittas et. &I. (1987). TheColombian igure is derived from Isaza (1987) ith theassumption that land value is equal to 2S percent of housevalue. The figures are from the late 19709.


31/39

-28-

TABLE 2: COEFPICIMITS VAMIATION P HOUSEPRICES ANDSTOCKMARKETNDEXES

Country House Prices Stock Index Ratio col.2/col.lArgentina .090 .399 4.3Brazil .060 .325 5.4Italy .114 .294 2.6Korea .081 .471 5.8Malaysia .027 .120 4.4UnitedKingdom .075 .20 2.7United States .063 .141 2.2Average .073 .279 3.8

Sources: Estatisticas istoricas o Brasil,1987; Business ndInvestment lmanac;S&P's Trade and Securities tatistics; nflationand CapitalMarkets proceedings f the OECD-CMBconference, 986.The U.K., lolmans(1987),Italy,Mazzola (1988), orea, Renaud. Thetim periodsfor the variouscountries re: Argentina nd Braxil 1977-85, Malaysia 1981-85, .S.A. 1975-86, orea 1980-87;Italy 1975-85, ndU.K. 1975-85.


32/39

- 29 -

BIBLIOCRAPHYAkerlof, George. "The Market for Lemons," uarterly ournal of

Economics, ugust 1970Boleat, Mark. National Housing Finance Systems: A Comparative tudy,Croom Helm, 1985.Buckley, ot Catherine arvacque, ian-Carlo uarda and Per Ljung."Annual Review of Urban Development perations: The Emerging oleof Housing Finance," NU Report No. 33, World Bank, 1988.Burn*, Leland and Leo Grebler. "Resource llocation o HousingInvestment: A Comparative International Study," EconomicDevelopment nd Cultural Change, October 1976.Charavarty, . Report on The Working of the Monetary System, ReserveBank of India, Bombay, 1985.Cunningham, .F. and P.H. Hendershott. "Pricing PHA MortgageDefault Insurance," ousingFinance Review, October 1984.Currie, Lauchlin. Accelerating evelopment: The Necessity nd theMeans, McGraw-Hill, ew York, 1966.Downs, Anthony. The Revolution n Real Estate Finance, Basic Books,1983.Feldstein, Martin, "Inflation, ax Rules, and The Prices of Land andCold." Journal of Public Economics, ecember 1980.Fishlow, lbert. "Indexing razilian tyle: Inflation ithoutTears?," Brookings apers on Economic ctivity, 1:1974.Fons, Jerome. "The Default Premium and Corporate ond Experience,"Journal of Finance, arch, 1987.Foster, Chester and Robert Van Order. "FHA Terminations: A Prelude toRationale Mortgage Pricing," ournal of American Real Estate andUrban Economics ssociation, all 1985.Friedman, enjamin. "Portfolio hoice and the Debt-to-Income atio,"American Economic eview, vol. 75, no. 2, May 1985.Friedman, ilton. "Monetary orrection A Proposal for EscalatorClauses to Reduce the Costs of Ending Inflation," he Institute fEconomic ffairs, 1974.Fry, Maxwell. Money, Interest, nd Banking in EconomicDevelopment, The John Hopkins University ress, 1988.Goldsmith, aymond. Financial tructure nd Development. YaleUniversity ress, 1969.


33/39

- 30 -

_ Comparative ational BalanceSheets. University f ChicagoPress, 1985.. Premodern Financial Systems, CambridgeUniversity ress, 1987.

Gultekin, ulent N. "Stock Market ReturnsUnder Inflation,"Journalof Finance, arch 1983.Hayashi,Fumio, T. Ito, and J. Slemrod. "Housing inanceImperfections:A Comparative imulation zalysis f the U.S. and Japan," Journalof Japaneseand International conomics, ol. 3, 1988.Ibbotson, . and L. Siegel. "The World MarketWealth Portfolio,"

Journal of Portfolio anagement, inter, 1983.Lessard, onald and FrancoModigliani. "Inflation nd the HousingMarket: Problems and PotentialSolutions". ew Mortgage Designsfor Stable Housing in an Inflationary nvironment, oston FederalReserve, 1975.Malpezzi, tephen, tephenMayo and David Cross. "HousingDemandin Developing ountries," orld Bank StaffWorking Papei,No. 733. Washington, .C.: World Bank, 1985.Malpezzi, tephenard Stephen Mayo. "User Cost and HousingTenure

in Developing ountries," ournalof Development conomics,September 987.Mazzola,Bruno. "HousingFinance in Italy,"Housing inanceInternational, ugust 1988.Meltzer, llan. "CreditAvailability nd Economic ecisions: SomeEvidence from the Mortgage and Housing Markets," Journal ofFinance, une, 1974.Mohan, Rakesh. "The Strategyfor Housingand Urban Development:Some New Perspectives," imeo, Planning Commission,New Delhi,1987.Morris, Felipe. "India'sFinancial ystem," World Bank StaffWorkingPaper,No. 793, 1985.Renaud,Bertrand. "Housing nd Financial rstitutions n DevelopingCountries: An Overview," orld Bank ;taff WorkingPaper,No. 658, 1984.Renaud, Bertrand. "The Role of Housing Finance in Development:Issues and Policies," NU mimeo, July 1989.Shah Report on Financefor HousingSchemes, ReserveBank of India,Bombay, 1978.


34/39

- 31

Timberg, homas and C.V. Aiyar. "Informal redit Markets in India,"Economic evelopment nd Cultural Change, ctober, 1984.U.S. Departmentof Commerce,Fixed Reproducible angible Wealth in theUnited States, Bureau of Economic Analysis, U.S. GovernmentPrinting ffice,Washington, .C. 1987.Vittas,Dimitri, atrick Frazer,and Thymi Metaxas-Vittas. The RetailBanking Revolution, afferty Publications, ondon, 1987.Williamson, liver E. The EconomicInstitutions f Capitalism.The Free Press, 1985.

. "Credible Commitments: Using Hostages toSupportExchange," merican EconomicReview, September 983.

Wai, U. Tun. "A Revisit to Interest ates Outsidethe OrganizedMoney Markets of Underdeveloped ountries," anca Nazionaledel LavoroQuarterly eview,vol. 2, no. 122, September 977.


35/39

- 32 -

FOOTNOTES1/ See Goldsmith 1985) for the most complete iscussion f this kindof data. Ibbotson and Siegel (1983) estimate that real estateaccounts for approximately ne-thirdof the world market wealthportfolio. Housing accounts for a larger proportion of thecapital stock than of fixed capital formation because of itslonger life. In the U.S., for example, the service life ofresidential apital used to derive wealth estimates is more thandouble that of any non-residential nvestment.2/ In 11 of the countries examined by Goldsmith (1969), it ispossible to identify (approximately) he share of mortgages infinancial assets. The countries and their average share of

financial ssets in mortgages re: Argentina, 1901, .27; Denmark,1900, .39; Egypt, 1900, .58; Germany, 1900, .28; Greece, 1929,.07; Italy, 1908, .12; netherlands, 900, .10; Spain, 1913, .04?Switzerland, 1900, .18; U.S., 1900, .18; Yugoslavia, 1929, .08;average, .21, median, .18.The beginning f the 20th century was used rather than more recentdata because 6 of the 11 countries in the survey are nowindustrialized, nd their current financial sset holdings shouldreflectthis pattern of real asset demand rather than the patternthat might be associated with an industrializing, rbanizingeconomy.

3/ To examine the housing tenure patterns.of developing ountries aregressionequation was estimated for 42 countries. The percentof housing units that were owner-occupied as regressed on per-capita income and the level of urbanization. The hypothesis thathomeownership s a primitive orm of tenure and inversely elatedto both the level of incomeand urbanization as supported. Bothvariables ere statistically ignificant explanators." Hence theconclusion in the text on the higher likelihood f homeownershipand more individually ased housing finance demand in developingcountries. The data on tenure are from Boleat (1985).4/ See Buckleyet al (1988) for a review and analysisof World Banklending for housing finance. See Currie (1966) for one of heexceptions to this lack of attention to the role of housingfinance in economic development.S/ For example, U.S. studies estimate that the service life ofresidential investments in 1 to 4 unit structures is 80 years.Industrial buildings have a service life of 31 years. See U.S.Department f Commerce (1987). Pg. xxii.


36/39

- 33 -

6/ Cunningham and Hendershott (1984) provide a good example ofanalyses that focus on the optimal default strategy. They suggestthat in the U.S. the indirect transactions osts of defaultingshould be on the order of 20 percent of the loan amount. Fosterand Van Order (1985) provide empirical support for the conclusionthat households face high transactions costs which reduce thespeed at which households exercise their "put" options, and bydefaulting ssentially ell the house to the lender or insurer inexchange for the mortgage.

7/ See Gultekin's (1983) analysis of stock market returns in variouscountries nd the effect of inflation n these returns.8/ In countries that are already highly urbanized, such as the U.S.or Latin America, in some areas of the country housing can be a

risky investment.9/ See Lessard and Modigliani (1975).10/ Housing Sector Report, Turkey, USAID-World ank (1989).11/ These calculations ignore the effects of the higher house price-to-income atio that obtains in Turkey. This approach was takento focus on the direct effects of inflation on mortgagesaffordability.12/ See Fishlow (1978) for a discussion of the policy objectives ofindexation n Brazil.13/ Goldsmith's (1987) work on Premodern inancial Systems indicatesthat the cost differential for mortgage debt was substantial.Wai's (1977) analysis yields similar results for developingcountries.14/ For example, Fons (1987) shows that U.S. investors ho received ayield differential f 3.5 percent for holding corporate ebt thatwas not of AAA quality were compensated for losses due todefault. Kau and Sirmans (1984) also found urban land to be a

less risky asset than high gradp corporate onds.15 See footnote on optimal default strategies.16/ See the World Bank Paper on Financial ntermediation 1985). Itindicates hat one-third of the development inance institutionsthat received orld Bank loans were technically nsolvent.


37/39

- 34 -

17/ See the 1988 regulatory requirements ecommended y the Bank forInternational ettlements. They identify ortgages s being muchless risky financial assets. Ironically, the most significantmispricing f risks that occurred in the U.S. financial ystem inrecent years was that of its main mortgage lenders, the savingsand loan associations. However, the mispricing was due tostructure f deposit insurance nd not the type of lending undertaken.

18/ See Burns and Grebler (1975).19/ The Shah Report (1978) to the Reserve Bank of Iidia.20/ Williamson (1983) provides a proof of why better terms should beoffered to a transactor who offers a "hostage" that insures his

fulfillment of the contract. Timberg and Aijar (1984) presentcredit market rates information or India.21/ Goldsmith (1985). The countries re the U.K., U.S., Germany, andFrance.22/ This is not to suggest that reducing minimum housing costs bychanging ndian building standards s unimportant.23/ See Akerlof's (1970) discussion nd the sources there.24/ Morris (1985).25/ Charavarty eport, Reserve Bank of India (1985).26/ See Malpezzi and Mayo (1985) for estimates of income housingexpenditure evels by income level.27/ See Renaud (1989) for a fuller discussion of the preconditionsnecessary to establish housing finance system.


38/39

PPRWorkingPMper eoasContact3: hit o flor aper

WPS323 TheOld and he New n Heterodox MiguelA. Klguel December1989 R. LuzStabiliation Programs:Lessons Nissan hlatan 61588from the 1960sand he 1980s

WPS 324 EthIcalApproacheso Family F. T. Sal December1989 S. AinsworthPlanning nAfrica K. Newman 31091WPS325 Manufacturers' esponseso Infra- Kyu Sik Lee December1989 L. VictoriostructureDlsfiiendes n Nigeria AlexAnas 31015WPS326 Do ExportersGain rom VERs? Jaimede MeloL AlanWintersWPS327 MakingNoisyDataSing: Estimating JamesR. TyboutProductionTechnologies nDevelopingCountriesWPS328 Europe,MiddleEast,and North Rodolo A. Bulatao November1989 S. AinsworthAfrica EMN)RegionPopulation EduardBos 31091Projections, 989-90Edition PatienceW. StephensMy T. VuWPS329 LatinAmerica nd he Caribbean RodoKo . Bulatao November1989 S. Ainsworth(LAC)RegionPopulation EduardBos 31091Projections, 989-90Edition PatienceW. StephensMy T. VuWPS330 Africa RegionPopulation RodoffoA. Bulatao November1989 S. AinsworthProjections,1989-90Edition EduardBos 31091PatienceW. StephensMyT. VuWPS331 Asia RegionPopulationProjections, RodoHfo. Bulatao November1989 S. Ainsworth1989-90 Edition EduardBos 31091PatienceW. StephensMyT. VuWPS332 India: Effective ncentivesn AshokGulhatiAgriculture: Cotton,Groundnuts,Wheat,and RiceWPS333 SecondaryMarketPricesunder StijnClaessensAlternativeDebtReduction Sweder anWijnbergenStrategies:An OptionPricingApproachwith an Applicationo MexicoWPS334 Built-inTax Elasticity nd he JaberEhdaieRevenue mpactof DiscretionaryTax Measures:An Econometric

EstimationMethodwith Applicationto MalawiandMauritius


39/39

PPRWorkingPaper eri9sContactlbi AuFr Do foroap2r

WPS335 Macroeconomic djustment nd RamonE. Lopez December1989 L. Riverosthe LaborMarket n FourLatin Lu.sA. Riveros 61762AmericanCountrlesWPS338 Complementary pproacheso GermanoMwabuFinanclngHeaithServices nAfi.icaWPS337 ProjectingMortalityor All RodoHfo . Bulatao December1989 S. AinsworthCountries EduardBos 31091PatienceW. Stephens

MyT. VuWPS338 Supplyand Use of EssentialDrugs S. D. Fosterin Sub-Saharan frica: IssuesandPossible SolutionsWPS339 Private nvestment nd Macro- Luis Serven December1989 E. KhineeconomicAdjustment:An AndresSolimano 61763OverviewWPS340 PrudentialRegulation nd Banking VincentP. Polizanto WDROfficeSupervision:Building n Institutional 31393

Frameworkor BanksWPS341 Cost-of-LivingDifferences etween MartinRavallion December1989 C. SpoonerUrbanand RuralAreasof Indonesia Dominique ande Walle 30464',PS342 HumanCapitaland Endogenous PatricioArrau December1989 S. King-WatsonGrowth n a LargeScaleLife-ycle 33730ModelWPS343 PolicyDeterminantsf Growth: Williamr Easterly December1989 R. LuzSurveyof Theoryand Evidence Deborah Wetzel 61588WPS344 PolicyDistortions, izeof WilliamEasterlyGovernment, nd GrowthWPS345 PrivateTransfers nd PublicPolicy DonaldCoxin DevelopingCountries: Emmanuel imenezA CaseStudy or PeruWPS346 India.TheGrowingConflict HansJurgenPetersbetweenTradeand Transport:Issuesand Options

housing finance in developing countries

Documents