In an era of rapid urbanization, escalating climate risks, and widening economic disparities, housing affordability gaps are expanding. This is especially true in developing regions, where informal settlements are common, and where women in particular face barriers to accessing housing finance.

In the absence of inclusive options, people are forced to rely on high-cost, informal lending. But it doesn’t need to be this way.

What is Inclusive, Affordable, and Sustainable Housing Finance (IASHF)

IASHF seeks to enable low-income households, women, rural communities, and other marginalized groups to access financial services in order to acquire, build, or upgrade homes.

It does this through an integrated approach which combines affordability with sustainability.

• Affordability includes subsidized interest rates, or adaptable repayment structures, to mitigate excessive debt burdens.
• Sustainability includes promoting energy-efficient and resilient housing design.

By bringing people into the formal financial sector, inclusive housing finance systems teach them how to save, and build their credit histories. But the benefits of IASHF go far beyond financial inclusion.

At a national level, it reinforces monetary and financial stability, while at a global level, it supports multiple Sustainable Development Goals, driving progress on poverty, climate action, sustainable cities and communities, water and sanitation, and reduced inequalities, among others.

Notably, through its emphasis on sustainability, IASHF aligns with international priorities, addressing climate-related threats to financial systems.

Where do central banks come in?

As custodians of monetary policy, central banks exert considerable influence over housing finance. Adjustments to interest rates directly impact mortgage accessibility, while quantitative easing can stimulate lending, provided measures prevent inflationary pressures. Macroprudential tools, such as loan-to-value ratios, manage risks while advancing inclusion.

Since 2024, AFI has been partnering with Habitat for Humanity to advocate for IASHF, and to build central banks’ and financial regulators’ expertise in affordable housing finance. This activity has included:

1. A masterclass in Zanzibar which equipped regulators with practical strategies for implementing IASHF policies.
2. A green, affordable housing finance workshop, held in Cairo and hosted by the Central Bank of Egypt, which explored Egypt’s experience with low-cost models and subsidies, and which included a visit to Badr City, the world’s largest housing project for low-income citizens.

A new AFI publication, Building Homes, Building Futures: Egypt’s Affordable Housing Finance Model, serves as a case study guide on how countries can address housing shortages, financial exclusion, and green issues effectively.

Emerging Innovations and Opportunities

Around the world, AFI is supporting members in integrating IASHF into national strategies through incentives for green lending, regulatory sandboxes for fintech innovations, and data-sharing protocols to expand credit availability.

We see a number of innovative approaches to IASHF emerging, which offer pathways forward:

• Microfinance institutions are deploying incremental lending for phased home improvements.
• Green bonds and climate-resilient mortgages are mobilizing sustainable investments.
• Fintech platforms are using alternative data sources, such as mobile usage patterns, for credit assessments.
• Gender-responsive products are being developed, which recognize women’s pivotal roles in household management.
• Values-based banking models are prioritizing community-oriented affordable housing initiatives.

Secrets of success: implementation challenges and the power of partnership

IASHF involves getting to grips with a wide range of barriers. These include high interest rates, rigorous collateral requirements, and regulatory frameworks that often exclude low-income groups. In many countries, gender biases restrict credit access for women and rural populations, aggravating inequalities. Effective IASHF policies acknowledge and address these issues.

While central banks and regulators play a key role in IASHF, they can’t do so alone. A collaborative approach that involves NGOs and community organizations is essential, as are public-private partnerships (PPPs) with clear risk-sharing structures, such as partial loan guarantees from central banks.

Time to double down on IASHF

By embracing IASHF, we serve not only financial inclusion, but also job creation, health improvements, education and gender equality. We cultivate equitable and resilient economies, raise living standards, and contribute to building a sustainable global financial architecture.

That’s why AFI is committed to helping our members share best practices, pilot novel models, and implement policies that democratize housing finance access.

For vulnerable populations, housing represents more than shelter; it serves as a critical entry point to inclusion. Central banks and financial regulators are uniquely positioned to develop policies that translate this principle into action.