Supply-Side Issues and Challenges of Home Financing in Afghanistan

By
Zulfiqar Ali Khan,
Hazik Mohamed Saiful AzharRosly

Abstract

The aim of this study is to examine the supply side issues and challenges of home financing in Kabul, Afghanistan. Afghanistan as a country is facing substantial housing shortage due to its growing population and unavailability of land in the major cities where unclear land titles, lack of legal and regulatory frameworks, absence of national housing policies and foreclosure laws constituted major barriers. These problems are compounded with the lack of supply of housing finance and people’s low financial capacity to take bank loans and financing. A sample semi structured interview method was applied for the collection of data. The study was carried out through questionnaire surveys via oral-verbal and face to face as well as written responses.  The findings of the study demonstrate that there are several factors, such as title searching expertise, professional appraiser, government intervention, and subsides and Takaful products that possess challenges to banks in extending loans and financing to the housing sector. This study concludes that the prospects of Islamic home financing in Afghanistan can be enhanced by considering policies to create more employment opportunities to bolster income that can make people more bankable, to enhance Shariah compliance so that people have trust that Islamic values prevails in the transaction. It is also crucial for Islamic banks to develop long-term Islamic home financing products such as leasing (Ijarah), partnerships (Diminishing Musharakah) in order to promote the use of Islamic banking housing products.