Meridian Development Limited

MIGA has issued $6.3 million in guarantees to Metro Ikram Sdn. Bhd. of Malaysia covering its $2 million equity investment in and $4 million shareholder loans (plus $1 million in interest) to Meridian Development Limited in Ghana. The guarantees are for five years and cover against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract.

With Metro’s investment, Meridian will develop and build the first phase of a large affordable housing project as a joint venture with Ghana’s Social Security National Insurance Trust (SSNIT). This first phase will result in the construction of approximately 1,000 homes in the crowded Accra-Temma metropolis. Once complete, the new neighborhood will feature a variety of housing styles offered at a wide range of prices, from two-bedroom low-cost houses to three-bedroom, medium-cost houses to four-bedroom premium single family homes. Later stages of the project include the construction of up to 100,000 homes throughout Ghana. The MIGA guarantees cover the first stage, which is considered a pilot for the future.

The project comes at a time when Ghana, like other sub-Saharan countries, is experiencing rapid urban population growth. The country’s housing sector has not been able to keep up with demand, particularly in affordable price ranges. Some estimates suggest that close to one million families in urban Ghana are looking to purchase homes, and this number could soar even higher as earning power increases. Meridian is a critical private investment that will help address the housing shortage, while demonstrating to other private investors that such projects can bring a strong rate of return when risks are properly mitigated.

The Meridian project is the first step in a multi-pronged government-backed approach to resolving Ghana’s housing crunch. The effort is aimed at making more housing options available and adding to the housing stock while tackling some of the overarching legal, regulatory, and financial issues that are preventing growth in Ghana’s private housing market.

Concurrent to Meridian’s pilot phase, MIGA, in conjunction with the Public-Private Infrastructure Advisory Facility, is embarking on a broad study of Ghana’s housing market. The goal is to develop a better understanding of these fundamental market and institutional deficiencies. Ultimately, it is hoped that the study will pave the way for reforms that will make the Ghanaian housing sector a more compelling investment proposition. Meanwhile the International Finance Corporation, the World Bank Group’s investment arm, is working to develop Ghana’s primary mortgage market and housing finance sector.