Mortgage Financing, Housing Investments and Economic Growth among East Africa Community Member Countries

Abstract

The objectives of the study were to investigate the relationship between mortgage financing and economic growth, and the mediating effect of housing investments on mortgage financing and economic growth of East Africa Community Member Countries. Theories adopted were the theory of financial intermediation, the theory of investment multiplier, new neoclassical economics theory and structural form. Secondary data was gathered through country-specific Central Bank reports, World Bank reports, IMF reports, as well as Africa Development Bank reports between January 2001 and December 2020. Descriptive statistics, correlation analysis, and panel data model estimations were conducted. The mediation effect was tested using Baron and Kenny’s (1986) model estimation processes.  According to the research, number of mortgage accounts and value of mortgage accounts have a significant positive effect on economic growth among EAC member countries; housing investments have no significant mediating effect on the association between mortgage financing and the economic growth of EAC member countries. Further, mortgage financing and housing investments significantly influence the economic growth of EAC member countries. In conclusion, housing investments does not mediate the relationship between mortgage financing and economic growth of EAC member countries. The study recommends the need to come up with measures that will increase mortgage uptake in the EAC member countries as this will contribute to economic growth.

Keywords: Economic Growth, Mortgage Financing, Housing Investments