The challenge of finding money to build shelter in Mogadishu’s informal settlements

Housing development in Mogadishu is overlooking and excluding its largest potential customer base: the poor.

Charlotte Bonnet's picture Erik Bryld's picture
Insight by 
Charlotte Bonnet
Erik Bryld
Charlotte Bonnet is a consultant; Erik Bryld is the managing director and a senior consultant at Tana Copenhagen
28 January 2019
Mogadishu attracts people from all over the country, making it the second-fastest growing city in the world, with a 4% annual rate of urbanisation growth (Photo: Baron Reznik, Creative Commons via Flickr)

Mogadishu attracts people from all over the country, making it the second-fastest growing city in the world, with a 4% annual rate of urbanisation growth (Photo: Baron Reznik, CC BY-NC-SA 2.0)

Shelter is one of the most fundamental elements needed to support human life. Having a place to come home to, to put your belongings, to gather your family, to cook, somewhere you can rest and feel safe – these are all basic human needs. With its ongoing displacement crisis, the demand for shelter in Somalia is among the highest in the world. 

Mogadishu, home of the displaced

Somalia’s capital, Mogadishu, is the starkest example of the country’s urban housing problem. The city attracts people from all over the country who migrate in the hope of finding security and livelihood opportunities. Often, they lose their income source when fleeing conflicts or environmental disasters. Thus, the influx of people arriving daily into Mogadishu is mostly made up of very low-income populations. 

The city simply cannot house these growing numbers. In 2018, an estimated 2.6 million people lived in Mogadishu, of which over 600,000 were displaced persons, scattered across over 480 informal settlements in and around the city. 

These settlements are home to Mogadishu’s most vulnerable people: not only Internally Displaced People (IDPs), but also urban poor and returnees, and across these categories, many female-headed households, youth, and people living with disabilities. The increasing number of displaced people and other urban poor communities arriving in Mogadishu make it the second-fastest growing city in the world, with a 4% annual rate of urbanisation growth. 


So what kind of homes do all these people live in? Tana Copenhagen and IIED are conducting a study on access to shelter for vulnerable populations in Mogadishu for the East African Research Fund. We are shedding light on the formal and informal systems governing access to housing by engaging with a range of stakeholders – IDPs, financial institutions, real estate developers, notaries, architects, urban planning experts, and so on. 

Notably, while the diaspora, banks and developers are investing in formal housing, this sector is outpaced by growth of informal settlements where thousands of people live in temporary shelters. 

Researching this apparent paradox reveals that the city’s housing development is not catering to its largest potential customer base: the poor. New buildings are completely out of financial reach for most of Mogadishu’s inhabitants: the cheapest newly built type of house in 2018 cost an estimated US$70,000 – unaffordable to almost all of Somalia’s population.

These exorbitant prices are partly due to the value of land, Mogadishu’s scarcest resource, skyrocketing in the last decade. This rules out formal home ownership for the majority of Mogadishu’s population.

The informal banking sector: personal networks

In informal settlements, the most common way for people to put a roof over their heads is to build it themselves with scrap materials such as wood, plastic sheets, and sometimes corrugated metal sheets. But even building these houses costs money – according to our respondents, ranging between $40 and $200, which most don’t have on hand. 

Yet, temporary shelters like these are popping up every day. So how are poor people accessing housing finance?

The obvious option would be bank loans. However, as anywhere in the world, you need money to borrow money. And while the banking sector in Somalia slowly recovers from 20 years of war, and more financing options become available, only 15% of the population has an account with a formal bank. This might not be a surprise in a country where 69% of the population lives below the poverty line, and most transactions are done in cash or via mobile platforms. 

Mogadishu’s settlements’ dwellers tell us that they are essentially excluded from the formal banking sector: they do not use banks to access the funds to build their house. Nor are microfinance schemes, and the 5-10% commission they charge, an option. 

Instead, the vast majority of this population relies on personal networks. They borrow from family, friends, relatives from abroad and within Somalia, either in cash or via mobile services, to pay for housing materials. Connections in Somali society are pivotal and override the formal institutions that are inaccessible to much of the general population. 

Durable solutions

While these informal systems enable people to house themselves in settlements, neither their homes nor their situation is sustainable. 

A durable solution for housing Mogadishu’s vulnerable populations should consider that, while they are poor, they constitute an enormous untapped market, both for housing and financial services. Our research shows that particularly vulnerable groups, such as women and young men (who are often suspected of being ‘troublemakers’ or susceptible to joining Al-Shabaab), may lack the networks to secure loans or are actively discriminated against as they search for shelter in the settlements. 

Efforts must be made to develop affordable housing and finance solutions that are tailored to the circumstances of the poor, the displaced and the disadvantaged. A decent place to live and the ability to borrow money is fundamental if Mogadishu’s vulnerable groups are to break out of the poverty cycle.

Further reading

Read more about Tana’s work with informal settlements in Mogadishu and Somalia:

  • Accountability in informal settlements, 2018
  • Accountability in informal settlements: Kismayo and Bossaso, 2018
  • Engaging the gatekeepers: using informal governance resources in Mogadishu, 2017
  • Informal settlement managers: perception and reality in informal IDP camps in Mogadishu, 2016

About the author

Charlotte Bonnet is a consultant on the East African Research Fund project.

Erik Bryld is the managing director and a senior consultant at Tana Copenhagen.

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