The community reinvestment bill : a study on whether the proposed legislation can address the lack of housing finance for the lower income population of South Africa

M.Com. (Economics)The banks role in financing growth and development has come under the spotlight over the past year, as part of a political debate about what role the private sector should be playing to address South Africa's social and economic problems. The introduction of the proposed Community Reinvestment Bill raised the prospect that banks could be forced by government into financing low cost housing. In my opinion community reinvestment must not be pursued through the introduction of legislation by government but rather through sustainable partnerships between government and the private sector which could deal with all aspects of community reinvestment. The main purpose of the study then is to propose a framework for this partnership between government and the private sector in providing housing finance to low income housing consumers. In this way community reinvestment will be multi-faceted, reflecting the need of government to introduce concrete sanctions against racial and geographic discrimination whilst facilitating the establishment of banking capacity and foster banker willingness to support local economic development programmes. An extended literature study was undertaken which literature study serves to document current viewpoints, principles and existing research on the research objective. From the literature study, the reasons for the failure of the United States of America version of the Community Reinvestment Act is stated, the objective of the proposed Community Reinvestment Bill is considered as well as the housing finance system into which government wants to introduce this Bill. The introduction of community reinvestment is not conducive to economic growth and to illustrate this argument, the provision of housing finance by either the banks or government is considered. The attitudes, perceptions and financial behaviour of the low income housing finance consumers was also considered by documenting existing research that has already been done in this regard. A recommendation is made on a possible framework for implementation of community reinvestment in the South African environment