Jonathan Halloran, CEO of American Homebuilders of West Africa (AHWA), recently introduced me to Ameet Dhillon, an old friend and business school classmate of his good friend and business partner, Robert Hornsby. Ameet now works in tandem with both of them, as the Managing Director of a separate organization, US-Africa Housing Finance. Intrigued, as usual when I meet someone doing something interesting, I asked if he would answer some questions for our readers. Fortunately, he is generally very enthused to talk about his work. Here’s what he had to say:
Our Q&A with Ameet Dhillon
Hometown: I grew up (from age 8 to 22) in Cary, North Carolina
Current town: Fremont, California (for the past 16 years)
Position: Managing Director of US-Africa Housing Finance
Date: February 10, 2021
Thank you for taking the time to answer some questions, which I really appreciate. How did you get involved in this work?
Bob Hornsby is a close friend from back in business school at Wharton, and he’s the reason I got involved. I was an original investor in AHWA, but a passive one. Now here I am, six years later, running a housing finance company that works hand-in-hand with AHWA. I took a trip to Guinea, West Africa, pre-pandemic, with Bob to see the houses, my first trip to Sub-Saharan Africa. When it is safe to travel, I am planning to go again.
When describing your job–what is your “elevator pitch”? How do you sum up the work you do?
The company name is the pitch: US-Africa Housing Finance. It’s a Delaware registered LLC financing housing that is physically located in West Africa. There are details of course, but that’s basically what it is.
How large is this company?
In the past four years we’ve attracted 22 individual investors who have invested a total of $2.1 million to date. Many existing investors have put money into USAHF multiple times as they have seen the company progress. Recently we signed on the first two truly independent investors–they weren’t friends and family members, just people interested in what we’re doing.
Who are your clients? What people are buying houses in West Africa?
The borrowers are all African diasporans. About 75% are in the United States, most of the balance in Western Europe. Two are in Australia. The loans are all US dollar denominated. The borrowers are fulfilling their African dream, the dream of buying a house. These are people who left West Africa ten or twenty years ago, but they want to buy a home in the country of their birth, for their family or for themselves. This is a realization of that dream. It is exceedingly difficult to build or buy a home in West Africa, doing it the standard way. Generally, they’d have to project manage it themselves, find local people whom they can trust. There is swindling. People get ripped off. Many of our clients have had that happen to them. And houses often get built one room at a time, as they can afford it. They save up a few thousand dollars and build what they can, and it’s very inefficient, built over years.
Jonathan and Bob came up with a better way. Like in the US, there’s a developer and a contract. You can choose the model, and there’s a certain level of customization, but it’s basically a tract home. Then my organization can finance it. There are some differences between working with us and say, Bank of America, but 95% of the process is the same, including making monthly payments in US dollars, interest and principal, amortized over ten years.
Do you end up selling these loans the way that they do here in the US? My husband and I recently refinanced our mortgage, and I think before we even paid the first monthly bill we had a notice in the mail that the loan had been sold to a different entity. Then we got another notice that yet another organization was going to be administering the loan. How does it work for these loans?
I’m kind of like Fannie Mae here. I don’t originate the loan; I immediately purchase it (with investor capital). The flow of investor monies creates the flow of the loans. AHWA is like the bank, underwriting and originating the loan; they take in the payment. From the customer’s perspective, they only deal with AHWA. They pay directly to AHWA; they can even autopay electronically. Once a quarter, AHWA aggregates the principal and interest payments and sends the money to USAHF. We have 44 loans currently, worth about $2.1 million overall. We use the interest to provide dividends to investors. It’s been 9% per annum over the last four years. When the principal is paid off, I use that money to either buy more loans or pay back existing investors. There’s no idle cash. And hardly anyone has asked for their money back; our investors stay in. For them it’s a passive investment opportunity and they get paid every quarter. Customers have no idea that USAHF holds their loan, and there’s no reason they need to know.
One amazing thing is that one of our customers paid off her house loan and then when she learned about our structure, she decided to invest with USAHF. That was pretty significant to me. Having long been on the other side, she really understood the business model.
Has the pandemic disrupted your business greatly?
We have had two loans paid off in the last nine months, during the height of the pandemic. There has not been a higher delinquency rate. And the two loans paid off are out of only four paid off altogether over the past four years. I ask myself how that is possible, and the answer is, I think, three things. First, the African dream. This is such a dream, from emigration. And it’s not unique to Africa–having a house of your own, a plot of land, that’s universal. It’s a very strong desire, when people leave their place for a better life, the draw home is very powerful. You will do, within reason, what you have to do. Work another job, tighten your belt, forgo that new iPhone.
The second thing is, we require 30% down. The houses cost between $25,000 and $200,000, the average being around $75,000. For easy math, we’ll use $100,000 as an example: $30,000 down, and I finance 70%. From day one, you’ve got a lot of skin in the game. You are not going to let this go. The incentive is the opposite–how quickly can I pay this down?
And the third thing is that our customers don’t get the title until they have fully paid. It’s not like in the US where you get the title and occupancy and if you don’t pay the bank will put a lien on the title. They get the title when the loan is paid off. It’s not technically a mortgage, it’s more like a lease-to-own. It’s otherwise like a mortgage contract. But because they don’t have the title, and it’s a personal capital investment, people have to really be under extraordinary duress to default. Over 44 loans we’ve only had two defaults.
What kind of interest rates do these home buyers pay?
The loans are for ten years and the interest rate is 12%. That sounds outrageous to Americans. But in Africa, the going rate at a bank for US-dollar loans–if you go to, say, Ghana Home Loans–the interest rate is over 13%. That’s how the business model works. We are a for-profit business, but we are not taking advantage of our customers. It’s not our ethos. For the two defaults, we resold the homes and after finance and administrative costs, we paid the borrower back the rest of the money. So one of them lost $4,000 on a $50,000 loan and was relieved that it wasn’t more. During COVID, we offered our customers the chance to pay interest only and very few people took us up on it.
What has surprised you since you started working in this business?
A few things. One, there’s an exceedingly low default rate, which we discussed. We didn’t know four years ago what would happen, but we were surprised by that.
Second, our investors (with one exception) are not from the African diaspora. It has not resonated with that population too much. Most of our investors are Americans who have not been to Sub-Saharan Africa. I would have thought that getting a good return and having an incentive to help West Africa would have attracted more African diasporans, but not so far. It might change going forward.
And the biggest surprise for me was learning that there is a total lack of housing finance across all of Africa. I focus on West Africa, but there are almost no housing financing institutions in the entire continent. Almost anyone who wants to buy a house has to pay in cash. Would you be able to do that?
Me either, not a chance. Not without housing finance. Probably 99% of us would agree. A few people have enough wealth to buy a house outright, but most of us don’t. But that’s the situation that all of West Africa is in, with very miniscule exceptions. That was astounding to me. I went to business school. I hear people talk about Africa and how its economy is the future, how it has such a young population. But without proper housing finance institutions, it is impossible for these economies to achieve the necessary degree of development. Housing finance is the backbone of the middle class. A house is, for most of us, our most valuable asset. It’s rare for people to have other more valuable assets. And the current situation is depriving an entire population of the ability to do that. These economies cannot grow before solving this problem. It was a revelation to me. But by running this business, we are part of the solution. It’s a small part but it is part of the economic solution to growth across Africa.
So, if this is such a large problem, why has no one else done this? Why aren’t governments promoting home ownership, or other companies?
I would like the answer to that question myself. I have a few ideas. I think that there’s a perception of Africa risk–people do not want to get involved. The media portrayal of Africa is negative; vision is tainted. The news focuses on wars and disease. We view it differently–Africa is not like its perception. I’ve been writing articles about this in an effort to inform others about what the risk is really like in Africa. There are myths about risks–they’re not always what you think they are. And this is not esoteric economic theory! There’s a lot of ignorance.
Also, I think governments haven’t done enough. There is corruption of course, but there’s corruption in lots of places.
It’s far more rampant here than I would like.
Here and many places. But I think this is something governments in Africa should be focused on.
And there’s also racism. It’s not totally far-fetched that people are prejudiced against Africa as a place to do business. So, a variety of different forces have conspired to hold much of Africa not able to grow. Housing finance is not the only problem, but it is a glaring example of a problem that hasn’t been addressed. The US understands the importance of home ownership. It affects neighborhoods, when people have an ownership stake, there’s less crime. People take better care of what they own as opposed to what they rent.
So, I keep hearing about Chinese business interests in China, in mining, in construction, in development. Why haven’t the Chinese been involved in housing finance?
They are in some sense taking advantage of the situation. Most African people don’t like the Chinese model. They build dams, they build housing, but they bring in labor from China. That’s not what you want as a person living there. You want local jobs. I wrote another article about why this work is a social impact investment and my observations about the work. It’s the old saying, give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime. The houses we finance are built locally by local people. I’m Indian-American, Jonathan and Bob are white. But the local officers are Black Africans. All the trades involved in building, skilled labor, plumbing, electrical work: it’s all done by local people. That has an obvious economic impact in that we pay a fair wage, and it stimulates the economy. But in my mind, there’s a bigger social benefit. Africa is the youngest continent, a low median age, and we are training a cadre of young people with skills. They will have the skills for decades ahead. They can train others. They are becoming a skilled labor force. In the future they might be building dams, hospitals, railroads, all the infrastructure their countries need. And we’re providing an outlet.
There are well meaning foundations and NGOs that provide training. They do train people with job skills. But they need to practice those skills. They need work, apprenticeships, jobs. If they learn skills and don’t practice them, the skills are lost. We are an outlet for that–it’s part of our social impact. I mean this wholeheartedly; this is an invaluable social impact. I challenge anyone to find a better social impact that has a similar financial return and risk profile. If you know a better investment, tell me. I will invest in it!
I hope someone does!
I do, too! I mean that sincerely.
Have you received criticism for this enterprise? For example, are there people who question you as to whether the western world should be making money off of Africa at all?
There’s a spectrum of opinions. On one side there are people who think it should be business only. They don’t care about social impact; they just want the maximum return.
On the other side there are people that think the west’s involvement with Africa should only be charitable and that it is unethical to make money off of the poor.
I’m in the middle. Yes, we’re from the west and it looks like we’re extracting wealth. But we’re in the very center–and we are not extracting wealth. We are providing a benefit.
Economically, West African governments should want the world to do what we are doing. Investing foreign capital and making it work for the benefit of West Africans in West Africa. If anything, we’re making money off of western capital. The capital invested is from the US. We’re adding to their housing stock, employing people, training people, helping African diasporans efficiently realize their dreams. I am very much making this transaction smoother for them. How is this exploitative? We’re not not taking wealth, we’re building infrastructure. Not extracting. Injecting? Whatever the opposite of extracting is!
I would be glad to debate anyone on this point.
So how come African banks don’t do this? It seems like there would be an opportunity for their financial institutions to take this kind of project on.
Banks in Africa have almost no incentive to do housing finance. They lend to governments running deficits, which is more lucrative and less risky for them.
And I’m in a unique situation. I have access to cheaper US capital because I’m here in the US! In Africa, or in any other country, you are at a disadvantage in terms of accessing dollars. You need to get dollars from elsewhere. I recently got a Small Business Administration (SBA) loan at 3.758%. It seems so cheap! But that’s actually a great return for the US Treasury. The US prints the money! It hadn’t hit me until then, but I’m where there’s the cheapest access to US dollars. In other countries, they can’t compete with me on cost of capital as long as loans are denominated in dollars.
So, you’re where you are due to some specific historical and economic circumstances. What do you see happening in the future? I know you don’t have a crystal ball, but where do you see this going or evolving?
What I’d like to happen, my dream, would be to grow this. I want to grow this from two million now to 100 million dollars or more. I’m interested in shaking the necks of the people who want to see this part of the world grow. If you want this to happen, let me show you how to do this. Not theoretically, but with real-world data. My dream is that the countries of Africa would follow this model. I would gladly show them the roadmap to do this. My goal isn’t just to make money. Yes, we built it to make money, but it is more interesting to actually do something that goes beyond me–how can I benefit other people? They won’t listen to me at $2 million, but maybe they will at $10 million, or $50 million. I’m not sure what the number is.
When you hit that number, please invite me to the party!
Sure, you’ll have VIP seats!
Great! Looking forward to it!
On a slightly different topic, for people unfamiliar with this part of the world, is there a book or a movie that you’d recommend for them to learn something about it?
That’s a good question but that might not be possible! West Africa is made of many countries which are very different from each other. One challenge from an investor perspective, which may explain why there are not more African diasporan investors, is that if you’re a Nigerian, you would ask, why would I invest in Guinea? They don’t know it, have never been there, don’t have any particular interest in it. There’s not one window into West Africa. There are Francophone countries like Guinea and Anglophone countries like Sierra-Leone, which is mostly English-speaking. The histories are different, the religions are different, they have different colonial histories, and different local languages.
But for people interested in learning more, I’d say read my articles. They’re not technical, just be a thinking human and you will get a window into what I’m talking about. And you can imagine the scenario and understand their challenges.
That’s probably not a very good answer! Better answer: talk to West Africans! We have multiple investors who put in $50K or $100K because they thought it was a “cool project.” I hear pitches all the time for all kinds of things, but this is interesting, it’s different. And I send everybody involved a quarterly newsletter!
Thanks so much for your time! It was really interesting hearing about what you do!
Laura LaVelle is an attorney and writer who lives in Connecticut, in a 100-year-old house, along with her husband, two daughters, and a cockatiel.
Laura can be contacted at firstname.lastname@example.org
Images Courtesy of Ameet Dhillon
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