"Enabling housing markets and mortgage finance expands affordable housing more effectively than public construction"

"). Thus having a financial system heavily concentrated in banks may constrain the provision of insurance. Similarly, the absence of capital markets, mutual funds, or broker- age houses can constrain people’s options to diversify wealth. protecting against a systemic risk (such as financial crisis) because it may fail if many insurance com- panies go bankrupt. At the individual level, people can prepare and cope better with systemic shocks by increasing their self-reliance (self-insurance and self-protection), including by using a range of suit- able financial tools. Some fi nancial systems are better than others at offering access to variety The range of financial tools supplied by the formal financial system varies considerably with the stage of development and personal income within a country. On average, people in high-income coun- tries save through bank deposits much more than people in middle- and low-income countries (figure 6.1a). Even the poorest 40 percent of people in high- income countries (figure 6.1b) are much more likely to use formal saving deposits than people in middle- income and low-income countries. Formal credit is commonly used in high- and low-income coun- tries; people in middle-income countries use credit much less. The use of private health insurance across middle- and low-income countries differs greatly, both on average and for the poorest 40 percent. BOX 6.2 Housing finance can improve household resilience and opportunities A house can be a lifelong investment. Housing fi nance allows indi- viduals to acquire property at an early age and spread repayments over time, as their income rises. Without proper fi nancing, the alter- native is to spend years saving while living in unsatisfactory condi- tions, or building housing little by little at a higher cost. In old age, home ownership provides security and resilience when income is lower and would not easily cover rent payments. Housing fi nance can bring economic opportunity to house- holds. By expanding access to secured credit collateralized by hous- ing, housing fi nance can release family wealth for other diversifi ed investments, unlocking the power of so-called “dead capital.”a A properly functioning titling system and housing fi nance products can thus play a role in creating economic opportunity. Housing fi nance improves people’s resilience and helps them avoid poverty traps. To obtain a mortgage, households usually need to accumulate signifi cant savings for the down payment. This “forced” saving alone can contribute substantially to a household’s resilience.b Through housing fi nance products, people have access to better housing with better sanitary conditions, thus improving their resilience to disease. Having utility connections, sanitation, Source: Simon C. Walley for the WDR 2014. a. De Soto 2000. b. Collins and others 2009, 179. c. Cohen 2007. d. RTI International 2005. a waterproofed dwelling, and warmth or shade can all improve health conditions, especially among the more vulnerable young and elderly. Simple improvements like having a concrete fl oor can reduce mosquito breeding grounds and thus lead to lower levels of malaria. The availability of high-quality aff ordable homes enables families to spend a greater share of their household income on nutritious food, health care, and other essentials that promote good health. Greater residential stability also reduces the stress and dis- ruption associated with frequent or unwanted moves and provides a stable base for individuals with chronic illnesses and other condi- tions to receive needed care.c Improved housing contributes to safer and more resilient commu- nities. In"