Housing Finance for the Poor in Asia

Two Perspectives on Best

Practices and Promising Trends in the Region

The Banking with the Poor Network featuring

Habitat for Humanity and

LFSUS

Webinar Agenda 3:00 – 3:10pm About this Webinar 3:10 – 3:30pm Jennifer Oomen and Rajan Samuel of Habitat for Humanity will present trends and best practices in housing microfinance in the Asia-Pacific region, and considerations for adding value to the borrower experience. 3:30 – 3:50pm Ayanthi Gurusinghe of LFSUS, will discuss affordable housing finance through making low-income settlers bankable. 3:50 – 4:15pm Discussion and question time

About this Webinar

- Attendees will be muted during the presentation; they will be given the possibility to speak only during the discussion time - At the end of the Webinar a follow-up email containing a survey will be sent to all the attendees - Two practical tips:

How to raise a question

To ask questions or make comments type

them into the “questions” window in your menu and we will

answer during the discussion time

How to ask to participate actively

To participate actively use the tool “raise hand” from your menu during

the discussion time. We will allow you to talk making you unmuted.

•  Association of microfinance stakeholder organizations from across Asia - most of BWTP’s members are MFIs and the secretariat based in Singapore.

•  Committed to improving the quality of life of the poor, through promoting and facilitating access to sustainable financial services.

•  We do this through co-operation, training and capacity building initiatives, with the aim of achieving innovative, appropriate and demand-driven financial services for the poor.

www.bwtp.org the poor.

The Banking with the Poor Network (BWTP)

Housing Finance for the Poor in Asia

Two Perspectives on Best

Practices and Promising Trends in the Region

The Banking with the Poor Network featuring

Habitat for Humanity and

LFSUS

Housing Finance in Asia-Pacific Best Practices and Trends from the Grassroots Level

Presented By: Rajan Samuel, Housing Finance Manager

Jennifer Oomen, Housing Finance Manager Habitat for Humanity International

Center for Innovation in Shelter and Finance

Presentation Outline

• Trends in Housing Finance in the Asia-Pacific Region

• Habitat’s  experience  in  housing  finance • Adding Value through non-financial support

services

2

Dedicated to eliminating poverty housing

Improving shelter in nearly 90 countries and territories around the world.

HFHI has helped over 2 million people in 3,000 communities gain safe, decent, affordable shelter since 1976.

3

The Center for Innovation in Shelter and Finance facilitates collaboration between public, private, and third sector partners to

develop sustainable, and innovative housing solutions.

Housing Finance in

Asia Pacific Region

4

Only 5% of developing country households have access to formal housing finance

Lack of formal jobs

Lack of land title

Money lenders may charge

200-300% interest per year

The challenge of poverty housing

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Mortgage sector

Micro Mortgage

Sector

Low Income Group –

Bankable Poor

Economically Weaker Section –

Below Poverty Line

Vulnerable Beneficiaries

Less than $400

Less than $200

Less than $100

Primarily commercial bank housing

Housing Finance Corporation – Nano

Housing

MFI / HMF

MFI / Subsidy

Grant

Greater than $400

HOUSING DEMAND INCOME RANGE PER MONTH

HOUSING SUPPLY

Opportunities in the Poverty Housing Pyramid

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Habitat’s Product Mix: Lending Models

1. Philanthropic Model o ReBuild post-disaster; Retail Mortgage Program

2. Save & Build Model o Sri Lanka Savings Groups

3. Partnership Model (institutional lending) o Nepal’s  Village  Banks

4. MFI Partnership Model o HFH India Technical Assistance

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Products Continued

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• Lending terms & loan size is based on the lending model & product offering – ex: Save & Build (Nepal) – savings account for more than

75% of the loan • “Sweat  equity”  

– Client + family is expected to contribute 200- 1000 hours of sweat equity (depending on the type of housing intervention)

• Eligibility – Poverty indicator – per capital income of the family (ex:

Cambodia US $ 2 per day)

Promising Trends in the Region

• MFI Market: Demand to diversify products and services

• Current Research supporting separate housing finance product provision

• National Housing regulators promoting housing finance through MFIs

• Micro-mortgage space is developing but housing microfinance is a emerging market opportunity

9

10

MicroBuild Fund Investments in Asia-Pacific for 2012

include India, Cambodia and Philippines.

Adding value to the borrower experience through technical

assistance

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Adding value to the borrower experience

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70% of home improvements or upgrades are completed via self-construction

Increasing availability of both financing and technology is important.

Support Services & Housing Value Chain

Land and Tenure

Essential services (WATSAN, power, etc.)

Financing Building materials

Design and building skills/services

Housing

Community Development

Assistance to secure land and tenure

Assistance to access finance, subsidy, or savings facilities

Assistance to secure or improve services

Assistance to obtain or produce quality building materials

Design advice, building services

Construction supervision or technical assistance

On-going support services

The value chain identifies all of the main components needed for access to adequate and

affordable housing solutions.

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Connecting finance with technical

assistance

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By linking financial literacy with technical assistance we are bringing together the borrowers and the skilled workers into the same room.

Goal Setting & Planning for your home improvement

Family Finance: Family budgeting, debt management, managing remittances & savings

Making your goal a reality: Budget & Save for home improvement, financing options

Implementing your home improvement: Choosing the best materials, skilled workers, negotiating with contractors, etc.

Financial Education with technical assistance to make home improvement goals a reality.

Example from India

• Go Finance providing loans to their high-performers • 100% are women • Loan size averages US$700 • Loan product is introduced with a 90

minute  “Financial  &  Construction Technical  Briefing”  where  clients:

– Identify their housing goals and needs – Calculate their debt capacity – Hear about different material options – Ask questions to a licensed architect

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Results

Added-Value of Financial Orientation & Technical Assistance: • Set a process to achieve their

goals • Prioritizing health-related

improvements • 75% of housing clients seek low-

level of support services in the form of designs and information

• Clients are willing to pay fee for getting accurate Bill of Quantities

Before preparation: • 95% clients seek a

higher loan amount than is needed.

• 90% are not saving for housing

• 40% unable to calculate their EMI

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Self-Build Component

10 USD

Latrine Core Component

40USD

Thatch/leave Superstructure

87-100 USD

Brick Superstructure

187-200 USD

Brick with plaster finish 242-300 USD

Sanitary Toilets in Cambodia

Different Water & Sanitation Solutions at various price points.

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Costing Technical Assistance

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PRODEL, Nicaragua; TSPI, Philippines

Interest Rate Percentage fee tied to loan amount technical assistance; 5% on loan amount

Technical Assistance Center, India

Fee for Service $5 on $500, $10 on $1000

Moving beyond cross-subsidy, examples from the sector:

Business case is supported when technical support responds adequately to the demand.

Trends

• Demand to diversify products and services.

• Financing with technical support can improve the loan usage.

• Small fees can offset additional costs.

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Resources for further information

Habitat  for  Humanity’s  Center  for  Innovation  in  Shelter  and  Finance Toolkits and advisory services available globally THE BIG IDEA: Global spread of Affordable Housing Series of articles on Housing for the BOP compiled by ASHOKA and including writings by Habitat White Paper: The Role of Financial Education in Improved Housing written by Habitat for Humanity International

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Please contact us at: Rajan Samuel, rsamuel@habitat.org Jennifer Oomen, joomen@habitat.org Habitat for Humanity International Center for Innovation in Shelter and Finance Based in Makati City, Metro Manila, Philippines

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LFSUS%Making''

Low+Income'Settlers''Bankable'

Lanka%Financial%Services%for%Underserved%Settlements%

By%Ayanthi%Gurusinghe%Chief%Executive%Of;icer%%

Lanka%Financial%Services%for%Underserved%Se3lements%

LFSUS%

TO#Bridge#the#gap#between#informal#market#######and#the#formal#market##

TO#Leverage#finance#opportuni;es#within#######microfinance#ins;tu;ons##

TO#Package#financially#viable#projects#

The#Credit#Enhancement#/#Guarantee#mechanism###was#created#:…….#

• #Long#Term##Financing#• #Collateral#with#clear####;tle#deeds#?#

Service%Delivery%Mechanism%

! No#ReKInven;ng#the#Wheel#

! Long#Term#Microfinance#Loans#

! Simple#Procedures#

! Door#to#Door#Service#

! Daily#,#Weekly#Repayment#Collec;on#

! Collateral#less#lending##

! Introduc;on#of#Commercial#Financing#######

• !Long!Term!Financing!!

• !No!Direct!Income!Genera:on%%• !Issues!With!Ownership!• !Probable!Ownership!changes!

X##Conven;onal#forms#of#collateral#were#not#available##X##There#are#high#lending#risk#because#of#the#financial#######vulnerability#of##group#lending##X##There#was#no#blueprint#to#follow,#in#terms#of#banking#with#####lowKincome#communi;es##

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LFSUS%%LENDING%#

MECHANISM%

! MFI#member#and#their#families#out#of#homelessness#

! Helping#them#to#upgrade#their#homes#thereby#####improving#access#to#water,#sanita;on#and#other#####basic#infrastructure#services#

! Providing#an#asset#to#increase#their#economic######security#

LFSUS%%Supports%its%MFI%Partners%to………..%

Overcoming%Challenges%%

! Assessing#the#credibility#and#financial#behaviors#of#the#members,#rather#than#depending#on#tradi;onal#concepts#of#collateral#for#repayments##! PuUng#emphasis#on#peer#groups#pressure#as#a#mechanism#to#ensure#prompt#repayments##

! Providing#extensive#credit#extension#services#

! Prepara;on#of#project#feasibility#reports#formats#as#per#bank#requirements#

Overcoming%Challenges%%

! Crea;ng#Banking#track#records##through#savings####records##! Linking#with#other#formal#services#to#secure#lending#####eg:#insurance##! Establishing#a#con;nues#rela;onship#with#the#MFI#####partner#and#the#community#

Why%Leverage%Finance%?%$• #PorKolio%Increase%!!!To!support!larger!number!of!community!members!!to!!!!access!!!housing!finance!

• #Capital%redistribu:on%%!!!Exis8ng!capital!is!release!to!!support!other!sectors!

• #Time%value%of%capital%funds%%!!!Capital!funds!can!con8nued!to!be!used!for!short!term!!!!investments!

• #Sustainability%%Access!to!long!term!funding!opportunity!#

Why%Commercial%Financing%?%

#

• House#upgrading##and#Repairing##

• Access#to##services##

Water#,#Electricity#and#Drainage###

Housing%and%Infrastructure%Loans%%Include………………..%

#

• Demand#

• Affordability#

• Compe;;on#

• Policy#

• Securi;za;on###

Reasons%for%the%growth%in%the%sector%#

LFSUS%Operations%Ongoing%

Kirulapona%Ratnapura%Hambantota%–%1%%Nuwara%Eliya%–%1%%Deniyaya%Nawalapitiya%Kaduwela%Nuwara%Eliya%–%2%%Hambantota%–%2%%Tissamaharama%#

PorZolio#of#USD#1.4#million##

! Sustainability%………..%

! Credit%worthiness%

! Security%of%Tenure%

! Financial%literacy%

! Nego:a:ng%Power%

LFSUS%:%Transforma:on%in%to%Genera:ons%

THANK%YOU%