the state of housing microfinance in africa description / examples county informal, locally...
TRANSCRIPT
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THE STATE OF HOUSING MICROFINANCE IN AFRICA
African Union for Housing Finance Annual General Meeting and Annual Conference
“Housing Finance - A Public-Private Partnership”
Joaquim Chissano International Conference Centre Maputo, Mozambique 8-11 September, 2009
Kecia Rust ([email protected])
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Outline
What is housing microfinance?
A growing sector…
… with growing demand
Opportunities
Challenges
Research commissioned
by FinMark Trust in 2009:
Housing Microfinance in
Africa: Status,
Opportunities and
Challenges, by Michael
Kihato.
Available on
www.finmark.org.za
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
What is housing microfinance?
Housing microfinance is … any micro financial tool to support investment in the components of
housing, including land purchase or access, provision of or improvement to services, full or
incremental house construction, renovation or maintenance. So, credit, savings, insurance.
Housing microloans are generally unsecured loans granted to individual borrowers (sometimes co-signers)
intermediate in size (from US$ 100 - $5000)
of longer duration (1-5 years) than other microfinance loans given their size.
higher in interest than secured loans but with interest rates on par with microloans
used to build or improve the home incrementally
a niche market product: something special about the housing part…
Productive, not consumption loans: enhancing risk management
Less than 30% of households in most emerging countries can afford a mortgage to purchase the least
expensive developer-built unit, so, most households build step-by-step, room-by-room
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
A growing sector…
Demand side indicators
High urbanisation rates
High real interest rates
Tenure security
The desire to self build
Supply side indicators
Insufficient affordable housing
Low penetration of commercial banking & financial services
A growing MFI sector
Availability of funding: Savings / Capital markets / International remittances
The Financial Bank in Benin was the first to propose social loans in 1995 to people who could not access formal funding from banks to improve their housing and buy land. In November 1998, Financial Bank created FINADEV as their microfinance subsidiary. Since its start up, FINADEV SA has given access to microcredit to more than 25 000 small borrowers in Benin. Apart from traditional microfinance products, it provides housing loans. FINADEV suffers from similar problems as other microfinance institutions including limitation of funding, a lack of innovation in loan management, difficulty in adjusting to risks, increasing unmet demand as well as weaknesses of MIS and governance.
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Borrowers
A growing sector…
HMF
Retailers
Investors: public / private /
institutional
Wholesale lender
Private equity firms / hedge funds
Donors
HMF
Retailers
Rating Agency
Provides support and spurs on community organisation around
land and infrastructure issues
Acts as a type of guarantor and grades institutions
Bank
NGO, building material suppliers, etc.
Work individually or
together to finance
HMF retailer: loans,
equity, guarantees
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Category Description / examples County
Informal, locally established (susu, umpato)
Savings based, locally defined. Approach and use of funds defined by group: individual or collective loans
All countries – lessons?
Community based shelter funds
Usually donor supported (i.e. Slum Dwellers International) largely collective loans, targeted at most poor
Trust Fund of the Housing People of Zimbabwe, WAT Human Settlements Trust in TZ; Angola, Namibia; Kenya
Cooperatives and credit unions (Saccos)
Individual loans for housing often a coincidental focus
NACHU in Kenya; WAT SACCOs in TZ; Namibia; Zambia
Non-bank Micro lenders (credit-only)
Origins in housing delivery / shelter NGOs that saw demand for finance
Kuyasa Fund & Lendcor in SA; Zambia Low Cost Housing Development Fund;
Origins in microcredit for SMMEs; housing the next progression.
Uganda Microfinance Ltd; Jamii Bora in Kenya; PRIDE in TZ; others…
Microfinance banks (deposit taking and lending to members and sometimes non-members)
Usually when micro lenders convert to banks to access capital - a focus on housing loans usually comes later
K-Rep in Kenya; Zambia National Building Society; Pulse Holdings in Zambia; African Bank, and Capitec Bank in SA; etc.
State owned banks offering microloans
Trend is now moving away from these as many sustained losses
Ghana, Tanzania, Guinea, Uganda,…
Commercial banks offering microloans
SA banks have offered unsecured loans for some time. The NCR estimates that 10-30% of these are used for housing.
Standard Bank, ABSA in SA; Indo-Zambian Bank; Namibia, Tanzania…
A growing sector… lenders
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… with growing demand
Country Population
------------------ Average
household size
% of population
that is (a)urban, or
(b)rural
x
No. of potential
borrowers (assuming
one per household)
=
% of urban
households who may afford a
loan
x
% of rural
households who may afford a
loan
x
x
% of urban
population not served by formal mortgages
% of rural
population not served by formal mortgages
% of urban
households who may want a
loan
x
% of rural
households who may want a
loan
x
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… w
ith
gro
win
g d
eman
d (u
rban
)
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… with growing demand (urban)
No. of potential
borrowers (assuming
one per household)
Average loan size
(HDI proxy or avg)
x =
Estimated total
value of the market
($)
Avg
$700 (DiD figure)
Morocco
$1150
South Africa
$430
Kenya
$533
Uganda
$942
Ethiopia
$228 Benin
$666
Rwanda
$350
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… w
ith
gro
win
g d
eman
d (u
rban
)
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Opportunities Successful growing and profitable microlending sector
Senegal, Burkina Faso
Urbanisation and demand Morocco, Egypt and Algeria (high urban populations)
Ghana, South Africa, Cameroon, Nigeria (high urbanisation rates and large urban centres)
Kenya, Congo DRC, Uganda, Ethiopia, Tanzania (urbanisation rates greater than 3%)
Rural demand Nigeria, Egypt, Ethiopia, Congo DRC, Uganda, Kenya, Tanzania
Favourable regulatory frameworks Morocco has specific legislation focusing on HMF
Use of capital markets South Africa, Egypt, Nigeria, Ghana, Kenya
International remittances Senegal, Burkina Faso, Tunisia, Benin, Mauritius, Eritrea, Malawi,
Niger, Congo, Lesotho
MDGs mean
governments
are
interested
Donors,
wholesale
lenders and
investors are
all interested
Growing
experience
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Opportunities WAT Human Settlements Trust,in Dar Es Salaam, Tanzania.
In 1998, WAT established a Savings and Credit Society to prvide credit for housing. The WAT Saccos grew to over 5000 members and about $800,000 in savings. In 2008, WAT signed an agreement with the Financial Sector Deepening Trust (FSDT) to undertake a 3.5 year HMF pilot. This will increase the number of housing loans to 1000 per year. This pilot will develop sustainable and replicable loan products and processes. It is expected that it will be spread over a network of 40 Saccos in Tanzania.
Development Workshop, Angola
In 1999, Development Workshop launched the Sustainable Livelihoods Programme, Angola’s first large-scale microfinance programme, along the Grameen Bank model. They realised that up to 30% of their microfinance clients loans were invested in their housing.
In 2005, they developed a housing microloan: KixiCasa. Loan sizes are $800-$2500, repayable over 10 -12 months.
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Challenges Land & services
Tenure security
Sustainable infrastructure
Regulatory frameworks Supportive legislation
Funding Guarantees
Information systems
HMF track record Appropriate products: savings + credit + technical support
Scaleable models: viable systems
Lender capacity & technical support: operations
Developmental outputs: the housing ingredients Product targets: home improvements, backyard rental, incremental housing
Public / private partnership opportunities
Role for donors, DFIs, NGOs
NGO / commercial partnership opportunities
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Conclusion
Total urban demand for Africa is potentially
large, but not unmanageable:
Total urban demand for Botswana estimated at
$37,5m vs. total pension assets for Botswana in
2005 of $3,58: Less than 1.5% of pension funds
used for HMF would meet total urban demand
in that country
Total urban demand for Kenya estimated at
$295m vs. stock market capitalisation of $6b (in
2005)
Total potential urban demand for the top 40
countries is over $10 billion - this is only 0.5% of
the estimated $2 trillion directly lost on sub-
prim loans.
Opportunity for government,
private sector, NGOs and
donors to come together to
address Millennium
Development Goals
Accepting incremental housing
on secure tenure as a viable
housing approach, is the first
step.
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
Conclusion
Establishing a housing loan product
Cooperative savings and loans for housing
Scaling up capacity for growth
Offering housing support services
Broadening institutional actors
The use of cheap and effective building technology
Public-private-international partnerships
Guarantee finance
Pension funds investment
Ugafode, Uganda
Faulu, Kenya
KixiCredito, Angola
Nachu, Kenya
Kuyasa Fund, South Africa
Development Action Group, South Africa
Centenary Bank, Uganda
Mchenga, Malawi
Zakouara with Shorebank Int’l & USAID’s DCA
WAT, Tanzania Nachu, Kenya
Teba Bank, South Africa