Analysis of Cuiient Tienus anu Challenges in the Fielu of
Bousing Niciofinance
Repoit piepaieu by }ohn uibbons anu Negan 0lson 29 Apiil 2u14
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'(' 56/$7. 8$9-$:.; Bitoishi Chakma iequesteu the Notie Bame Bevelopment Auvisoiy Team (BAT), maue up of Negan 0lson anu }ohn uibbons, ieseaich anu assess available miciofinance piouucts foi housing. Bis employei, BRAC, is seeking new, innovative ways to auuiess housing neeus foi the uiban anu iuial pooi. BRAC wants to look towaius successful piactitioneis foi financially viable methous of pioviuing low-income clients with loans to impiove, constiuct, oi buy housing. BRAC is inteiesteu in the types of piouucts oiganizations aie offeiing, the inteiest iates that aie chaigeu, taiget clientele, significant costs they aie encounteiing, how they manage extia cost, the success (oi failuie) of offeieu piouucts, how oiganizations maintain sustainability, anu any innovations oi goou piactices that coulu be of use to BRAC. '(< =>? =$6/0$3"@6$; The BAT woikeu with Bitoishi on the vision foi the final ueliveiable anu came up with a uocument auuiessing the abovementioneu conceins, cases of paiticulai inteiest to BRAC, anu what they consiuei most impoitant foi making housing miciofinance piouucts baseu on theii ieseaich. They have oiganizeu it into a shoit histoiy of the fielu of housing miciofinance, key conceins in the inuustiy, the majoi takeaways fiom theii ieseaich, anu synopses of the most impoitant cases. Loan piocesses aie geneially coveieu in the synopses when infoimation was available. '(A B"CD3 ?"E$"F"4:; The BAT consiueieu the following points the most impoitant items foi BRAC to consiuei when cieating its housing miciofinance piouucts: '(A(' ?$,G7/,"6 >::/:."7,$; The inclusion of Technical Assistance in the foim of a Technical Auvisei is pait of an ongoing uebate about its efficacy. Incluuing this seivice is a means of combating low-quality housing uesign anu insufficient loan amounts. Baseu on a pilot stuuy conuucteu by Accion anu Integial as well as eviuence foim othei cases, the BAT uoes not iecommenu offeiing in-house specifieu constiuction technical !"#$ &< assistance, but uoes suggest conuucting some foim of technical ieview to ensuie the askeu foi loan amount is sufficient. '(A(< HD"7 B/:-:$; 0ne of the piimaiy ieasons foi offeiing housing miciofinance piouucts is to pievent the misuse of othei loans foi housing, but this can go both ways. Some oiganizations institute ieviews conuucteu by loan officeis two months following loan uisbuisal to ensuie piopei use of the loan anu piogiess in the constiuction. '(A(A !"3.7$3:G/I:; Theie aie a vaiiety of uiffeient paitneiships engageu in by cuiient piactitioneis of housing miciofinance foi myiiau ieasons. The two most consistent aie between NFIs offeiing housing loans paitneiing with low-income housing uevelopeis anu NFIs paitneiing with chaiitable institutions. The fiist is uone to finu eithei clients foi the NFI oi housing foi the NFI's clients, anu the seconu is geneially to supplement the activities of the NFI, especially with iegaius to ieaching pooiei clients oi offeiing technical assistance. '(A(J HD"7 1.3-,.-3$; The challenge of loan uuiations is offeiing a loan with a long enough lifespan to allow clients to boiiow the necessaiy money foi theii house anu balancing this iisk against the NFI's own lenuing situation. The BAT's ieseaich suggests offeiing loans of at least five yeais foi laigei piojects. If this is not possible though, the BAT suggests offeiing piouucts that piomote piogiessive lenuing; home impiovement loans that can be useu foi inciemental builuing. '(A(K 5D66".$3"6; Collateial foi miciofinance housing loans is pioblematic because miciofinance clients often uo not own the title to theii lanu anu sometimes uo not have othei assets to secuie loans with. 0iganizations auuiess this pioblem by taking what collateial uoes exist (weuuing jeweliy, owneu-assets, etc.) as well as auuing guaiantois to the loans. '(A(L >M2/7/:.3"./0$ 5D:.:; BRAC is conceineu with the auueu auministiative costs of pioviuing housing loans. 0ne impoitant way to cut uown on these costs is to give supplemental tiaining to cuiient loan officeis insteau of hiiing specialists. While the piocess will be uiffeient, it
!"#$ & A is still cheapei anu moie efficient to use geneialists. 0sing existing loan piocesses will ieuuce extia auministiative costs, such as the appioval piocess, veiification of client income, maiketing, etc. A noticeable cost inciease will be hiiing a technical auvisei to ensuie boiioweis buuget coiiectly. This can be coveieu by the highei piofits of housing loans uue to theii longei teims, oi by auuing a fee to housing loans. !"#$ &J
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Sheltei is a funuamental human iight that helps ensuie peisonal safety anu health; eveiyone shoulu have access to a safe, secuie, habitable, anu affoiuable home. Yet, millions of low-income inuiviuuals woiluwiue aie left without secuie housing.
Banglauesh is no exception. Accoiuing to a 2uu8 stuuy, 77% of uiban uwellings anu ovei 98% of Banglauesh's iuial uwellings aie not peimanent. Neaily half of the low- income population cannot affoiu a ioof to piotect themselves fiom natuial elements. The booming population anu iapiu uibanization of majoi metiopolises like Bhaka is only exaceibating the pioblem, leaving many migiants no choice but to pay exoibitant ient fees foi cheaply built shacks.
In this context, uevelopment oiganizations like BRAC aie seeking to extenu housing options to these inuiviuuals by ensuiing all people have equal access to housing finance options.
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BRAC is looking foi new, innovative ways to auuiess housing neeus foi Banglauesh's uiban anu iuial pooi. uiven its expeiience with miciofinance, it is looking to expanu its loan poitfolio to incluue a housing piouuct. Theiefoie, BRAC is looking foi an analysis of successful piactices anu ciitical challenges in the fielu of miciofinance housing. To help BRAC answei this question, this iepoit offeis an oveiview of leaueis in the fielu anu an analysis of theii successes anu challenges. BRAC has expiesseu paiticulai inteiest in the types of piouucts oiganizations aie offeiing, the inteiest iates that aie chaigeu, taiget clientele, significant costs they aie encounteiing, how they manage extia cost, the success (oi failuie) of offeieu
!"#$ & K piouucts, how oiganizations maintain sustainability, anu any innovations oi goou piactices that coulu be of use to BRAC.
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Bioauly speaking, housing miciofinance can involve the financing of a vaiiety of activities incluuing the ienovation oi expansion of existing home, constiuction of a new home, acquisition of lanu, anu installation of basic infiastiuctuie. It biings togethei numeious actois fiom NFIs, iegulateu financial institutions, anu cieuit co- ops to uiban uevelopeis, goveinment agencies, anu Nu0s.
Tiauitionally, low-income housing finance existeu in the iealm of chaiitable non- piofits via Nu0 slum upgiaue piojects anu goveinment uevelopment stiategies; howevei, such methous weie often ciiticizeu foi being unsustainable. In iecent uecaues, theie has been a push foi moie sustainable options to uelivei much- neeueu seivices to low-income customeis who aie unable to access the housing financial seivices auministeieu by commeicial banks. This has laigely been iealizeu by the auuition of housing miciofinance piouucts to both establisheu NFIs anu Nu0s; these two appioaches aie often uistinguisheu as !"#$%#$&'"( (% *%+,"-. /"-0-#& anu ,*&1(&$ 0'2%#0#3 (% *%+,"-. /"-0-#&. 4*&1(&$ 0'2%#0#3 (% *%+,"-. /"-0-#& categoiizes Nu0s focusing on uiban housing, like Babitat foi Bumanity, who aie beginning to offei a miciofinance housing option while !"#$%#$&'"( (% *%+,"-. /"-0-#& uenotes NFIs focusing on entiepieneuiial loans, like NiBanco, that aie beginning to expanu theii poitfolios to incluue housing loan piouucts.
uiven BRAC's existing miciocieuit piouucts, it woulu best be locateu in the !"#$%#$&'"( (% *%+,"-. /"-0-#& categoiy. Niciofinance institutions offeiing cieuit to small anu meuium scale entiepieneuis have fiequently obseiveu theii clients using business loans to funu housing impiovements uespite the fact that business loans aie not piopeily stiuctuieu foi this activity; theiefoie, ovei time, these institutions !"#$ &L have iesponueu to client neeu by expanuing theii lenuing poitfolios to offei a iange of housing finance piouucts. An incieasing numbei of miciofinance institutions aie beginning pilot piogiams to auu on a housing loan to theii cuiient poitfolio. In the past uecaue, theie aie even miciofinance institutions emeiging that specialize solely in housing miciofinance, such as Fiist Finance in Cambouia (staiteu in 2uu6) anu Nicio Bousing Finance Coipoiation Limiteu in Inuia (incoipoiateu 2uu8).
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This section incluues a list of majoi points that we thought woulu be impoitant foi BRAC to consiuei when foiming its miciofinance housing piouucts. Theii impoitance is baseu on BRAC's iequests anu the BAT's opinion baseu on theii ieseaich finuings.
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Technical Assistance can be incoipoiateu in loans in a vaiiety of ways. It is mainly useu to auuiess two pioblems: 1. Loans being useu to finance low-quality constiuction using pooi mateiials anu insufficient oi incoiiect plans 2. Clients occasionally not boiiowing sufficient amounts to finish theii uesiieu piojects, impiopeily accounting foi mateiials oi laboi a. Clients with incomplete piojects aie moie likely to let the loan become uelinquent anu possibly uefault 0iganizations use uiffeient methous to auuiess these pioblems. Babitat foi Bumanity in Cambouia conuucteu a pilot stuuy in which they chaigeu a nominal fee foi a technical auvisei (a constiuction specialist) to ieview all builuing plans anu make iecommenuations. Fiist Finance employs an engineei that will ieview plans befoie loans aie appioveu to ensuie theii quality. TPC follows a similai piocess.
!"#$ & R In 2uuS anu 2uu4, Integial anu Accion conuucteu a pilot stuuy on offeiing constiuction auvice to clients. At one bianch they tiaineu constiuction specialists to be loan officeis, at anothei they tiaineu loan officeis to offei constiuction auvice, anu they kept the iemaining bianches as contiol. The stuuy founu that the constiuction specialists took moie time to leain how to be loan officeis than the loan officeis to offei constiuction auvice. Tiaining ieuuceu the efficiency of loan officeis foi a few months, but they ietuineu to pievious levels of piouuctivity following that peiiou. Nost impoitantly, it showeu that constiuction assistance uiu not have an impact on constiuction quality while still incieasing the cost of offeiing the loan. The two hypotheses pioposeu weie that clients weie not willing to spenu money foi highei quality mateiials (iegaiuless of whethei they coulu affoiu it) anu clients may not be capable of implementing the auviseu constiuction piactices. In iesponse to this, Integial uevelopeu constiuction pamphlets in an effoit to infoim clients on piopei constiuction piactices. Constiuction assistance uiu ieuuce the numbei of incomplete piojects by helping clients buuget piopeily. The pilot stuuy concluues that NFIs shoulu outsouice intensive constiuction auvice to a uiffeient agency if they still want to offei it. This is anothei way that Babitat foi Bumanity in Cambouia has been functioning in tanuem with TPC.
The BAT iecommenus that BRAC eithei look into tiaining its loan officeis in iuuimentaiy constiuction piactices to analyze whethei boiioweis aie auequately buugeting foi theii piojects, oi outsouice the entiie piocess to anothei oiganization (possibly Babitat foi Bumanity). Intensive technical assistance will not likely impiove constiuction quality; insteau it will just make the loans moie expensive.
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Nisuse of loans is pait of the ieason to offei specializeu housing piouucts, but misuse of those housing piouucts is also a concein. Since many oiganizations offei slightly ieuuceu inteiest iates on theii housing loans anu longei loan teims, clients might finu them piefeiable to moie suitable piouucts. This is pioblematic because !"#$ &S clients may be tiappeu in a long-teim loan that they uo not neeu anu will eithei be foiceu to pay moie money in inteiest ovei the life of the loan oi uefault. Clients might also piefei to use a uiffeient loan piouuct foi ienovating theii house if they believe the teims aie moie favoiable. Bespite having ueuicateu housing loans, SEWA Bank allows this to be uone without penalizing the boiiowei, but this has iesulteu in extiemely high uelinquency iates (49% foi 0nsecuieu Loans, which make up 4u% of SEWA's housing loan poitfolio). It is not auvisable to follow the same policy.
To pievent a similai situation fiom aiising, Integial iequiies loans be useu foi theii intenueu puipose. As a means of enfoicing this, loan officeis will ieview piojects two months aftei uisbuisal to ensuie the funus aie being useu piopeily anu piogiess is unueiway on constiuction. In auuition, the iisk officeis can make ianuom visits to any sites they want to. If a client is founu to be using the loan foi puiposes othei than housing, theii loan is ieconsiueieu. Theii inteiest iate is iaiseu to the maximum, oi theii loan is cancelleu anu calleu uue immeuiately. The BAT iecommenus that BRAC peifoim similai ieviews to ensuie piopei use of loans.
As anothei means of pieventing the misuse of othei loans to ienovate housing, it is impoitant to offei uiveisifieu teim lengths foi home impiovement loans. Theie shoulu not be one single loan teim-length oi extiemely high minimum loan amounts. Insteau the loans shoulu be easy to apply to a wiue aiiay of home impiovement activities so clients aie not tempteu to misuse othei loans they believe aie moie suiteu to theii piojects.
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NFIs can paitnei with Nu0s to help pioviue seivices to pooiei, iiskiei clientele. This can be uone thiough iisk-shaiing oi specific housing piogiams. F0SAI anu Integial pioviue community housing loans to pooiei clientele suppoiteu by F0SAI's uonoi funuing. F0SAI will obtain a piece of lanu (eithei thiough puichase oi
!"#$ & T goveinment-giants) anu uevelop infiastiuctuie on it, putting in watei anu connecting it to sewage lines. Each family in the gioup is then given a plot of lanu; they take out a loan fiom Integial to use foi constiucting a new home, oi a basic housing unit. These loans aie geneially subsiuizeu thiough uonoi funuing as well.
Anothei paitneiship common between Nu0s anu NFIs is founu in the piovision of technical assistance. Babitat foi Bumanity will often seive as the specialist agency able to pioviue constiuction auvice wheie neeueu. TPC conuucteu a pilot piogiam with Babitat seiving in this function, anu Fiist Finance has a Nemoianuum of 0nueistanuing that allows its clients to ieceive technical assistance fiom Babitat. While this may seem like a goou way to auuiess quality of constiuction conceins, it is not always guaianteeu that clients will follow constiuction auvice foi the pieviously mentioneu ieasons oi otheis. Also, the cost of pioviuing technical assistance woulu then piobably fall on the client as a sepaiate expense insteau of being calculateu as pait of the inteiest iate, making the loan less attiactive.
A common, mutually beneficial paitneiship that aiises in this maiket is between NFIs anu piivate ieal estate uevelopeis. If uevelopeis builu low-income housing, they can eithei senu potential puichaseis to the NFI, oi the NFI can senu clients seeking housing to the uevelopei. The CE0 of Fiist Finance saiu that this coulu manifest auuitional benefits like clients being able to move in eaily oi moie uevelopeis consiueiing the neeus of low-income gioups. It is piimaiily applicable to uiban oi peii-uiban settings since this is wheie most housing piojects aie unueitaken.
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Loan uuiation is a significant challenge in pioviuing housing-specific miciofinance piouucts. Bousing anu ienovations geneially cost moie than the maximum of most miciofinance loans. In auuition, housing is geneially not consiueieu (at least in the shoit-teim) a piouuctive asset. Foi these ieasons, housing loans neeu to be foi moie !"#$ &') money anu longei teims. But this means that lenueis have to take on moie iisk. Since it is uifficult foi most lenueis to get access to long-teim capital, theii iisk is extenueu. Because housing is not a piouuctive asset, boiioweis neeu to pay back with theii othei incomes, which can be subject to a vaiiety of thieats.
0iganizations ueal with this iisk in a vaiiety of ways. Fiist Finance, which offeis 1u yeai anu 1S yeai teim maximums foi Bome Impiovement Loans anu Bome Puichase Loans iespectively, builus the iisk into its inteiest iate as best it can anu opeiates on an aveiage of five yeais of unsecuieu iisk. But Fiist Finance iequiies lanu title as collateial, so even if a client uefaults they can still iecupeiate most losses.
0thei oiganizations offei smallei loans foi shoitei peiious, geneially as pait of a piogiam of piogiessive lenuing. 0ne obseivation the BAT maue uuiing its ieseaich tiip to Cambouia was that most boiioweis woulu builu stiuctuies with the capacity to auu anothei flooi above, below, oi anothei ioom to the siue. An example of an oiganization that offeis loans stiuctuieu foi this type of builuing is Nibanco.
This uoes not fully ieplace laigei, longei loans though. Nany builuing piojects cannot be uone in inciements small enough to waiiant boiiowing on a piogiessive lenuing scheme. NFIs often offei loans on five to seven yeai teims. It is easiei to secuie capital to back loans of these lengths, anu it is moie feasible that people will be able to use them to ienovate oi builu.
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The most impoitant obseivation to be maue is that it is necessaiy to collect on collateial. While this might seem obvious, seveial oiganizations uiu not iepossess aftei uefaults. Babitat foi Bumanity nevei iepossesseu because its piimaiy benefactois woulu not allow it to. They uiu not see it as pait of the Nu0's mission oi vision. As a iesult, Babitat has an extiemely high uefault iate. This is uue to clients
!"#$ & '' who weie in uebt to seveial lenueis iecognizing Babitat's inability to iepossess. Insteau of paying back Babitat, they woulu pay lenueis that woulu actually take theii collateial.
The othei majoi issue with collateial is that many potential clients uo not have tiauitional foims. They might not have official title to theii lanu, anu sometimes it costs a significant amount of money to get the goveinment to piouuce the iequiieu peimits. To auuiess this, some oiganizations take "soft titles," which aie baseu on uistiict iecognition of lanu owneiship. 0theis take uiffeient foims of collateial. SEWA Bank will take women's weuuing jeweliy oi othei assets as collateial foi some loans. They even offei an unsecuieu housing loan (0nsecuieu Paki Bhit), backeu by guaiantois anu liens on a client's SEWA saving account. These loans aie funueu by an Inuian ministiy piogiam anu aie not the noim foi NFIs.
uuaiantois aie a goou option in auuition to assets if they uo not piove valuable enough. Especially in iuial aieas, social ielationships can foice clients to abiue by the payment scheuule oi allow the NFI to iecupeiate theii loss.
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0ne of BRAC's main conceins is opeiating without significant auuitional auministiative costs. To a point, it is impossible to avoiu an inciease in auministiative costs. This can be auuiesseu thiough the natuial life of the loan without incieasing inteiest iates. Since the loans have longei teims anu aie foi moie money, BRAC will collect moie money in inteiest. It shoulu still be a piioiity to ieuuce costs wheievei possible though.
0ne impoitant stiategy to this enu will be to avoiu hiiing housing loan specialists. In the afoiementioneu pilot stuuy, Integial founu that tiaining geneialists in housing piotocols was moie efficient than tiaining constiuction specialists in lenuing piocesses. While the loan officeis' piouuctivity was ieuuceu uuiing tiaining, they !"#$ &'< ietuineu to noimal levels of efficiency in a few months. The assessment piocess will be faiily similai anu iequiie an in-uepth analysis of the client's income. It will take longei to assess housing loans oveiall, especially when tiying to see if clients buugeteu auequately. If the client is self-employeu, this will be a moie uifficult task, but it is something likely alieauy faceu by BRAC's loan officeis. 0sing community leaueis foi infoimation on potential clients also ieuuces costs anu the assessment time. Reviewing ongoing loans two months aftei uisbuisal will also auu woik anu laboi costs, but this shoulu be coveieu in the highei value of home loans.
Naiketing costs woulu not iaise significantly eithei. BRAC coulu maiket thiough existing channels, using cuiient bianch locations anu community leaueis. Auministiative costs have the highest potential to inciease baseu on whethei BRAC wants to hiie an in-house engineei like Fiist Finance anu some othei NFIs. They coulu avoiu this by paitneiing with othei oiganizations to auuiess the neeu foi ieview of housing plans, oi they coulu offei housing loans without this step.
The following page featuies a uiagiam illustiating these key takeaways. It outlines the challenges uiscusseu above, oui iecommenuations, anu cases of inteiest to each topic aiea.
!"#$ & 'A Key Takeaways foi BRAC - Challenges, Recommenuations, anu Cases of Inteiest
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The following aie biief synopses of case stuuies on the housing miciofinance opeiations of seveial oiganizations. They weie chosen baseu on theii applicability to BRAC anu inteiesting piactices that might be useful to the oiganization. They incluue the thiee case stuuies collecteu by the BAT uuiing theii ieseaich tiip to Loan Stuctuie Challenge: Access to meuium & long teim capital Recommenuations: - Best option - 0ffei S yeai loans - Alteinative - 0ffei piogiessive lenuing home impiovement Cases: TPC & Nibanco Collateial & Collection Challenge: Conflict between mission anu sustainability Recommenuation: Nust collect on collateial Cases: Babitat foi Bumanity & Fiist Finance Loan Nisuse Challenge: Cioss- lenuing & Nisappiopiiation of funus Recommenuations: - Loan officei uiligence & tiaining - Appiopiiate loan teims Cases: SEWA & Integial Technical Assistance Challenge: In- house, paitneiship, none. Recommenuations: - Cost Specific - Paitneiship Cases: Fiist Finance & Integial Paitneiships Challenge: Bevelop stiategic paitneis Recommenuation: - Taiget Nu0s & Bousing Bevelopeis Cases: TPC & Babitat foi Bumanity Auminstiative Aspects Challenge: Balancing costs & quality Recommenuations: - Biie geneialists - 0peiate thiough existing loan channels Cases: NiBanco & Integial !"#$ &'J Cambouia as well as thiee othei existing cases uiawn fiom aiticles, jouinals, anu othei souices.
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!"#$ TPC was chosen because it is a NFI that expanueu into housing miciofinance as pait of its piouuct offeiings. In auuition, it taigets the iuial pooi, similai to BRAC. TPC's case also has inteiesting innovations anu piactices, incluuing its loan stiuctuies, its paitneiship with Babitat foi Bumanity, anu othei issues that make it a useful case to stuuy.
%&'() %&+,+-.$ Fiist Finance was selecteu because of its intense focus on financial sustainability, something impoitant to BRAC. Also, it opeiates in uiban anu peii- uiban contexts, aieas that BRAC is inteiesteu in as well. Fiist Finance has stiategic paitneiships with Babitat foi Bumanity anu housing uevelopeis that help make it an effective NFI.
/,0&),) 12' /34,+&)5 6#,4027&,8$ Babitat foi Bumanity holus seveial ciucial lessons, incluuing the impoitance of collecting on collateial. In auuition, the case is useful because Babitat paitneis with a vaiiety of Nu0s to pioviue uiffeient seivices. Babitat is in Banglauesh as well anu coulu be a potential paitnei to tackle pioblems with technical assistance.
9&0,+-2$ Nibanco offeis an innovative loan stiuctuie that seeks to mitigate the challenges in obtaining long-teim capital. Nibanco offeis successive, shoit-teim loans that suit the piogiessive builuing of most low-income clients. This offeis BRAC a mouel foi an alteinative to longei-teim loans.
:;<= >,+?$ SEWA Bank offeis loans accessible to the veiy pooi, something faiily unique. It also has loosei iestiictions on what can be consiueieu collateial, which allows it to expanu its client base anu theiefoie its impact. Thiough its piactices, it
!"#$ & 'K also offeis lessons on the necessity of specializing loans. SEWA also cateis almost exclusively to pooi women, as uoes BRAC.
@+).A',B$ Integial is of inteiest because of its ieseaich on technical assistance anu its efficacy. In auuition to this, Integial has goou piactices that BRAC shoulu consiuei engaging in as well, such as the ieview of loan usage two months following uisbuisal. Also, its paitneiship with F0SAI allows Integial to woik with the veiy pooi. 0veiall, Integial is an inteiesting example of a sheltei auvocacy to housing finance piogiam that spun into miciocieuit anu must maintain financial viability as a iesult.
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Infoimation foi this case stuuy was obtaineu by peisonal inteiview with Beputy CE0 Sok voeuin of TPC on Naich 12 th 2u14. TPC seives as an impoitant case foi BRAC because of its natuie as an NFI that expanueu to offei a housing piouuct. Auuitionally, it taigets the iuial pooi, similai to BRAC. TPC's case also has inteiesting innovations anu piactices, incluuing its loan stiuctuies anu its paitneiship with Babitat foi Bumanity.
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Thaneakea Phum Cambouia, LTB. (TPC) is the fifth laigest miciofinance institution (NFI) in Cambouia by numbei of boiioweis. Catholic Relief Seivices (CRS) oiiginally establisheu TPC in 1994 to enable iuial micioentiepieneuis to gain access to financial seivices. In }anuaiy 2u1u, Beveloping Woilu Naikets, a 0S-baseu, socially iesponsible investment fiim acquiieu a majoiity equity stake in TPC fiom CRS.
TPC focuses on seiving low-income families in iuial Cambouia with a paiticulai emphasis on women. It offeis a vaiiety of uiffeient loan piouucts incluuing gioup !"#$ &'L anu inuiviuual business loans, seasonal loans, anu most iecently, home impiovement loans (BILs). Recognizing many clients weie impiopeily using business loans foi home impiovement, TPC ueciueu to uiveisify its loan offeiings to incluue a loan specifically stiuctuieu foi home impiovement. In 2u12, it began the pilot of its BILs anu in 2u1S iolleu the piouuct out to its 2u main bianus. By 2u14, the BILs hau been iolleu out to all 2u main bianus anu 26 sub bianus.
By the beginning of 2u14, the total loan poitfolio of TPC has ieacheu 8uu million 0SB with 1Su,uuu boiioweis; of this, the BIL compiises 2.6 million 0SB with 1,1uu clients. The expectation is this numbei will inciease to 4 million by the enu of 2u14 with somewheie between 2,uuu to S,uuu clients.
J(<(< HD"7 !3DM-,.:
The BIL is intenueu foi the constiuction of a new home oi the ienovationexpansion of an existing home. In oiuei to constiuct a new home, the client must alieauy have puichaseu the mateiials with the plan to use the loan to pay foi laboi costs. Foi the ienovationexpansion of an existing home, the loan may be useu foi both mateiial anu laboi costs. 8S peicent of BILs aie useu foi the ienovation anu expansion of an existing housing stiuctuie. Common ienovations incluue changing fiom woou anu thatch ioofs anu walls to ones maue of biick, tile, oi cement; othei clients auu an auuitional ioom, iaise the house, oi ienovate the bathioom with the BILs. Betails on the specific loan stiuctuie of the BIL incluuing inteiest iates anu teim length can be founu in the table following the case.
J(<(A 56/$7.$6$ !3DP/6$
The typical BIL client has an aveiage householu income of 2uu to Suu 0SBmonth anu a householu size of five. Women compiise a laige peicentage of the BIL clientele with 8S peicent of the BILs given to women, often times with the husbanu as a co-
!"#$ & 'R boiiowei. The vast majoiity of clients live in iuial aieas, with only 1u peicent living in the uiban peiipheiy. Nost householus aie suppoiteu by multiple income stieams, with husbanus woiking in agiicultuie oi constiuction anu the women opeiating small micioenteipiises oi caiing foi livestock. Nany men suppoit theii agiicultuial activities with off-season woik as tuk-tuk uiiveis. 7u peicent of BIL clients uo not have a haiu title (an official lanu title iecognizeu by the national goveinment) anu insteau use a soft title (a lanu title iecognizeu at the community level) as a foim of collateial.
J(<(J !"3.7$3:G/I:
0f TPC's many paitneiships, this case stuuy will highlight two in paiticulai: its ielationship with 0SAIB anu Babitat foi Bumanity.
1) Relationship with the 0.S. goveinment: TPC has an ongoing ielationship with 0SAIB, which has helpeu facilitate a loan thiough 0PIC (the 0.S. goveinment's uevelopment finance institution). 0PIC has given TPC a S million 0SB loan with a seven-yeai teim to suppoit TPC's miciofinance lenuing in Cambouia; at least Su peicent of the funus must be ueuicateu to the BIL piogiam. TPC pays yeaily inteiest to 0PIC in auuition to senuing quaiteily iepoits.
2) Babitat foi Bumanity: TPC anu Babitat foi Bumanity Cambouia aie cuiiently in a pilot piogiam in which Babitat foi Bumanity Cambouia acts as a consultant pioviuing technical assistance to customeis on how to builu homes with low cost anu high quality. Thus fai, this paitneiship has been limiteu to one TPC bianch location anu incluues tiaining of TPC management anu scieening officeis.
J(<(K 1."PP/7#
TPC cuiiently employs 2u loan officeis who specialize in BILs, anu it iecently hiieu an in-house engineei to pioviue tiaining anu assistance to staff at the bianch level. !"#$ &'S This tiaining is intenueu to impiove loan officeis' ability to evaluate the feasibility of clients' constiuction plans anu buugets. Cuiiently customeis come to the TPC auvisois with a plan at the eaily stages foi auvice; most customeis have cieateu these plans in auvisement with contiactois fiom theii villages. Loan officeis aie also iesponsible foi managing payment collection. The methou of payment collection is baseu on the oiiginal loan teim agieement between the inuiviuual client anu TPC; ioughly 7u peicent of clients pay at the bianch office while the iemaining Su peicent have theii payments collecteu within theii communities.
J(<(L B"3E$./7#
TPC piomotes its BIL piogiam thiough leaflets, laige winuow anu fence banneis at bianch offices, anu iauio anu television aus. It also employs uooi-to-uooi piomotion anu woiu of mouth iefeiials.
J(<(R H$::D7: "7M 5G"66$7#$:
Aftei its pilot piogiam, TPC maue seveial changes to its BIL piogiam that can foi the most pait be summaiizeu as aujustments to make the loans moie inclusive anu expansive. Fiist, it piogiessively incieaseu its maximum loan size fiom S,uuu 0SB to S,uuu 0SB to wheie it cuiiently stanus at 1u,uuu 0SB. Seconu, it expanueu the BIL to incluue home constiuction as well as ienovation anu expansion. Thiiu, TPC now accepts clients looking foi a loan foi theii seconu home. Nany families look to constiuct a seconu home on theii piopeity foi a chilu who has maiiieu anu wants to have hishei own home on the family lanu. Lastly, TPC changeu the inteiest iate stiuctuie to be a ueclining balance inteiest iate. In a ueclining balance inteiest iate, as the loan capital is iepaiu thioughout the life of the loan, the inteiest chaigeu pei month ueclines accoiuingly.
Noving foiwaiu, Sok voeuin has expiesseu that the biggest challenge to the BIL piogiam is secuiing a long-teim souice of funuing. TPC uoes not want to incui the
!"#$ & 'T iisk of lenuing long anu boiiowing shoit, so theiefoie must finu lenueis willing to loan it funus foi a minimum of foui yeais. TPC is cuiiently tiying to get one of its lenueis (Tiiple uem) foi its micioenteipiise loan piouuct to also back the BILs. In oiuei to offei BILs foi a teim length that allows the clients to affoiu the monthly payments, TPC must be able to secuie long-teim loans if it iefuses to iun at a iisk.
J(<(S 1-22"34 DP U":/, HD"7 V$".-3$:
HD"7 ?4I$ OD2$ W2I3D0$2$7. HD"7 HD"7 !-3ID:$ Foi the constiuction of a new home oi the ienovationexpansion of an existing home !$3,$7. DP HD"7 !D3.PD6/D .SS% ?"3#$. 56/$7. Low income (avg. householu income of 2uu - Suu 0SB mo) Ruial women =D,-2$7."./D7 8$9-/3$M Pioof of Citizenship Resiuency in TPC opeiating aiea veiifiable Income Lanu Title (Baiu oi Soft) Cleai piojection of pioject =DF7 !"42$7. 8$9-/3$M 1u% 5D66".$3"6 Lanu Title (Soft oi Baiu) W7.$3$:. 8".$ 2u.4-Su% W7.$3$:. 8".$ 1.3-,.-3$ Beclining balance inteiest iate HD"7 =-3"./D7 0p to 4 yeais (avg. of S) HD"7 5$/6/7# 1u,uuu 0SB >0$3"#$ HD"7 1/X$ 1,uuu - 4,uuu 0SB >0$3"#$ BD7.G64 HD"7 !"42$7. $7u =$P"-6. 8".$ .uS%
J(<(T >II3D+/2".$M 5D:. 1.3-,.-3$ PD3 OWH
- TPC pays 8 peicent annual inteiest on 0PIC loan - Expenus appioximately 1u peicent annually on opeiating costs - Asks foi appioximately 21.6 peicent annual inteiest fiom boiioweis !"#$ &<) - Net piofit of appioximately S.6 peicent (othei business loans yielu laigei net piofits)
J(A V/3:. V/7"7,$ 5":$ 1.-M4
Infoimation foi this case stuuy was obtaineu by peisonal inteiview with Kevin Lim CE0 of Fiist Finance on Naich 12 th . Fiist Finance is an impoitant case foi BRAC because of its intense focus on financial sustainability. Also, it opeiates in uiban anu peii-uiban contexts, aieas that BRAC is inteiesteu in as well. Fiist Finance has stiategic paitneiships with Babitat foi Bumanity anu housing uevelopeis that help make it an effective NFI. J(A(' U",E#3D-7M
Fiist Finance was staiteu in 2uu6 as Fiist Bome by Talmage Payne with the intent of allowing low income people to own theii fiist home. The oiiginal goal of Fiist Bome was to builu housing specifically foi this uemogiaphic in auuition to financing theii puichases of it, but eaily on it was ueciueu to limit it to the finance iole. With a few othei investois anu cuiient boaiu membeis Ni. Payne cieateu a small loan poitfolio, lenuing to theii fiist clients. In 2uu8, they ieceiveu an initial equity capital of Suu,uuu 0SB fiom Phillip Capital. In 2uu9, they ieceiveu anothei equity capital injection fiom Fiist Bome, Insitoi Funu, anu Phillips Capital, theii thiee shaieholueis. They officially staiteu the company as the fiist miciofinance housing company in Cambouia with this capital.
Bue to the global iecession in 2uu9, lanu anu housing piices weie extiemely low. Speculation on ieal estate was extiemely ieuuceu as well because of the hit the maiket took. This enviionment was veiy conuucive foi both Fiist Finance anu its clients. It only took them a yeai to begin tuining a piofit. In 2u12, Fiist Finance expanueu to two auuitional bianches in Siem Reap anu Battambang. In the same yeai, they ieceiveu the ASEAN Business Awaiu.
!"#$ & <'
So fai, Fiist Finance has uisbuiseu 1u million 0SB to about 1,uuu householus. They aveiage between a 1% to S% uefault iate. This uoes not mean a loss, since they aie able to iepossesses the collateial put up by clients, but because these loans aie foi longei teims, they geneially take up to a yeai to wiite-off. They also aie iequiieu to maintain a high level of tianspaiency because of theii status as a NFI. In this light, they ielease annual iepoits uetailing theii financials (they cuiiently have up to yeai 2u12 on theii website).
Fiist Finance was able to change the intentions of some uevelopeis, getting them to make moie moueiate housing plans. They focus on peii-uiban aieas anu sometime small uiban pockets. This is because the majoiity of uiban housing is not affoiuable to Fiist Finance's taiget clientele. Ruial opeiations aie not cost effective foi the company since it only opeiates thiee bianches, anu all aie in uiban aieas.
J(A(< OD-:/7# HD"7 !3DM-,.:
Fiist Finance offeis Bome Impiovement Loans anu Bousing Loans. Bome Impiovement Loans aie foi builuing a house oi the ienovation of an existing stiuctuie. If the client intenus to builu the house with the Bome Impiovement Loan, they must alieauy own the lanu title. When intenueu foi ienovation, loans aie geneially useu foi auuing anothei flooi to the existing house oi an auuitional ioom. When useu foi constiuction, the loans aie often useu in situations when a son maiiies anu neeus a house foi his family oi a family inheiiteu the title. Loans aie not useu foi auuing a toilet oi othei sanitation installments, but Fiist Finance's clients aie tienuing towaius smallei ienovations.
Bousing Loans aie foi puichasing existing (oi in the piocess of constiuction) houses as well as the lanu title. The houses aie often pait of new low income uevelopment in the peii-uiban aieas of cities oi in small pockets within the city limits. !"#$ &<< J(A(A !"3.7$3:G/I:
Fiist Finance uoes not have any contiacteu paitneiships with any othei entities. They uo have infoimal paitneiships though, incluuing an N00 with Babitat foi Bumanity. This agieement woiks thiough a iefeiial piogiam wheie Babitat can senu clients to Fiist Finance when they aie not able to finance the loans. Fiist Finance will then uiiectly uisbuise the loan to Babitat foi Bumanity, anu Fiist Finance clients can sometimes ieceive technical assistance fiom Babitat.
Fiist Finance's othei paitneiships function in a similai way. They woik with a vaiiety of uevelopeis anu constiuction companies on a iefeiial basis. When a uevelopei of low income housing has an inteiesteu client that iequiies a loan, they senu them to Fiist Finance. These ielationships have helpeu establish Fiist Finance anu make it a common name in low income housing piojects. This means that when a client comes to Fiist Finance foi a loan anu can pay theii uown payment, the uevelopei will geneially tiust Fiist Finance to covei the client's uebt anu give the client theii new home. 0ne specific company that Fiist Finance has significant ties to is 0iban village. It was staiteu by Talmage Payne anu is the othei half of what he hau hopeu Fiist Bome woulu be, but uoes not shaie the cuiient veision of Fiist Bome as a holuing company.
J(A(J 1."PP/7#
Fiist Finance has S7 employees. It maintains a small staff to cut uown on its cost anu uevelop a tight-knit team. 0f the S7 employees, 16-17 seive as Cieuit Consultants. This position is similai to a Cieuit 0fficei but with a softei title. Cieuit Consultants meet with potential clients anu pioviue a loan consultation foi fiee; this is because they aie meeting people who hau nevei thought they coulu own a home. Aftei this initial inteiview, they conuuct site visits, assessments, anu eveiything else they neeu to uo to ensuie that the client will be a goou boiiowei. If a loan passes the Cieuit
!"#$ & <A Consultant's appioval, they pass it to the Bianch Nanagei. If it passes this stage, it goes to the Cieuit Committee in the heau office, fiom which it goes to the Cieuit anu Finance 0ffice. The Cieuit Consultants aie incentivizeu by finuing moie qualifieu canuiuates, but they aie penalizeu foi any bau loans they aie iesponsible foi. This is to ensuie that they seek a balance of quantity anu quality.
The othei piimaiy iole to be filleu is the Cieuit Auministiatoi. Aftei the loan passes the Cieuit anu Finance 0ffice, it goes to them to woik on to collect the iequiieu legal uocumentation: payslip, IB caiu, lanu title, whatevei was necessaiy. The Cieuit Auministiatoi will facilitate the loan thioughout its lifecycle by checking up on the boiioweis. If the boiioweis have any tiouble making payments, the Cieuit Auministiatoi will iepoit on it anu help iestiuctuie the loan.
J(A(K 56/$7.$6$ !3DP/6$
Fiist Finance pioviues loans to low income anu low miuule income families in uiban anu peii uiban aieas. The aveiage inuiviuual income of theii clients is Suu to Suu 0SB pei month. They allow combineu income, so a householu can be consiueieu as one unit anu boiiow moie. 9u% of boiioweis aie families with an aveiage of foui people. Nost clients aie couples that aie co-boiiowing leu by the wife. Its piimaiy clients at the beginning weie local salaiieu woikeis foi Nu0s, anu woikeis with some foim of salaiy still make up Su to 6u% of theii loan poitfolio. Fiist Finance is moving towaius having moie self-employeu clientele to pioviue a new uemogiaphic with the oppoitunity to own a home oi impiove theii oiiginal one.
J(A(L B"3E$./7#
Fiist Finance uoes not have a laige maiketing buuget. This is one of the ways that they aie able to cut cost. Cuiiently they uo uiiect maiketing in specific aieas, going uooi to uooi to piomote theii loan piouucts. They also pay foi some iauio aus, but !"#$ &<J this is a limiteu effoit. Fiist Finance offeis piomotional mateiials anu banneis at all of theii bianches, but they uo not pay foi billboaius oi mailings. 0ne of the main ways Fiist Finance piomotes theii business is thiough talking to constiuction companies, uevelopeis, anu community leaueis. This netwoik helps uiffuse knowleuge about what Fiist Finance can offei potential boiioweis.
J(A(R 5G"66$7#$:
Kevin Lim tolu us that the most significant challenge foi Fiist Finance is the piocess of uoing backgiounu checks on potential clients. Because Fiist Finance is tiying to giow its clientele beyonu salaiieu employees, this pioblem has been incieaseu. It is moie uifficult to ueteimine whethei a peison will be able to pay back a loan when they uo not have a guaianteeu cashflow. The uangei is that if the Cieuit Consultants make a mistake, Fiist Finance coulu enu up holuing a non-peifoiming (anu piobable uefault) loan, as well as putting theii client into uebt. To mitigate this iisk, Fiist Finance tiains its Cieuit Consultants extiemely well, teaching them the best ways to piove a client's income.
Anothei uifficulty Fiist Finance faceu eaily on was acquiiing enough capital but now, aftei they have pioven themselves foi a few yeais, it is much easiei to finu willing funueis. A significant challenge that is pait of offeiing this type of loan is finuing long-teim loans. They cuiiently have a uiveisifieu loan poitfolio on five yeai scheuules. But this means that they often opeiate on a ten yeai gap iisk because of the long teims they offei theii clients.
J(A(S 1-22"34 DP U":/, HD"7 V$".-3$:
!"#$ &'() *"+) !"#$ *"+) ,+(-".)+)$/ !"#$ /"-& 0#+1"$. Foi the puichase of a new home Foi the constiuction, ienovation, oi expansion of a home
!"#$ & <K 2 ", /"-& 0"+3,"4%" 7u% Su% 5-+'.3 64%.&3 Low Income to Low Niuule Income Low Income to Low Niuule Income 7"*#8.&3-3%"& 9.:#%+.; Pioof of Citizenship veiifiable Income Pioof of Citizenship veiifiable Income Lanu Title (Baiu oi Soft) 7"<& 0-=8.&3 9.:#%+.; 1S% of total None 6"44-3.+-4 Puichaseu home functions as collateial Lanu Title (Soft oi Baiu) >?.+-'. @&3.+.$3 9-3. 18% pei month 21.6% pei month /"-& 7#+-3%"& 0p to 1S yeais 0p to 1u yeais /"-& 6.%4%&' S7,uuu 0SB 2S,uuu 0SB >?.+-'. /"-& A%B. 1u,uuu-11,uuu 0SB Less than 1u,uuu 0SB >?.+-'. )"&3C4= 0-=8.&3 16u 0SB vaiies uieatly /-3. 0-=8.&3 0.&-43= .S-1% ueteimineu on a loan specific basis .S-1% ueteimineu on a loan specific basis
J(A(T YI$3"./7# 5D:.:
- In 2u12 Fiist Finance hau an opeiating cost iatio of 11.96% - In 2u12 they spent S47,48S 0SB on opeiation costs anu othei expenses anu alloweu 7u,766 0SB foi bau oi uoubtful loans o They maue a net piofit of SS,797 0SB aftei income tax - In 2u12 Fiist Finance hau a 2.u2% ietuin on equity anu 1.u7% ietuin on assets (lowei than pievious yeais because they openeu two new bianches anu incoipoiateu costs into theii stiuctuie)
J(J O"@/.". PD3 O-2"7/.4 5"2@DM/" 5":$ 1.-M4
Infoimation foi this case stuuy was obtaineu by peisonal inteiview with von Chhimvannak, Bousing Finance Nanagei of Babitat foi Bumanity Cambouia on Naich 1S th 2u14. Babitat foi Bumanity Cambouia is an impoitant case to stuuy, !"#$ &<L because it seives as a iepiesentative mouel foi the ,*&1(&$ 0'2%#0#3 (% *%+,"-. /"-0-#& appioach, anu theiefoie auus an impoitant peispective to this iepoit on housing miciofinance. Things to note in this case aie Babitat's shoit-teim loans, theii extiemely pooi clientele (those living on less than $1uay), the lessons it holus foi collection on collateial, anu its potential as a paitnei foi BRAC.
J(J(' U",E#3D-7M
Babitat foi Bumanity Cambouia is an Nu0 offeiing technical assistance, home constiuction & iepaii, tiaining, financial euucation, anu financing foi low-income Cambouians. The oiganization iecently electeu to uevelop a small financing piogiam in oiuei to assist theii clients in financing theii infiastiuctuie piojects. Initially, only existing Babitat clients weie eligible foi financing; in the last two yeais, Babitat's piogiam has expanueu to offei financial seivices to any low-income Cambouian, even if they aie not using Babitat as the constiuctoi oi mateiial pioviuei foi theii pioject. The funus foi Babitat's financing aim come fiom Babitat foi Bumanity Cambouia anu fiom Babitat foi Bumanity Inteinational. Since its inception, the financing aim has seiveu 2,uuu clients with between 7uu anu 8uu active clients cuiiently.
J(J(< ?4I$: DP HD"7:
Babitat offeis Bome Constiuction loans anu Bome Impiovement loans. Foi both loan types, the client must alieauy own lanu. The Bome Constiuction Loan is intenueu foi the constiuction of a new home oi the expansion of an existing home while the Bome Impiovement loan is intenueu specifically foi infiastiuctuie impiovements to an existing piopeity, such as lanu filling anu the installation of watei, electiicity, oi sewage systems. Two unique factois iegaiuing these loan piouucts aie uiscusseu below; a moie compiehensive oveiview of loan teims, conuitions, anu inteiest iates can be founu in the table at the enu of this case.
!"#$ & <R 0ne consiueiation is the small loan ceiling of Babitat's Constiuction loan. The Bome Constiuction loan cap is set at $2,Suu, which is quite small given aveiage home piices in Cambouia anu compaiable loans offeieu at othei NFIs offeiing housing piouucts (like Fiist Finance anu TPC). With a loan size cappeu at $2,Suu anu aveiage iuial home piices at $S,uuu anu aveiage city piices at $2u,uuu, Babitat is tiuly taigeting some of the pooiest segments of society anu calling foi clients to contiibute a significant uownpayment of peisonal savings (2S%). Anothei contiibuting factoi to the uispaiity between these aveiage piopeity piices anu the loan cap is that the aveiage piices aie a ieflection of the total cost of the piopeity incluuing lanu title, which is something Babitat uoes not help finance.
Anothei unique factoi is the flexibility in loan payment plans. Babitat offeis a unique option foi the Bome Impiovement loan that allows foi a seasonal payment stiuctuie as opposeu to the tiauitional monthly payments. This is specifically foi home impiovements uealing with sanitation infiastiuctuie, most commonly the installation of a toilet. The payment plan is intenueu foi iice faimeis with seasonal incomes. J(J(A 56/$7.$6$ !3DP/6$
Babitat's taiget clients aie householus with incomes less than $1uay pei family membei. Babitat opeiates in the uiban aiea of Phnom Penh anu in the iuial aieas of Siem Reap. Cuiiently, the majoiity (8S peicent) of the active clients iesiue in Phnom Penh's uiban peiipheiy.
J(J(J !"3.7$3:G/I:
0f Babitat's many paitneiships, this case stuuy will highlight its ielationship with TPC in paiticulai. Babitat foi Bumanity Cambouia paitneis with many Cambouian NFIs (such as BKL, Fiist Finance, anu CBIRB); usually the paitneiship involves the NFI uisbuising loans suppoiteu by Babitat as a technical assistant consultant. The paitneiship between Babitat anu TPC is an example illustiative of this piocess. !"#$ &<S
1) Relationship with TPC: TPC anu Babitat foi Bumanity Cambouia aie cuiiently in a pilot piogiam in which Babitat acts as a consultant pioviuing technical assistance to customeis on how to builu homes with low cost anu high quality. Thus fai, the pilot has been limiteu to one TPC bianch location with Su clients paiticipating. The pioject featuieu the tiaining of TPC management anu scieening officeis. The finuings fiom the pilot have thus fai suggesteu it is not piofitable foi Babitat, although it has been beneficial foi TPC. The paitneiship was stiuctuieu so that foi minoi impiovement loans ($1uu - $1,Suu) TPC uisbuiseu, Babitat woulu consult without collecting a fee; foi majoi impiovement loans ($1,Suu - $S,uuu), Babitat woulu collect a $1u - $1S fee. Such fees weie not substantial enough to covei Babitat's costs. As a socially minueu not-foi-piofit funueu by philanthiopy without an emphasis on sustainability, Babitat was able to shouluei the buiuen of the cost while the NFI enjoyeu cost-effective technical assistance consultation foi its clients.
J(J(K 1."PP/7# Z HD"7 !3D,$::
Foi its financing piogiam, seveial key staff aie involveu in the loan piocess. The piocess begins with a cieuit agent who scheuules meeting with clients to collect client infoimation, inteiviews clients to ueteimine eligibility, anu assists clients in filling out the loan application. The next stage biings in the pioject managei, who ieviews the application anu confiims eligibility. If appioveu, engineeis anu the constiuction staff then meet with homeowneis to show them options anu piices to uevise a constiuction plan foi the pioject; if the homeowneis elect to pioviue theii own laboi anu mateiials, the engineeis sign off on the plan to ensuie quality constiuction is maintaineu.
The loan is then confiimeu anu uisbuiseu in multiple installments. 9S peicent of the loan collection occuis at the homeowneis' homes by cieuit agents. Ni. Chhimvannak stiesseu the impoitance of the use of cieuit agents in the loan collection piocess, inuicating fiom past expeiience Babitat has leaineu it is not a goou piactice to have
!"#$ & <T community leaueis collect payments on behalf of Babitat. Although this incieases auministiative costs, it pioviues a bettei expeiience foi clients, impioves tianspaiency, anu avoius coiiuption.
J(J(L B"3E$./7#
While Babitat uoes not utilize community leaueis foi loan payment collection, it uoes leveiage community leaueis as assets foi loan piomotion. Beyonu piomoting thiough community leaueis, Babitat maikets its financing piouucts uiiectly to homeowneis.
J(J(R H$::D7: "7M 5G"66$7#$:
Babitat foi Bumanity Cambouia faces a uifficult challenge in tiying to balance the inteiests of social mission with the uemanus a financially sustainable appioach iequiies. Babitat has iealizeu, foi example, that theii taiget clientele (householus eaining less than a $1uay pei peison) is not sustainable.
Foi the most pait, Babitat has leaneu towaiu maintaining its social mission anu foigoing financial sustainability. This is laigely ieflecteu in its policy to not collect on collateial when a client uefaults. This has leu to a veiy high uefault iate of 2u peicent, as clients begin to leain they can "get away" with not iepaying Babitat's loans; insteau, clients piioiitize othei outstanuing loan payments to othei NFIs who uo collect on uefaulting loans.
uiven the challenges Babitat has faceu, it is beginning to ieconsiuei the appiopiiateness of offeiing finance options itself; insteau, it is moving towaius focusing on its ioles as a technical consultant anu paitneiing with NFIs who uo offei housing finance.
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4.4.8 Summary of Basic Loan Features
HD"7 ?4I$ OD2$ 5D7:.3-,./D7 HD"7 OD2$ W2I3D0$2$7. HD"7 HD"7 !-3ID:$ Foi the constiuction of a new home oi expansion of an existing home Foi infiastiuctuie impiovements to an existing piopeity, such as lanu filling anu the installation of watei, electiicity, oi sewage systems HD"7 =/:@-3:$2$7. Loans uispeiseu in multiple installments Loans uispeiseu in multiple installments ?"3#$. 56/$7. Less than $1uay pei family membei
Less than $1uay pei family membei
=D,-2$7."./D7 8$9-/3$M Pioof of Citizenship Lanu Title (Baiu oi Soft) Constiuction peimit Pioof of Citizenship Lanu Title (Baiu oi Soft) =DF7 !"42$7. 8$9-/3$M 2S% - Babitat holus on to savings anu uispeises it along with its own capital in multiple installments to the client 5+$$&-( "-/%$!0("%- -%( /%+-' 5D66".$3"6 In theoiy, the lanu title, but homes aie iaiely iepossesseu In theoiy, the lanu title, but homes aie iaiely iepossesseu W7.$3$:. 8".$ 12% annually 12% annually HD"7 =-3"./D7 S yeais 6mo-18mo HD"7 5$/6/7# $2,Suu *ueneial infoimation not available, but foi the sanitation loan specifically, the cap is $SSu >0$3"#$ BD7.G64 HD"7 !"42$7. $6umo 5+$$&-( "-/%$!0("%- -%( /%+-' =$P"-6. 8".$ 2u% 2u%
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J(K B/U"7,D 5":$ 1.-M4
Infoimation foi this case stuuy was obtaineu fiom a vaiiety of stuuies, aiticles, anu annual iepoits anu supplementeu by infoimation publically available on Nibanco's website. As an NFI that initially offeieu miciocieuit to entiepieneuis anu expanueu to offei a housing piouuct, Nibanco is a goou example foi the type of appioach BRAC might take in tiansitioning to offei a housing piouuct. Paiticulai things to note in this case incluue Nibanco's innovative loan stiuctuie that offeis clients shoitei-teim loans that meet existing consumei builuing patteins (piogiessive builuing).
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Nibanco is Latin Ameiica's seconu laigest iegulateu NFI opeiating in Peiu. Initially oiganizeu as a Nu0, Nibanco latei tuineu into a piivate bank in 1998. In 2uuu, it launcheu a new housing piouuct calleu Nicasa that offeieu clients loans to finance home impiovements. Nibanco has been a populai case analyzeu by seveial ieseaicheis because of its impiessive showing in the fiist yeai aftei the home impiovement piouuct launch. In one yeai, the Nicasa piouuct was offeieu to S,uuu clients anu the poitfolio hau ieacheu $2.6 million. By }une 2uu1, Nicasa was geneiating $1S,S61 a month in inciemental net income.
J(K(< ?4I$: DP HD"7:
The Nicasa home loan is intenueu to finance on-going investments in impiovement piojects. Such ienovations often entail conveiting woouen walls to biick, ieplacing zinc ioofs oi uiit floois with cement, oi auuing auuitional iooms. A unique aspect of the loan piouuct is its unique stiuctuie, which was uesigneu to meet client builuing habits anu mitigate the challenge of access to long-teim capital. Because clients' builuing patteins aie piogiessive in natuie, Nibanco is able to offei successive, !"#$ &A< small loans with shoitei teims. The loans theiefoie moie closely iesemble micioenteipiise loans than moitgage loans. The aveiage loan size is $1,uuu with a teim of less than one yeai.
As the piouuct has uevelopeu ovei the past uecaue, Nibanco has begun to expanu to offei the option foi longei-teim loans in laigei amounts. Yet, the piogiessive builuing loans aie still extiemely populai. Nibanco has also uevelopeu a veiy nuanceu set of teims anu conuitions that offeis uiffeient conuitions anu iates baseu on which cuiiency is useu (Peiuvian Soles oi the 0S uollai) anu also the natuie of the applicant's occupation. Noie uetails on these teims anu conuitions can be founu at the enu of the case oveiview.
J(K(A 56/$7.$6$ !3DP/6$
The typical client of Nibanco's home loan is a low-income woman living in an uiban centei. When initially launching the piouuct, Nibanco taigeteu its tiauitional customei base of micioentiepieneuis in auuition to low-income salaiieu woikeis living in communities wheie Nibanco was alieauy opeiating.
J(K(J HD"7 !3D,$:: Z 1."PP/7#
Nibanco has ielatively fast loan application piocessing times. Loan applications foi new clients typically take thiee uays fiom the time of submission to uisbuisement. Repeat loans (an existing client iequesting a new loan foi continueu ienovation) aie geneially piocesseu in an even fastei time fiame of one uay. Nibanco is able to achieve these fast piocessing times uue to a uecentializeu loan appioval uecision piocess. Essentially, Nibanco gives its loan officeis a laige amount of uiscietion. Loan officeis typically manage ovei Suu clients at a time.
J(K(K H$::D7: "7M 5G"66$7#$:
!"#$ & AA Nibanco offeis seveial lessons to othei NFIs like BRAC looking to expanu into housing miciofinance: 1) Nibanco leveiageu its existing bianch anu lenuing infiastiuctuie to achieve iapiu scale anu piofitability. 2) Nibanco's innovative piogiessive-builu financing offeis an alteinative to the tiauitional moitgage lenuing foi NFIs who cannot obtain access to long-teim capital. S) Nibanco uoes not offei technical assistance oi assist in any way with the planning oi supeivision of piojects. The success of Nibanco uespite the lack of this assistance that noimally accompanies a housing piouuct iaises questions as to the necessity of offeiing constiuction assistance.
J(K(L 1-22"34 DP U":/, HD"7 V$".-3$:
The infoimation below ieflects the teims anu conuitions foi a loan given to a peison with a salaiieu position using 0S cuiiency; in some aieas, Nibanco offeis uiffeient teims when local cuiiency is useu oi if the applicant is a business ownei.
HD"7 ?4I$ B/5":" HD"7 HD"7 !-3ID:$ Finance on-going investments in upgiaues anu impiovement piojects such as conveiting woouen walls to biick, ieplacing zinc ioofs oi uiit floois with cement, oi auuing auuitional iooms, one at a time.
?"3#$. 56/$7. Low income salaiieu woikeis & Existing miciocieuit clients =D,-2$7."./D7 8$9-/3$M Age between 2S anu 69 Pioof of Citizenship Lanu Title Noimal SBS (cieuit) iating foi past S months Copy of last two pay slips Copy of utility bill !"#$ &AJ Bome ImpiovementExpansion Pioject Plan anu Buuget =DF7 !"42$7. 8$9-/3$M None (can qualify foi 1uu% financing) 5D66".$3"6 Najoiity secuieu with householu assets iathei than moitgages. W7.$3$:. 8".$ Su% - S9% annually W7.$3$:. 8".$ 1.3-,.-3$ Nonthly payment with giace peiiou of 2 months HD"7 =-3"./D7 Ninimum of S months with maximum of S yeais. >0$3"#$ HD"7 ?$32 6 -12 months HD"7 5$/6/7# Ninimum of $1Su with maximum of $1S,uuu >0$3"#$ HD"7 1/X$ $1,uuu =$P"-6. 8".$ 5+$$&-( "-/%$!0("%- -%( /%+-'
J(L 1*[> 5":$ 1.-M4
This infoimation is uiawn fiom a vaiiety of stuuies, aiticles, anu annual iepoits. 0nfoitunately, the majoiity of ieseaich on SEWA Bank is faiily uateu, but its expeiience still holus inteiesting insights.
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SEWA, oi the Self-Employeu Women's Association, was staiteu as a tiaue union in Ahmeuabau, uujaiat in 1972, but was fiist iegisteieu as a bank in 1974. Its fiist funuing came fiom contiibutions fiom about 4,uuu membeis. The bank became a legally sepaiate entity anu pait of the SEWA Netwoik. The Netwoik is maue up of about 1uu uiffeient institutions that staiteu fiom the oiiginal SEWA piogiam oi in a ielateu mannei, anu focus on similai values. SEWA Bank piimaiily opeiates as a coopeiative bank, meaning its lenuing funus aie maue up of savings fiom its membeis. In auuition, it has ieceiveu money fiom seveial oiganizations to help expanu its opeiations anu fuithei covei auministiation costs.
!"#$ & AK
Bespite being one of many institutions of the SEWA Netwoik, SEWA Bank is one of the most ciucial. The Bank offeis a vaiiety of miciofinance seivices incluuing savings, financial liteiacy tiaining, anu a vaiiety of loans.
J(L(< OD-:/7# HD"7 !3DM-,.:
SEWA Bank offeis loans piimaiily uiffeiing on the length of the iepayment peiiou as well as the iequiieu collateial. SEWA Bank offeis both "secuieu" (backeu thiough jeweliy oi fixeu ueposits helu at the Bank) anu "unsecuieu" (backeu thiough uemanu ueposits anu guaiantois) loans. The loan type is ueteimineu by the Bank staff when clients fill out theii iequiieu uocuments, but clients can use uisbuiseu funus as they see fit.
SEWA Bank cieateu loans specifically uesigneu foi housing. These loans all have longei iepayment peiious uue to the size of the loan anu its lack of piouuctivity as an asset. The most populai loan cieateu to auuiess this neeu is the Paki Bhit loan, available in both secuieu anu unsecuieu foims. This loan is also calleu a "Bouse Repaiiing Loan," but is intenueu foi moie than just iepaiis. Boiioweis can use this money to ieplace a ioof, uooi, wall, auu a ioom, auu watei, electiicity, toilets, oi othei constiuction piojects. The maximum amount the Bank will lenu foi an unsecuieu Paki Bhit loan was 2S,uuu INR (SS2 0SB) in 2uu2, but has likely incieaseu since then. The amount lent though is ueciueu upon what SEWA Bank consiueis the client's iepayment capacity, something they base piimaiily off of theii savings patteins anu the managei's assessment, though they also take the family income, family size, living conuitions, anu past loan peifoimance into account.
0nsecuieu Paki Bhit loans aie paitially financeu thiough B0BC0 (an Inuian goveinmental coipoiation) funuing, but secuieu loans aie funueu by SEWA alone. While SEWA Bank has uesigneu these loans foi housing, most othei loan piouucts !"#$ &AL can be useu foi housing. The Bank estimates that a significant amount is useu foi housing (Su% in 2uu2).
0thei fees associateu with the loans aie incluueu in the iepayment package. These incluue uocument fees (4u iupees foi loans up to S,uuu iupees, 6u iupees foi any loans ovei), stamp fees (11u iupees foi unsecuieu loan woith moie than S,uuu iupees), anu SEWA Bank membeiship fees.
J(L(A 56/$7.$6$ !3DP/6$
SEWA Bank's taiget clientele aie geneially pooi women who aie self-employeu, usually in the infoimal sectoi. The majoiity makes less than two uollais a uay anu is employeu as micio-entiepieneuis, uepenuent sub-contiactois, oi casual laboieis. Nost women who take out loans fiom SEWA Bank alieauy have householu uebt, but stuuies have shown that they geneially boiiow to inciease theii outstanuing uebt anu not just to pay off existing loans.
J(L(J 1."PP/7#
SEWA Bank's housing loans aie auministeieu along with its othei loan piouucts, anu it uses the same staff foi both. The Bank has foui main positions: Banu Bolueis, Banksathis, Recoveiy 0fficeis, anu Loan 0fficeis. Banu Bolueis hanule outieach, maintaining anu ueveloping ielationships with community leaueis, conuucting assessments on clients' businesses anu living conuitions, collecting loan payments, anu a vaiiety of othei activities. Banksathis aie community leaueis who iepiesent SEWA Bank locally. They help Banu Bolueis by uetailing clients' chaiacteis in the community anu pioviuing what infoimation they can. They also help auveitise the Bank's financial piouucts. Recoveiy 0fficeis focus on loan payments anu keep tiack of clients in aiieais. Loan 0fficeis hanule the application piocess fiom the Bank, ieviewing guaiantois anu helping veiify applications when possible.
!"#$ & AR
J(L(K HD"7 >II6/,"./D7 !3D,$::
SEWA Bank uses one loan application foi all loans, so it falls to the staff to ueteimine the best matching loan piouuct baseu on what the potential client's backgiounu anu intenueu use aie. Since many of SEWA's clientele aie illiteiate, the Bank offeis a loan wiiting seivice as well. These eaily stage tasks aie conuucteu by a hanu holuei. Aftei an application, the hanu holuei will visit the client's iesiuence to veiify anu assess the pioposal. These assessments geneially last foi Su minutes. Baseu on this visit, the Banu Boluei will aujust the application anu iecommenueu loan befoie submitting it to a loan ieview committee. This committee ueteimines the final loan amount. If the loan is unsecuieu, the guaiantoi will have to sign the final loan uocuments anu pioviue an IB caiu anu pioof of income. This peison is ievieweu by the loan officei. If they pass the ieview, the client then signs the loan uocuments, incluuing a piomissoiy note, a contiact, a stamp papei, anu a lien papei.
J(L(L B"3E$./7#
As mentioneu befoie, SEWA Bank staff geneially ueteimines which loan people shoulu apply foi baseu on theii iequests in each bianch. They uo not specifically auveitise theii uiffeient loan types. They uo auveitise thiough existing lenuing stiuctuies to piomote theii ability to help theii taiget population.
J(L(R H$::D7: "7M 5G"66$7#$:
0ne of the most significant challenges SEWA has faceu comes fiom theii leniency on how loans aie useu once uisbuiseu. While loan types aie ueteimineu by the hanu holueis, theie is a significant pioblem with clients using non housing uesignateu loans foi housing piojects. SEWA estimates that about Su% of its loans aie useu foi housing puiposes uespite having only thiee uesignateu housing loans. 0nsecuieu !"#$ &AS loans (not the unsecuieu Paki Bhit, housing specific loans) make up 4u% of SEWA's housing loan poitfolio, anu 49% of these loans aie uelinquent. 1 0thei non-housing uesignateu loans being useu foi housing (making up anothei 8% of the housing poitfolio) have uelinquency iates fiom 17% to 24%.
In auuition, the Bank's piactice of basing theii loan iepayments on S% of the loan size without consiueiing the loan teim has likely boosteu uelinquency iates. If clients know that theii loan amount is meant to be paiu ovei a 6u month teim, they may take the full loan teims to iepay. This means they may be uelinquent when paying theii loans, paying accoiuing to the actual loan teim insteau of the scheuuleu payments.
J(L(S 1-22"34 DP U":/, HD"7 V$".-3$:
!"E/ UG/. HD"7 \OD-:/7# HD"7] HD"7 ?4I$ 0nsecuieu Secuieu HD"7 !-3ID:$ Foi the iepaii oi upgiaue of an existing home (incluuing auuitions) !$3,$7. DP HD"7 !D3.PD6/D 19.SS% .u9% ?"3#$. 56/$7. Low-income women without collateial Low-income women with collateial =D,-2$7."./D7 8$9-/3$M Photogiaph of iecipient Pioof of iesiuence Savings book Pioof of income (ueteimineu thiough applicant's inventoiy, income, oi pay stub) Impiovements cost estimate fiom constiuction woikei oi mateiials company *6/#/@/6/.4 8$9-/3$2$7.: Bave savings account with SEWA Bank
1 Belinquency iates aie useu because of its status as a coopeiative bank, SEWA uoes not wiite off bau loans. The piocess is uifficult foi coopeiative banks in Inuia, anu since SEWA's clients aie its boaiu of uiiectois, the management uoes not want to piesent a bau message on loan wiite-offs.
!"#$ & AT Be a membei of SEWA Tiaue 0nion anu SEWA Bank Bave shaies in the Bank woith at least S% of loan amount =DF7 !"42$7. 8$9-/3$M None 5D66".$3"6 uuaiantois oi uemanu ueposit accounts }eweliy oi fixeu ueposit accounts W7.$3$:. 8".$ 14.S% 17% W7.$3$:. 8".$ 1.3-,.-3$ Nonthly payments, S% of the oiiginal loan amount with inteiest assesseu quaiteily HD"7 =-3"./D7 6u months 6u months HD"7 5$/6/7# 2S,uuu iupees No ceiling >0$3"#$ HD"7 1/X$ 2S,uuu iupees 2S,uuu iupees >0$3"#$ BD7.G64 HD"7 !"42$7. 1,2Su 1,2Su =$6/79-$7,4 8".$ 4% u%
J(L(T YI$3"./7# 1.3-,.-3$ - Aveiage auministiative costs foi active loans between 1998 to 2uu1 weie about S2 0SB pei loan - Aveiage ietuin on assets foi 1998-2uu1 was 1u-1S%
J(R W7.$#3"6 5":$ 1.-M4
This infoimation is uiawn fiom a vaiiety of stuuies, aiticles, anu annual iepoits. While theie is not much infoimation available on Integial's loan teims anu conuitions, this case was inteiesting enough to incluue because of theii expeiience with the pilot stuuy on technical assistance anu methous of pieventing the misuse of housing loans, as well as seveial othei aspects.
J(R(' U",E#3D-7M
Integial was staiteu in 1992 as the housing cieuit piogiam of F0SAI, an Nu0 in El Salvauoi. In 2uu2, it split away fiom F0SAI anu became a foi-piofit entity with !"#$ &J) shaieholueis. Its shaieholueis aie F0SAI, the Buenas-Beiieia Founuation, anu Accion Inteinational. Integial initially only offeieu housing miciofinance piouucts, but since then it has expanueu into loans foi small enteipiises, consumption, housing, as well as othei puiposes anu it now takes savings too. In 2u12, Integial hau Su,844 boiioweis with a gioss loan poitfolio of 64.2 million uollais with an aveiage loan balance of 2,u8S uollais.
J(R(< OD-:/7# HD"7 !3DM-,.:
Integial offeis seveial loan piouucts ielateu to housing (which makes up Su-SS% of its loan potfolio). It offeis home impiovements, lot puichase loans, house puichase loans, anu loans foi the constiuction of a house. Each loan has uiffeient teims anu maximum amounts. Beyonu this, Integial offeis inuiviuual home loans anu "community" loans. Community loans aie geneially given to pooiei clients who cannot affoiu a moitgage anu have no lanu title. It is uone in tanuem with F0SAI, the oiganization Integial split off fiom. F0SAI will builu the infiastiuctuie on a laige piece of lanu anu then give each family a plot on which they can builu with a loan fiom Integial. Each family is iesponsible foi paying its own loan.
J(R(A 56/$7.$6$ !3DP/6$
As of 2uu6, SS% of Integial's clientele lives below the poveity line of El Salvauoi, anu Su% lives on less than two uollais a uay. 8% aie consiueieu extiemely pooi. Integial's clients aie piimaiily women (7S%) with an aveiage age of 4S yeais-olu anu an aveiage house size of 4.S membeis. Pooiei householus geneially have S.9 membeis, while the non pooi have fewei. A significant poition has not completeu any foimal euucation, anu 72% uo not have any type of health insuiance. 71% woiks in commeice anu all clients woik 12 months out of the yeai. S9% ieceive economic assistance (iemittances) fiom abioau to supplement theii income. The aveiage householu income foi pooi clients is $61S, foi vulneiable non-pooi it is $922, anu foi the non-pooi it is $1,744.
!"#$ & J' J(R(J !"3.7$3:G/I:
Integial paitneis with F0SAI, the oiganization it split fiom, to pioviue the community housing loans mentioneu eailiei, as well as on othei piojects. This paitneiship is ciucial foi Integial to be able to offei its seivices to its pooiei clients. Integial's othei majoi paitneiship is with Accion. Accion is one of Integial's piimaiy shaieholueis, anu woiks with Integial in a vaiiety of ways. Accion funus ieseaich foi Integial, incluuing the pilot stuuy on technical assistance as well as stuuies uone on Integial's clientele.
J(R(K 1."PP/7#
In 2uu6, Integial hau 2uu employees. Loan officeis woiking foi Integial aie geneialists; none specialize in housing miciofinance. This cuts uown on Integial's staffing costs.
Loan officeis visit clients 6u uays aftei a loan is uisbuiseu to investigate the housing woik in piogiess, anu iisk management officeis make ianuom visits to the sites. This piocess is in place to ensuie that loans aie being useu foi the coiiect puipose. If it is founu that someone is misusing the loan, Integial will eithei iaise the inteiest iate to the maximum available oi call the loan uue immeuiately.
J(R(L H$::D7: "7M 5G"66$7#$:
Integial conuucteu a pilot stuuy with Accion in 2uuS anu 2uu4 on whethei offeiing loans with technical assistance woulu make a bettei piouuct. They wanteu to auuiess a few conceins that they hau iegaiuing existing loan piactices, such as the loans financing pooi constiuction piojects baseu on lack of technical skill anu quality builuing piouucts, as well as some clients finuing that the loan amounts they askeu foi weie not enough, which iesulteu in half-completeu piojects.
!"#$ &J< Integial ueciueu to test the feasibility of technical assistance by using two types of loan officeis. They tiaineu constiuction specialists to be loan officeis as well, anu they tiaineu loan geneialists in some constiuction piactices. They then useu these uiffeient loan officeis at uiffeient bianches anu continueu offeiing the loans without technical assistance in theii othei bianches.
Fiom this stuuy, Integial founu a few key things: 1. Technical assistance uiu not iesult in piojects with highei quality constiuction a. This is eithei because clients uiu not want to pay foi highei quality constiuction, oi they uiu not have the technical ability to use the impioveu plans b. The buuget pait of the technical assistance consultation uiu help clients plan foi the costs of constiuction bettei, iesulting in fewei unfinisheu piojects 2. It is much easiei to tiain geneialists in constiuction skills than it is to tiain constiuction specialists to be loan officeis a. The extia tiaining anu piotocol make housing loan evaluations a lengthiei piocess than othei loan piouucts S. 0ffeiing technical assistance uiu not make the loan piouucts much moie attiactive offeiings 4. 0veiall, technical assistance is unjustifiable beyonu buuget assistance; it makes the piouuct moie expensive anu uoes not have the uesiieu iesults
J(R(R 1-22"34 DP U":/, W7M/0/M-"6 HD"7 V$".-3$:
HD"7 ?4I$ OD2$ W2I3D0$2$7. OD-:$ !-3,G":$ HD"7 !-3ID:$ To impiove oi expanu existing stiuctuies (incluuing builuing new walls, auuing infiastiuctuie oi sanitation. To buy a new house !$3,$7."#$ DP HD"7 1S%
!"#$ & JA !D3.PD6/D ?"3#$. 56/$7. Pooi to vulneiable Non- pooi vulneiable Non-pooi to Non-pooi =DF7 !"42$7. 8$9-/3$M None S% 5D66".$3"6 Bouseholu goous, guaiantoi, moitgage oi a combination Noitgage with a guaiantoi if neeueu (iequiieu foi loans above $4,uuu) W7.$3$:. 8".$ 2S% 2S% HD"7 =-3"./D7 S yeais 7 yeais HD"7 5$/6/7# $S,Suu $9,1Su >0$3"#$ HD"7 1/X$ =$P"-6. 8".$ Integial's uefault iate foi its poitfolio oveiall is 1.41%
K() 5D7,6-:/D7:
Bousing miciofinance is a uifficult fielu to navigate because of associateu challenges. In many ways, it is iiskiei than offeiing noimal miciocieuit piouucts uue to its non- piouuctive natuie, longei teims, anu laigei sums. It is still a ciucial seivice to offei, howevei, because housing is a basic human iight anu an integial pait of human uevelopment. This is why it is so impoitant foi BRAC, the laigest Nu0 in the woilu, to launch its own housing miciofinance piouuct anu give thousanus moie people the oppoitunity to own oi impiove theii home.
This pioject hau seveial uifficulties in auuiessing this subject, piimaiily because it has not been as thoioughly stuuieu as othei seivices in miciofinance. Some of the best infoimation available is alieauy ovei a uecaue olu. Even infoimation fiom six yeais ago shoulu be consiueieu uateu; the iecession has changeu the playing fielu of finance anu housing finance possibly most of all. Nuch of the cuiient housing piouucts aie not auveitiseu in accessible ways foi anyone outsiue theii intenueu clients, anu as a iesult the teims, conuitions, inteiest iates, etc., containeu within this iepoit may be inexact. Insteau, this pioject shoulu be tieateu as a set of guiuelines composeu by the BAT as a iesult of theii ieseaich anu the inteiests that !"#$ &JJ BRAC expiesseu. Baseu on both of these, the BAT has asseiteu these iecommenuations foi BRAC when it cieates its housing miciofinance piouucts:
This list is not exhaustive; insteau it contains what the BAT consiueieu paiticulaily ielative to BRAC oi impoitant consiueiations foi any NFI beginning to offei housing piouucts.
L() V-3.G$3 8$:D-3,$:
In this section, the BAT has incluueu the contact infoimation of thiee key contacts they maue on this pioject. They have also incluueu a bibliogiaphy, which can pioviue a iich souice of fuithei iesouices foi BRAC if it woulu like to examine a specific stuuy moie in uepth. # 1 - 0ffei at least S-yeai loan teims foi majoi piojects anu consiuei piogiessive lenuing foi home impiovements if long-teim loans aie not possible. # 2 - Collect on collateial. #S - Investigate accepting non-tiauitional foims of collateial. # 4 - Institute ieviews by loan officeis to pievent loan misuse. # S - 0ffei a vaiiety of loan teims. # 6 - Pioviue technical assistance foi clients' buugets oi pioviue it thiough a stiategic paitneiship. # 7 - Taiget Nu0s & Bousing Bevelopeis foi paitneis. # 8 - Biie anu tiain geneialists anu use existing loan piocesses when possible.
Agaiwal, Auitya; }ain, vikiam; Kaiamchanuanii, Ashish. "State of the Low-Income Bousing Naiket: Encouiaging Piogiess & 0ppoitunity to Realize Bieams of Nillions." Nonitoi Beloitte. }uly 2u1S.
!"#$ &JL "Beveloping Bousing Niciofinance Piouucts in Cential Ameiica." Accion. August 2uu4.
Bewez, Baviu, Neisa, Sanuia, anu Reuuy, Rekha. "ACCI0N Poveity 0utieach Finuings: Apoyo Integial, El Salvauoi." Accion. Naich 2uu6.
Ball, }oan. "micioN0TE S9: Bousing Finance foi the Pooi: El Salvauoi" 0SAIB. Becembei 2uu7.
Baque, Nohu. Shamsul. "Banglauesh's Expeiience with Low-Income Bousing Finance." Islami Bank Banglauesh Limiteu. 2uu8.
Bokans, }ames. "Naximizing Choice: Biveise Appioaches to the Challenge of Bousing Niciofinance" 0SAIB. Apiil 2uu8.
"Bousing Niciofinance Initiatives Synthesis anu Regional Summaiy: Asia, Latin Ameiica anu Sub- Sahaian Afiica with Selecteu Case Stuuies." The Centei foi 0iban Bevelopment Stuuies Baivaiu 0niveisity uiauuate School of Besign. Nay 2uuu.
Kiuize, Amy Bavis. "micioN0TE SS: Babitat foi Bumanity vietnam Paitneiing with NFIs to Impiove Bousing foi the Pooi." 0SAIB. Apiil 2uu7.
Nalhotia, Nohini. "Nicasa: Financing the Piogiessive Constiuction of Low-Income Families' Bomes in Peiu." Washington, BC: Cities Alliance, 2uu2.
Naitin, Cailos. "uoing to Scale with Bousing Niciofinance: The Role of Commeicial Banks." 0SAIB. Naich 2uu8.
Naitin, Richaiu }; Nathema, Ashna S. "Bousing Finance foi the Pooi in Noiocco: Piogiams, Policies anu Institutions. 0SAIB. }anuaiy 2uu8.
Neiiill, Sally; Wambugu, Angela; }ohnston, Catheiine. "micioN0TE S8: Bousing foi the Pooi in Kenya: Nachu's Coopeiative Appioach." 0SAIB. Novembei 2uu7.
Nesaiina, Nino anu Stickney, Chiisty. "uetting to Scale in Bousing Niciofinance: A Stuuy of ACCI0N Paitneis in Latin Ameiica." Accion. Nay 2uu7.
Seiuman, Ellen anu }ennifei Teschei. "0nbankeu to Bomeownei: Impioving Financial Seivices foi Low-Income, Low-Asset Customeis." =+"1'"-. 9,,&(,> =+"1'"-. 5$&'"(: The Biookings Institution Piess, 2uuS.
Schmiut, Stephanie, anu valeiia Buuinich. "Bousing Solutions Seiving Low-Income Populations: A Fiamewoik foi Action." Ashoka, 2uu6.