FINMARK FORUM
A meeting place for practitioners and others interested in access to financial services in Southern Africa and beyond
Presents
Measuring the performance of affordable housing loans
by
Illana Melzer, Eighty20
Marlene Heymans, Independent credit analyst
South Africa
The first phase of the Financial Sector Charter came to an end on 31 December 2008. During this five year period the Big 4 banks exceeded their targets, lending just under R45 billion to the FSC target market. For the duration of the Charter, the Banking Association provided (unaudited) origination figures - issued every few months or so. The FSC council secretariat also published three annual reports on transformation (2005, 2006 and 2007). This data has been very useful in helping us understand how the FSC helped extend access to housing finance for low income borrowers.
Another important area of enquiry to better understand the experience of the FSC period with respect to housing lending, is the performance of those loans issued. Were these loans acceptable from a risk perspective for the banks, or have there been an inordinate number of defaults? Did borrowers manage their new liability, or did access undermine their financial position by putting them too far into debt? And critically, is the business of lending for housing down market viable, and is there a case for banks to carry on lending to this market in the absence of an FSC?
To begin to answer these questions, the FinMark Trust commissioned research to explore a key question: How have FSC housing loans performed? Did low income borrowers perform worse or better than their higher income counterparts? Did lower income mortgage borrowers, who by and large accessed variable rate loans, manage to keep up with installments over the turbulent interest rate cycle between July 2006 and June 2008 which saw the prime rate increase from 10.5% to 15.5%? More recently, have borrowers in this market segment been more adversely affected by the economic downturn and resultant job losses than other mortgage borrowers, and has this been expressed in their loan repayment behaviour?
Researchers Marlene Heymans and Illana Melzer explored available data to answer these questions. Please join us for a presentation of findings.
Illana Melzer is a co-founder of Eighty20 Consulting, a Cape Town based consulting company that focuses on data driven analysis. She has extensive experience in strategy consulting, having previously worked for two well-known international consulting companies, Monitor and Accenture (formerly Andersen Consulting). Illana primarily focuses on the low-income market in South Africa with a focus on access to financial services (including housing finance, insurance, and savings). Other recent areas of research include financial literacy and the affordable rental housing market.
Marlene Heymans is an independent consultant engaged in various projects related to consumer credit. She started her career as a stock broking analyst responsible for a wide range of industrial stocks. For the past 9 years, she specialized in the analysis of various matters related to consumer credit extension in South Africa and the National Credit Act.
Date: 15 July 2010
Time: 17:30 -18:45 (with refreshments thereafter)
Venue: Old Mutual, Old Mutual Square, Isibaya Building, 93 Grayston Drive, Sandton
RSVP: Priscilla on 011-315 9197 or priscillac@finmark.org.za