SUSTAINABLE HOUSING MICROFINANCE in
SUB-SAHARAN AFRICA: Turning Loans into Homes
Rooftops Canada, the Centre for Affordable Housing Finance in Africa (a division of the FinMark Trust), and Habitat for Humanity International arranged a regional workshop on sustainable housing microfinance, held in Nairobi, Kenya, from 12-15 April 2010.
(scroll down to access presentations)
Housing microfinance (HMF) is not a new trend in Africa. Historically, it has been known that shelter needs in the continent are largely met when households use their own savings and other informal funding sources to finance and build their homes incrementally. A new dimension was added to this process of self-build when microfinance lending grew in the continent, and lenders saw that up to 30% of microfinance loans for small business and other uses were diverted for housing purposes. Noting this, many microfinance lenders have started, or are considering providing loans for HMF. Increasingly, MFIs, banks, NGOs, community based shelter funds, SACCOs and even newly established dedicated HMF lenders are moving into or diversifying into HMF lending across the continent.
As HMF becomes more explicitly available, a key constraint to the growth of this industry relates to limitations in the systems necessary to facilitate the incremental housing process that HMF finances. Of course, access to secure tenure, a plot of land on which a borrower can safely build without fear of eviction, is a first condition. Even with this, however, the construction process is not an easy one. Building processes vary from one locality to another, involve multiple parties and service providers, and demand complex decision-making and fairly detailed expertise on the part of the borrower. There is often little support available for households to undertake the housing construction process independently.
But is this something that should concern a housing micro lender? Is the provision of housing support services important to loan performance? How and on what basis can HMF lenders decide how they approach this question? This is the focus of this workshop for African practitioners.
Over three days, plus a 4th day for site visits, the HMF Workshop in Nairobi focused on the issue of "Turning Loans into Homes". Workshop sessions enabled practitioners to interrogate their own practice, forge linkages and associations with others from the region, and offer their own experiences to the wider network. Baseline research recently commissioned by the Centre for Affordable Housing Finance in Africa (FinMark Trust), Rooftops Canada and Habitat for Humanity International was presented in order to initiate the debate. We were also delighted to welcome practitioners from Central America, whose participation has been sponsored by Sida so that they can share their experiences with this very important question of turning loans into homes.
Background
The incremental housing process that HMF finances involves a number of progressive housing steps, each adding value to the ultimate housing product. These steps present their own unique finance and technical capacity demands.
Savings, borrowing from friends and family, rotating savings groups and informal loan providers, as well as income from businesses are often used to finance these progressive steps. Housing microfinance has likewise emerged as a useful financing mechanism to assist the poor in negotiating these stages of the housing process. However, there is a need to determine what kind of products and services should accompany and if need be, get financed by HMF within the value chain at each financing moment.
Whether provided by the lender itself, other private sector players, or by partner NGOs or other service providers, housing support may include:
Support for the acquisition of land with secure tenure and basic services
This area of support recognises that in many Africa cities, the acquisition of land with secure tenure, and available basic services is a major undertaking. It often involves the ability to lobby and engage with politicians and local governments. There is a cost element, as the land may have to be bought, and funds sought to bring services to the individual plots. Professional services of surveyors, engineers, town planners and lawyers are also often necessary.
Support for construction and building
To ensure that a quality housing product is provided, there is need for a wide range of construction support services. These include providing advice on housing design, construction and improvements, costing, exploring the possible use of appropriate and inexpensive technologies and materials, sourcing of materials, screening of local contractors, supervision of the works and many more.
Support in financial and legal education
Potential loan recipients have to be made aware of their legal rights and obligations with regard to housing loans. They likewise need to understand the financial implications of the debt undertaking and its implications on the household expenditure and cash flows.
Post construction support
This involves follow up support as the beneficiary pays up the loan amount. It may also involve post-loan visits offering advice and support regarding future home improvements and how these may be organised and financed.
The focus of this workshop is explicitly on the question of housing support services. What kind of housing support products and services should accompany and if need be, get financed by HMF within the housing supply value chain? How is this done, and what are the implications for institutional arrangements, systems, & financial sustainability?
The related sub-questions were:
How well are HMF lending institutions and other institutions responding to the demand for housing support services?
- Who presently provides housing support services to HMF clients?
- What is the range, type and cost of housing support services provided?
- How are housing support services priced, timed and incorporated into the overall loan product, if at all?
- If not, how are they financed?
- Where housing support services are incorporated, what are the effects on product affordability and operations? What are the main benefits, challenges and lessons?
- What are the formal arrangements between HMF lenders and various other institutions involved in housing support delivery?
What is the current capacity of HMF lending institutions to provide or expand provision of housing support services?
- What are current barriers to adequately meeting the demand for housing support services among clients?
- What is needed to enhance existing practices regarding the provision of housing support services?
For more information, please contact:
Barry Pinsky, Executive Director, Rooftops Canada barry@rooftops.ca
Kecia Rust, Housing Finance Theme Champion, FinMark Trust Kecia@iafrica.com
Grace Sebageni, Housing Finance Coordinator, HFHI AME GSebageni@habitat.org
This workshop was co-hosted by:
Rooftops Canada is the international development program of co-operative and social housing organizations in Canada. Rooftops Canada works with partner organizations to improve housing conditions, build sustainable communities and develop a shared vision of equitable global development. Rooftops Canada's focus is on disadvantaged communities in Africa, Asia, Latin America, the Caribbean and Eastern Europe. http://www.rooftops.ca/ | The Centre for Affordable Housing Finance in Africa is a division of the FinMark Trust. FinMark was established in March 2002 with funding from the UK's Department for International Development (DFID). Our mission is summarised in our slogan: "Making Financial Markets Work for the Poor". FinMark Trust aims to promote and support policy and institutional development towards the objective of increasing access to financial services by the un- and under-banked in Africa. http://www.finmark.org.za/ | Habitat for Humanity International is a nonprofit, ecumenical Christian housing ministry. HFHI seeks to eliminate poverty housing and homelessness from the world, and to make decent shelter a matter of conscience and action. Habitat partners with people of all backgrounds, races and religions throughout Africa to find innovative ways to address shelter needs for poor and marginalized people. www.habitat.org/ame |
This workshop has benefited from the support of a number of organisations. Specifically, the organizers would like to thank: Agència Catalana de Cooperició al Desenvolupament, Canadian International Development Agency, Habitat International Coalition, Mazingira Institute, SIDA as well as UN Habitat.