Lessons learned scaling up housing microfinance
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Lessons Learned Scaling Up Housing Microfinance. Richard Shumann Technical Officer, Housing Finance CHF International SEEP Annual Meeting 2006. Housing Microfinance and CHF -2000. 64% of CHF’s microfinance portfolio Loans as means to the goal of better housing

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Lessons Learned Scaling Up Housing Microfinance

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Lessons LearnedScaling Up Housing Microfinance

Richard Shumann

Technical Officer, Housing Finance

CHF International

SEEP Annual Meeting 2006


Housing Microfinance and CHF -2000

  • 64% of CHF’s microfinance portfolio

  • Loans as means to the goal of better housing

  • Intensive technical assistance to ensure quality

    • Architect visits, loans in kind, disbursements in kind

  • Microfinance as projects within

    CHF Offices

  • Donor driven


Housing Microfinance and CHF - 2006

  • 30% of CHF’s microfinance portfolio

  • Housing as a way to expand microfinance outreach and meet market demand

    • Jordan: 1,110 loans, $980,000 in one year of new product

  • Wide range of technical assistance models

  • Projects becoming local institutions with separate identity and financials

  • Client driven


CHF Loan Portfolio 2000 - 2006


Why these changes?

  • More attention to markets, client needs and competition

  • Stronger push for sustainable institutions within MF community

  • New competition gives clients more convenient options

  • Consumer finance companies and building suppliers

  • Clients do not necessarily need architects

  • Need to cover costs, especially for technical assistance


Housing-Only Lending Institutions

  • Palestine started 1995

  • Mid-2006: 3,749 loans, $11.5 million portfolio

  • Limited scale in microfinance but successful housing projects

  • Constraints to profitability:

    • Covering costs of architectural assistance

    • Improving efficiency of loan process

    • End of subsidized loan capital

  • Pricing policy not flexible due to competition and interpretation of social mission

  • What’s more important: Housing or Lending?

  • Mexican institutions moving into microenterprise loans


Challenges to Scale

MARKETS

Research

Respond

COSTS

Expenses

Income

STAFF

Profile

Training


Markets

  • Housing an untapped opportunity

  • Seek new segments, low level civil servants

  • FONDEP Morocco: 95% housing clients new to MFI in first year

  • Adapt procedures and policies to new competition and client needs


Costs

  • Housing loans tend to have higher amounts and lower delinquency than business loans but

  • Are more expensive to provide (extra loan officer time, assistance)

  • And often at lower interest rates

  • More study needed


Staff

  • Where do you put the architects, if you have them?

  • Train existing credit staff

    to reach new markets

    and be efficient

  • FUNHAVI Mexico:

    third of new clients from

    small satellite offices


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