THE STATE OF HOUSING MICROFINANCE IN AFRICA. African Union for Housing Finance Annual General Meeting and Annual Conference “Housing Finance - A Public-Private Partnership” Joaquim Chissano International Conference Centre Maputo, Mozambique 8-11 September, 2009
THE STATE OF HOUSING MICROFINANCE IN AFRICA
African Union for Housing Finance
Annual General Meeting and Annual Conference
“Housing Finance - A Public-Private Partnership”
Joaquim Chissano International Conference Centre
8-11 September, 2009
Kecia Rust (email@example.com)
What is housing microfinance?
A growing sector…
… with growing demand
Research commissioned by FinMark Trust in 2009:
Housing Microfinance in Africa: Status, Opportunities and Challenges, by Michael Kihato.
Available on www.finmark.org.za
Demand side indicators
High urbanisation rates
High real interest rates
The desire to self build
Supply side indicators
Insufficient affordable housing
Low penetration of commercial banking & financial services
A growing MFI sector
Availability of funding: Savings / Capital markets / International remittances
For example: in Benin
The Financial Bank in Benin was the first to propose social loans in 1995 to people who could not access formal funding from banks to improve their housing and buy land. In November 1998, Financial Bank created FINADEV as their microfinance subsidiary. Since its start up, FINADEV SA has given access to microcredit to more than 25 000 small borrowers in Benin. Apart from traditional microfinance products, it provides housing loans. FINADEV suffers from similar problems as other microfinance institutions including limitation of funding, a lack of innovation in loan management, difficulty in adjusting to risks, increasing unmet demand as well as weaknesses of MIS and governance.
Investors: public / private / institutional
Work individually or together to finance HMF retailer: loans, equity, guarantees
Private equity firms / hedge funds
Acts as a type of guarantor and grades institutions
Provides support and spurs on community organisation around land and infrastructure issues
NGO, building material suppliers, etc.
Successful growing and profitable microlending sector
Senegal, Burkina Faso
Urbanisation and demand
Morocco, Egypt and Algeria (high urban populations)
Ghana, South Africa, Cameroon, Nigeria (high urbanisation rates and large urban centres)
Kenya, Congo DRC, Uganda, Ethiopia, Tanzania (urbanisation rates greater than 3%)
Nigeria, Egypt, Ethiopia, Congo DRC, Uganda, Kenya, Tanzania
Favourable regulatory frameworks
Morocco has specific legislation focusing on HMF
Use of capital markets
South Africa, Egypt, Nigeria, Ghana, Kenya
Senegal, Burkina Faso, Tunisia, Benin, Mauritius, Eritrea, Malawi, Niger, Congo, Lesotho
MDGs mean governments are interested
Donors, wholesale lenders and investors are all interested
WAT Human Settlements Trust,in Dar Es Salaam, Tanzania.
In 1998, WAT established a Savings and Credit Society to prvide credit for housing. The WAT Saccos grew to over 5000 members and about $800,000 in savings. In 2008, WAT signed an agreement with the Financial Sector Deepening Trust (FSDT) to undertake a 3.5 year HMF pilot. This will increase the number of housing loans to 1000 per year. This pilot will develop sustainable and replicable loan products and processes. It is expected that it will be spread over a network of 40 Saccos in Tanzania.
Development Workshop, Angola
In 1999, Development Workshop launched the Sustainable Livelihoods Programme, Angola’s first large-scale microfinance programme, along the Grameen Bank model. They realised that up to 30% of their microfinance clients loans were invested in their housing.
In 2005, they developed a housing microloan: KixiCasa. Loan sizes are $800-$2500, repayable over 10 -12 months.
Public / private
Role for donors, DFIs, NGOs
NGO / commercial
Total urban demand for Africa is potentially large, but not unmanageable:
Total urban demand for Botswana estimated at $37,5m vs. total pension assets for Botswana in 2005 of $3,58: Less than 1.5% of pension funds used for HMF would meet total urban demand in that country
Total urban demand for Kenya estimated at $295m vs. stock market capitalisation of $6b (in 2005)
Total potential urban demand for the top 40 countries is over $10 billion - this is only 0.5% of the estimated $2 trillion directly lost on sub-prim loans.
Opportunity for government, private sector, NGOs and donors to come together to address Millennium Development Goals
Accepting incremental housing on secure tenure as a viable housing approach, is the first step.
Establishing a housing loan product
Cooperative savings and loans for housing
Scaling up capacity for growth
Offering housing support services
Broadening institutional actors
The use of cheap and effective building technology
Pension funds investment
Kuyasa Fund, South Africa
Development Action Group, South Africa
Centenary Bank, Uganda
Zakouara with Shorebank Int’l
& USAID’s DCA
Teba Bank, South Africa