Transcript Bienvenue - Sanabel - The Microfinance Network of Arab

Housing Panel Discussion
Momina Aijazuddin
Program Manager, Microfinance, MENA Region
International Finance Corporation (IFC)
Tunis – May 2008
Table of Contents
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
IFC’s Four Key Strategic Solutions in Microfinance
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Promoting collective investment
vehicles (structured finance, debt
and equity funds)
Developing microfinance network
partners
Supporting individual financial
institutions through strategic
partnerships (i.e., MIFA – IFC/KfW
program in Asia developing
greenfields)
Engaging in selected advisory
services projects at the institution,
financial infrastructure, and policy
levels
IFC’s Microfinance Strategy
IFC's Cumulative and
Annual Commitments
(US$M)
700
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
600
500
400
300
200
100
0
95-02
03
04
05
06
07 (E)
No. of Active Clients ('000)
Portfolio Commitments and Client Growth
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Financed 128 projects in 47 countries
+ 15 regional/global projects; portfolio
$635 million.
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High Impact – MFIs provided loans of
$5.6 billion to more than 3.5 million
entrepreneurs; ROE 14%
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Supported (i) greenfield banks (ii)
transformation of NGOs (iii) bank
downscaling (iv) funds
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Now scale-up activities through (a)
networks (b) strategic partnerships eg
KfW and (c) funds
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Over the next 3 years, IFC expects
to reach annual commitments
averaging US$300 million, leading
to a committed portfolio of US$1.2
billion by the end of 2010, with
exposure to over US$15 billion.
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
IFC Commitments in Microfinance
Committed Portfolio by Region (US$ m) FY07
82
14
25
46
Sub-Saharan Africa
East Asia & the Pacific
Central and Eastern Europe
Latin America & Caribbean
Middle-East & North-Africa
171
South Asia
Southern Europe & Central Asia
231
World
6
53
Future Growth will be Balanced Among Regions
 Sub-Saharan Africa to grow with new greenfield projects: Microfinance Initiative
for Sub-Saharan Africa (MIFSSA)
 IFC to boost investment in EAP and SA: Microfinance Initiative for Asia (MIFA)
Microfinance MENA
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# of Projects: 15
# of Clients: >1.1 million
Invested: US$70 million
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Countries: Pakistan, Afghanistan,
Yemen, Syria, Lebanon, West Bank
& Gaza, Jordan, Tunisia, Algeria,
Morocco
Gross Loan Portfolio: US$520
million
Women Borrowers: 825,000
Instruments:
Partial credit guarantees, dedicated
country fund, Lcy, sovereign linked
guarantees
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MENA Microfinance Product Diversification
Credit Products
Housing
Pakistan
Tourism
Seasonal
Savings
Consumer
Compulsory
Voluntary
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Insurance
Life
Health
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Afghanistan
X
Egypt
Jordan
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Iraq
X
Lebanon
X
X
Morocco
X
X
Palestine
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Tunisia
Saudi
Arabia
Sudan
X
Syria
X
Yemen
X
X
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
Defining Housing Microfinance
Micro/Small loans made for housing that are not backed by mortgages.
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Here is an example of text written in blue color…
Typical Characteristics
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Address habitat needs of the poor and very poor using methodologies adapted
from micro credit practices
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Monthly payment up to 25% of family income
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Tenors typically range from 1 to 5 years
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Pricing is typically higher then that for other regular MF loans because of longer
tenors
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Client must show tenure security right to the property
– Not necessarily a full land title
– Can be tax receipt, sales contract, etc.
– Individual, not group loans
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Individual, not group loans
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Secured typically by one or more co-signers, rather then lien on property
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Used typically for incremental construction and for home improvement but can
also be used for home purchase and land purchase
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Often accompanied by construction (technical) assistance
Commercial Reasons to Launch HMF
• High demand
• Amounts, payments and guarantees are
accessible to low-income families
• Reduces risk of financing housing within the
microenterprise portfolio
― In some countries 20% to 25% of business
loans used for housing
• Builds client loyalty
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
Linked vs. Stand –alone Products
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Linked HMF loans require the customers’ prior
participation in a savings account or a micro
credit line.
– Performance filter and a credit bureau
– Indication of the applicants’ capacity to
manage and repay their debt
Stand-alone HMF loans do not require
borrowers to have a prior history with the
lender, that could be used as a proxy of their
ability to repay.
– On average, have higher interest rates and
shorter tenors
Typical Target Groups
Self employed
Family businesses; established for several years
Selfemployed
(Urban)
Food processing & production, trade, services,
transportation, home-based industry Women
work from home: domestic work, beauty salons,
handicrafts
Selfemployed
(Rural)
Agriculture, livestock, silk, day labour, transport,
carpet weaving, food processing and shop
keeping
Salaried
workers
Mainly public sector but can also include private
sector
Product Examples
Minor
Major
Construct
Amount
$500
$1,000
$8,000
Term (Mo)
12
12
60
Interest/Mo
2%
2%
1.5%
Payment/Mo
$46
$92
$200
HH
Income/Mo
$184
$368
$800
Market
segment
Lower
poor
Middle - upper
poor
Upper
poor
Guarantees
Evaluation Evaluation
Cosigner
Evaluation
Cosigners
Salary
Type
Standalone
Linked
Linked
Examples From Emerging Countries
LINKED HMF PRODUCTS
MFI
Max.
Tenor
Required
Security Time w/
Collateral Program
Grameen
5 cosigners
Bank
& center
(Bangladesh) 120 mos guarantee Min 2 yrs
SEWA Bank
(India)
2
cosigners.
Lien on 1 yr
60 mos of savings Min 1 yr
STAND-ALONE HMF PRODUCTS
Savings
Required
MFI
Max.
Tenor
Security
Collateral
Required
Time w/
Savings
Program Required
Yes
ADEMI
(Bolivia)
Collateralize
36 mos d loan
None
No
Yes
FUNHAVI
(Mexico) 20 mos 2 cosigners None
No
Features of HMF and Mortgage backed loans
Characteristics
Housing MF
Mortgage-Backed Loans
Target market
Low income clients
Middle to high income
clients
Loan term
Short & medium term
(< 5 years)
Long term (over 5
years)
Loan amounts
Small to medium
Large
Loan use
Home improvement
Progressive building
New house construction
House purchase
Type of guarantee
Co-guarantor,
collateral required for
typical
microenterprise loans
Formal mortgage
Demand for HMF in West Bank & Gaza
Micro entrepreneurs in the
Gaza Strip mainly need
loans to:
Needs for credit (%)
9
reimbursement of debt
working capital
7
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Expand their activities, where
expansion can be interpreted
as an increase of business
output or investment in new
projects (43%)
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Working capital loans (7%) or
funds to start a new activity in
the context of their existing
business (8%)
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Consumption, housing,
education or emergencies
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Reimburse debts (9%).
finance asset
8
start up new activity
43
expand your business
education
emergency reason
occasional reason
own consumption
house improvement
0
10
20
30
40
50
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
Challenges for MFIs
• Financial services vs Subsidy
• Limited Access to Medium/ LT funding
• Revised individual lending methodologies
• Capacity building for staff
• Effective guarantee mechanisms
• Unclear security of tenure in some countries
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IFC and Microfinance
Microfinance MENA
Defining Housing Microfinance
Products
Challenges for MFIs
Solutions
Potential Solutions
• Market Research/Survey
• Technical Assistance Program – toolkit, lending policies,
training, pilots
• Partnerships with banks and international agencies for 3-5
year credit lines
• Link to capital markets
Example of linking MFIs to Capital Markets
EFSE
• Promoted by KfW, managed by Oppenheim Pramerica,
advised by Bankakedemie
• Leverages investors funds for up to 7 years in different risk
tranches – IFC, EBRD, NDFC, KfW and private investors
• Provides funds, capacity building and training, product
development and market studies, and impact studies for
partner lending institutions: Banks and MFIs
• Recipients: MSEs and private households
Thank you for your attention