Transcript [Presentation Title/Subject]

Conference on Affordable Housing & Housing Finance
Micro Housing Finance – Scaling up
Alok Prasad
27th January 2010, Delhi
January 2010
India: Microfinance and Housing
• Housing Finance – Rapid growth over last two decades with CAGR of 25% +
• Microfinance – Explosive growth in last 5 years with CAGR of 60% +
• Housing Microfinance – Nascent & struggling
Housing Finance
 Outstanding mortgage
loans - US $ 80 Billion**+
 Annual originations of ~
US$ 24 Billion
** Includes HFCs and Commercial Banks
Source: Sa-dhan, Access, NHB
Microfinance
 Outstanding loans US
$ 7.8 Billion
 Annual originations of ~
$2 Billion
Housing Microfinance
 No hard data. Est less than 5% of total
microfinance lending
India - Housing Finance Growth
$ million
Growing Disbursals
Prime
Lending
Institutions
FY 05
FY 06
FY 07
FY 08
FY 09 (Est)
Commercial
Banks
11200
13022
15555
18178
20000
Housing
Finance
Companies
5777
6089
8911
10444
12222
Total
16978
19111
24467
28622
32222
13%
28%
17%
13%
Annual Growth 42%
(%)
Source: NHB, RBI
• Large & growing Industry
• Strong RBI / Government support
India - Microfinance Sector Growth
Rapid growth but limited coverage
$ Million
Outstanding FY 07
Portfolio*
FY 08
FY 09
% Change
09
NABARD
SHG’s
2756
3778
5200
38%
MFIs
768
1323
2608
97%
Total
3524
5101
7808
In Million
Client
FY 07
Outreach
(Million
Households)
*
FY 08
FY 09
%
Change
09
NABARD SHG’s 41
51
64
26%
MFIs
10
14
23
65%
Total
51
65
87
34%
53%
Microfinance- The Sunrise Sector
• Microfinance has witnessed dramatic growth - loan portfolio of MFIs + the SHG-Bank
linkage model at US$ 7.8 Billion covering over 87 million borrowers.
Microfinance
Growth
• Increased flow of commercial capital
• MFI’s evolving from NGOs to NBFC structures
• Evolving regulatory framework
* Source- Sa-dhan 2009 Report
Microfinance & Housing Finance – Key Success Factors
Development of
Ecosystem
Government &
Regulatory
Support
Low Cost Funding
What Poor
Women
Want
Appropriate
Products
Successful Business
& Lending Models
Institutional
Framework / Delivery
Mechanism
Microfinance and Housing Finance - Ecosystem
Microfinance
MFI Network / SHGs
Housing Finance
Apex Body
Regulators
Funders
NHB
RBI
Commercial Banks
(Promotional &
Developmental role)
NHB
Private Equity
Investors
Customer
Customer
Credit
Regulators
RBI
NABARD
Networks
Sa-dhan
Access
Lenders
Infrastructure
HFCs
Valuers
Commercial Banks
Lawyers
Co-ops Institutions
Credit Bureaus
India Micro Housing - Experiments
• SEWA Bank (Ahmedabad) - Total housing loan portfolio (for the FY 08-09) - $ 8 Million
representing 40% of their total micro loan portfolio.
• Bhavanashree (Kerala) - Kerala State government's poverty eradication programme has
a housing microfinance scheme administered in partnership with NABARD and Community
Based Organizations. So far, around Rs. 53 Million has been disbursed to construct a total
of 1,345 houses.
• MFIs - introduced Micro Housing Product for borrowers with good credit history of 3-5 years. Loans
are in the range of Rs.50,000-Rs.1.5 lakhs for a tenure of 2 to 5 years. Some MFI products are:
• Adhikar (Orissa) – Has started Adhikar Basa Gruha Loan (Housing Loan) in 2008
• ESAF (Kerala) - Housing loans are dependent on ownership of certain minimum amount of
land and do not carry a group guarantee.
• SKS (AP) – HDFC tied up with SKS in 2009 for a Micro Housing pilot in AP
• Sanghamithra (Karnataka) – Housing loans while retaining the group lending mechanism.
• Micro Housing Finance Corporation – Started in 2008 with plans to scale to 50,000 loans with an
outlay of Rs.2000 crores in next 5 years. 2010 plan for 1,500 loans with outlay of Rs. 60 crores.
• NHB's Pilot 'Productive housing in rural areas' or PHIRA - Loans given to self help groups
that have a proven track record of repayment & to members who have land. It has plan to cover
10,000 members in the next 5 years with an outlay of $25 million. In 2008 NHB tied up with Repco
bank to cover 10,000 members in 5 years with an outlay of Rs.100 crore under rural housing
Microfinance scheme
1
International Micro Housing - Products
MFI / Program
Loan
Amount
Loan
Term
ADEMI (Dominican
Republic)
Up to $ 5M
Up to 60
months
18-24%
BancoSol (Bolivia)
Up to $ 10M
Up to 60
months
CALPIA (El Salvador)
Collateral
Product
NA
Unsecured, guarantee
of 10% of loan
Housing Purchase +
Improvement
32%
23%
Mortgage & Personal
guarantee
Housing loan to
Microfinance clients for
New house
Up to 60
months
32%
23%
Mortgages, fixed assets,
deposits
Housing loan for
upgrade, rebuild, etc
CARD (Philippines)
Up to $ 350
Up to 3
Years
20%
20%
Completion of previous
loan cycle
Housing Purchase +
Improvement
FUNHAVI (Mexico)
$500-$2500
Up to 3
years
NA
54%
Co-Signer
100% Home
improvement projects
30 months
35%
25%
120
months
20%
8%**
Genesis (Guatemala)
Grameen (Bangladesh)
MiBanco / MiCasa (Peru)
1
MF Interest MH Interest
Rate
Rate
*Source: IFMR report 2007
Up to $600
Up to 120
months
60-85%
50-70%
** Low Housing Interest rate is subsidized by Microfinance business
Infrastructure loans
Completion of previous
loan cycle
Housing loan to
Microfinance clients for
New house & Upgrade
Affordable New housing
including Government
subsidies
Micro Housing – Scaling up
Information
Gap
Client Delivery
Illiterate
Populace
Products
Infrastructure
Risk Model
Accessibility
Reach
Business &Model
Foolproof Framework
Identity
Institutional
Information
Market Gap
Micro Housing Math
Assumptions
Purchase Price
Cost of
Unit
Rs. 100,000
Borrower
Loan to Value
90%
Bank
MFI
Two Scenarios
Rs. 90,000
Tenure
5 years
Rate of Interest
IIR* 40%
Income Required per Month
Rs. 5250
15%
reducing
EMI
Rs.2100
IIR* 30%
*Income/Installment ratio
Rs. 7000
Micro Housing - Way Forward
Way Forward
• Specialized Housing Micro Finance Institutions
• Partnership Approach - Government programs, Banks, MFIs, RRBs,
Cooperatives, Corporates
• Regulatory / Government Support
• Customized financing products
• Appropriate Credit infrastructure
• Increased supply of low cost housing
Micro
An agent&ofFinancial
FinancialInclusion
Inclusion
MicroHousing
Housing– Finance
Micro Housing Impact
• Housing has direct impact on employment and income generation - An engine of
Equitable and Balanced Economic Growth
• Indirect impact is in terms of improved habitat, living, educational, social and
cultural standards leading to human capital formation and thereby the future income
capabilities
• Improved productivity leading to enhanced income, saving and repayment potentials on
sustainable lines
• Sustainable Human Settlement an Effective tool towards “Financial Inclusion” with
Financial Stability and Social Inclusion
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