Transcript Document

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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
Kecia Rust ([email protected])
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Outline
 What is housing microfinance?
 A growing sector…
 … with growing demand
 Opportunities
 Challenges
 Research commissioned
by FinMark Trust in 2009:
 Housing Microfinance in
Africa: Status,
Opportunities and
Challenges, by Michael
Kihato.
 Available on
www.finmark.org.za
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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What is housing microfinance?
Housing microfinance is … any micro financial tool to support investment in the components of
housing, including land purchase or access, provision of or improvement to services, full or
incremental house construction, renovation or maintenance. So, credit, savings, insurance.
Housing microloans are generally
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unsecured loans granted to individual borrowers (sometimes co-signers)
intermediate in size (from US$ 100 - $5000)
of longer duration (1-5 years) than other microfinance loans given their size.
higher in interest than secured loans but with interest rates on par with microloans
used to build or improve the home incrementally
a niche market product: something special about the housing part…
Productive, not consumption loans: enhancing risk management
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Less than 30% of households in most emerging countries can afford a mortgage to purchase the least
expensive developer-built unit, so, most households build step-by-step, room-
by-room
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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A growing sector…
Demand side indicators
 High urbanisation rates
 High real interest rates
 Tenure security
 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
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.
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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A growing sector…
Work individually or
together to finance
HMF retailer: loans,
equity, guarantees
Donor
s
Investors: public / private /
institutional
Wholesale
lender
Private equity firms /
hedge funds
Rating Agency
Bank
HMF
Retailers
Acts as a type
of guarantor
and grades
institutions
HMF
Retailers
NGO, building material
suppliers, etc.
Provides support and
spurs on community
organisation around
land and
infrastructure issues
Borrowers
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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A growing sector… lenders
Category
Description / examples
County
Informal, locally established
(susu, umpato)
Savings based, locally defined. Approach
and use of funds defined by group:
individual or collective loans
All countries – lessons?
Community
based
shelter funds
Usually donor supported (i.e. Slum Dwellers
International) largely collective loans,
targeted at most poor
Trust Fund of the Housing People of
Zimbabwe, WAT Human Settlements Trust
in TZ; Angola, Namibia; Kenya
Cooperatives and credit unions
(Saccos)
Individual loans for housing often a
coincidental focus
NACHU in Kenya; WAT SACCOs in TZ;
Namibia; Zambia
Non-bank
Micro
lenders
(credit-only)
Origins in housing delivery / shelter NGOs
that saw demand for finance
Kuyasa Fund & Lendcor in SA; Zambia Low
Cost Housing Development Fund;
Origins in microcredit for SMMEs; housing
the next progression.
Uganda Microfinance Ltd; Jamii Bora in
Kenya; PRIDE in TZ; others…
Microfinance banks (deposit
taking and lending to members
and sometimes non-members)
Usually when micro lenders convert to
banks to access capital - a focus on housing
loans usually comes later
K-Rep in Kenya; Zambia National Building
Society; Pulse Holdings in Zambia; African
Bank, and Capitec Bank in SA; etc.
State owned banks
offering microloans
Trend is now moving away from these as
many sustained losses
Ghana, Tanzania, Guinea, Uganda,…
Commercial banks offering
microloans
SA banks have offered unsecured loans for
Standard Bank, ABSA in SA; Indo-Zambian
some time. The NCR estimates that 10-30% Bank; Namibia, Tanzania…
of these
are used ▪for
housing.
Kecia Rust
([email protected])
Centre
for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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… with growing demand
Country
Population
-----------------Average
household
size
x
% of
population
that is
(a)urban, or
(b)rural
% of
urban
population
not served
by formal
mortgages
x
% of
urban
households
who may
want a
loan
x
% of
urban
households
who may
afford a
loan
x
=
% of
rural
population
not served
by formal
mortgages
x
% of
rural
households
who may
want a
loan
x
% of
rural
households
who may
afford a
loan
No. of
potential
borrowers
(assuming
one per
household)
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… with growing demand (urban)
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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… with growing demand (urban)
No. of
potential
borrowers
(assuming
one per
household)
x
Average
loan size
(HDI proxy
or avg)
=
Estimated
total
value of
the market
($)
South Africa
Morocco
$1150
$430
Uganda
Rwanda
$942
$350
Kenya
$533
Ethiopia
Avg
$700
(DiD figure)
Benin
$228 $666
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
… with growing demand (urban)
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Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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Opportunities

Successful growing and profitable microlending sector
 Senegal, Burkina Faso
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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%)
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Rural demand
 Nigeria, Egypt, Ethiopia, Congo DRC, Uganda, Kenya, Tanzania
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Favourable regulatory frameworks
 Morocco has specific legislation focusing on HMF
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Use of capital markets
 MDGs mean
governments
are
interested
 Donors,
wholesale
lenders and
investors are
all interested
 South Africa, Egypt, Nigeria, Ghana, Kenya
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International remittances
 Senegal, Burkina Faso, Tunisia, Benin, Mauritius, Eritrea, Malawi,
Niger, Congo, Lesotho
 Growing
experience
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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Opportunities
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 largescale 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.
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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Challenges
 Land & services
 Tenure security
 Sustainable infrastructure
Public / private
partnership opportunities
 Regulatory frameworks
 Supportive legislation
 Funding
 Guarantees
 Information systems
Role for donors, DFIs, NGOs
 HMF track record
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Appropriate products: savings + credit + technical support
Scaleable models: viable systems
NGO / commercial
Lender capacity & technical support: operations
partnership opportunities
Developmental outputs: the housing ingredients
 Product targets: home improvements, backyard rental, incremental housing
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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Conclusion

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 subprim 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.
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)
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Conclusion
Ugafode, Uganda
KixiCredito, Angola
Faulu, Kenya
 Establishing a housing loan product
 Cooperative savings and loans for housing
Nachu, Kenya
 Scaling up capacity for growth Kuyasa Fund, South Africa
 Offering housing support services Development Action Group, South Africa
 Broadening institutional actors
Centenary Bank, Uganda
 The use of cheap and effective building technology
Mchenga, Malawi
 Public-private-international partnerships Zakouara with Shorebank Int’l
 Guarantee finance
& USAID’s DCA
WAT, Tanzania
 Pension funds investment
Nachu, Kenya
Teba Bank, South Africa
Kecia Rust ([email protected]) ▪ Centre for Affordable Housing Finance in Africa - a division of the FinMark Trust (www.finmark.org.za)