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Lessons LearnedScaling Up Housing Microfinance
Richard ShumannTechnical Officer, Housing Finance
CHF InternationalSEEP 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
• 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
Housing Microfinance and CHF - 2006
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006
US
$ M
illi
on
0%
10%
20%
30%
40%
50%
60%
70%
Housing CHF Total % Housing
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
MARKETSResearchRespond
COSTSExpenses
Income
STAFFProfile 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