Breakout Session 1: SCALING UP HOUSING MICROFINANCE: Global Best Practices from the Field Presenter: Jennifer Oomen Associate Director, Center For Innovation In Shelter & Finance Habitat for Humanity International
Session Guide Overview Housing Backlog Supporting the sector What we have learned About Habitat Phil. Housing Situation Habitat Response Lessons Learned 7/30/2014 2014 MCPI Annual Conference 2
Session Guide Overview Housing Backlog Supporting the sector What we have learned About Habitat Phil. Housing Situatio n Habitat Respons e Lessons Learned 7/30/2014 2014 MCPI Annual Conference 3
A world where everyone has a decent place to live Habitat for Humanity is an International NGO Habitat Philippines is a country affiliate of Habitat for Humanity International based in Atlanta, Georgia, USA
Habitat s work around the globe Over 70 countries More than 4 million people served
Session Guide About Habitat Overview Housing Backlog Market Development Approach Lessons Learned Challenges Phil. Housing Situatio n Habitat s Respons e Lessons Learned 7/30/2014 2014 MCPI Annual Conference 6
Housing Market Failures at the BOP Country Profile Housing Microfinance Demand Formal National Poverty Line Informal income Upper & Middle class Poor Very poor $2/day Extreme poverty $1/day Informal Formal title Two-thirds of the world s emerging market population live in substandard shelter 70% of the world s population access shelter through progressive housing (Ferguson. 2003) BOP spends more than $330 bn annually on housing (WRI 2007) Over 30% of microenterprise loans commonly are used for housing Housing markets are nascent (Brazil 2%, Indonesia 3%, Bolivia 8.6%, against 79% US, 43% EU Ferguson 2010) Investment potential in BOP housing sector over next 10 years: $214 - $786 bn or up over 4x microfinance (JP Morgan 2010) 7
Current housing backlog of 3.9 million houses expected to grow to 6.5 million by 2030 Habitat Philippines Vision 2020: Reduce the housing backlog by 20%
HMF Industry Highlights Source: www.bsp.gov.ph BSP Timeline on Housing Microfinance: Housing MF Loans 3% Micro-Agri Loans 12% 2013 BSP Financial Inclusion Report Feb. 2008 Jan. 6, 2010 Circular 678 Dec. 2011 BSP Monetary Board has approved housing microfinance product to address the shelter needs of the economically active poor Rules & Regulations that govern the approval of banks housing microfinance products 24 Banks have Housing Microfinance Dec. 2012 P242 Million Total Housing Microfinance Portfolio Microfinance Plus Loans 1% Micro Enterprise Loans 84% Jul. 18, 2013 Circular 817 Dec. 2013 Amendments on the Grant of Housing Microfinance to simplify the process by which banks can offer innovative microfinance products P235 Million Total Housing Microfinance Portfolio with 19 banks
Selected Microfinance Industry Highlights on Housing Microfinance Source: www.mixmarket.org 2013 Estimated HMF Data (CARD NGO, TSPI, ASKI, ASHI) 6% HMF Portfolio 94% Total Loan Portfolio 7/30/2014 2014 MCPI Annual Conference 10
Cooperative Industry Highlights Source: www.cda.gov.ph Statistical Data as of Dec. 31, 2013 0.08% or 20 Registered Housing Coops 99.92% or 23,672 Registered Coops with 12.7 M Members 616 Members Total Registered Coops Registered Housing Coops 7/30/2014 2014 MCPI Annual Conference 11
What to do with this reality? DEMAND Which products and services could fill the gap? SUPPLY
Session Guide About Habitat Overview Phil. Housing Situation Housing Backlog Supporting the sector Lessons Learned Habitat Program Lessons Learned 7/30/2014 2014 MCPI Annual Conference 13
Two main barriers to scaling Housing Microfinance (HMF) Insufficient technical capacity to develop adequate HMF products Lack of adequate/long term capital
Accelerating the Market for Housing Microfinance Strategies for Building a Marketplace Monitor Impact Investing Report Source: Monitor Impact Investing report, Jan-09
Habitat for Humanity s response to these barriers
MicroBuild Fund By moving the global microfinance sector from 2% housing to 10% housing, move over $4B of investment to affordable housing, serving over 15M households. EQUITY Start-up cash in the form of grants and patient capital STANDBY LETTERS OF CREDIT Assets committed to remain in relatively liquid holdings and callable if the fund takes losses beyond cash base. DEBT Concessionary capital from missionminded investors (government, private investors, foundations). MicroBuild aims to demonstrate commercial viability and social impact of Housing Microfinance -17-
The Center for Innovation in Shelter and Finance The Center facilitates collaboration between public, private, and third sector partners to develop innovative housing solutions for the 1.6 billion people worldwide who lack adequate shelter. Advisory services Product Development ITA HSS Development Pilot implementation and monitoring Research and Knowledge Development Case studies Innovative practices & methodologies Toolkits The Center has to-date worked with 50+ partners worldwide Peer Learning Communities of Practice Forums, Conferences 18
Session Guide About Habitat Overview Phil. Housing Situatio n Housing Backlog Habitat Program Supporting the sector What we have learned Lessons Learned 7/30/2014 2014 MCPI Annual Conference 20
In this reality, how do people build? 70% of the world s population access shelter through progressive housing (Ferguson. 2003)
Lesson learned #1: A home improvement product matching the progressive building technique little by little makes scale possible It strengthens the loyalty of the clients. It contributes to improve the quality of life of the clients It creates opportunities to enter new market niches. It leverages the positioning of the MFI.
A response to the self-construction, building in stages process Financing CTA & Other support services Housing Microfinance (HMF) Product 23
How can we help the poor make better improvements? Training in home improvement planning and sequencing Training in aspects of basic construction Printed materials on cost-saving measures Negotiation with suppliers of construction materials List of preferred or certified vendors
Lesson learned #2: Housing Support Services are powerful differentiating element to sell the HMF product. They help establish a plan for continuous home improvement They contribute to increase the level of satisfaction of the family Improve the quality of the improvements
Housing Support Services can be sustainable Technical Information 1. General information on shelter-related issues, typically not customised for specific clients Professional Services Construction Technical Assistance 2. Advice, services and/or training not involving site visits. Includes design, budgeting, entitlement/permit processing, etc. 3. CTA level A basic work Minor repairs, maintenance & improvements often performed by the homeowner 4. CTA level B Non-structural work Major Non-structural renovations & repairs, complex home improvements, extensive maintenance Work requiring skilled tradesman Charge Variable price according to complexity of project Loan amount 5. CTA Level C structural work Major structural renovations, extensions and repairs, Work requiring professional technical services -26-
Pilot testing an embedded CTA When explained what CTA services might be made available, Market Research respondents revealed that 65% of those who want to build new house and 68% who plan on home improvements want CTA services. Loan Officer CTA marketing and leaflet Information sharing on minor improvements Branch Manager HKL Loan Officer Civil Engineer Construction Manager HFHC Civil Engineer supports CTA marketing / promotion Credit & technical advice and assessment Submitting the completed technical sheet to the loan committee Monitoring loan utilization -27-
Lesson Learned #3: Think about sustainability from the start The product can be sustainable, as long as: The financial projections are realistic. It is not overwritten by the inefficiency in other product lines of the institution in general. It reaches a significant volume in a reasonable time period. It meets needs of the clients. It is affordable to the clients. The costs are recovered.
Staff training aligned with the product goals A six month five-branch pilot commenced in May 2014 targeting 500 clients. Building capacity of over 70 MFI staff to deliver HMF product Help them launch their first HMF product with HSS Partner Profile Gross Loan Portfolio: $179 million Number of clients: 83,416 Number of Branches 136 Top 4 MFIs in Cambodia HKL Construction Loan Product made up 11% of portfolio with 7,599 clients and a portfolio of $12.69 million HKL Plans to deploy US$8.8 million for HMF in the next 5 years
Lesson learned #4: Sales force is the tipe of the arrow to reach scale with the HMF product with HSS Necessary for success is: Training Goals for outcomes Incentive systems Promotion strategy Identification and commitment with the product
Lesson learned #5: A pilot is your laboratory There is controlled risk management It contributes to identify adjustments and fine tune the product designed It contributes to identify strengths and weaknesses in the delivery process The conditions for a massive launching are created.
Lesson learned #6: Scale is possible and imperative 7/30/2014 2014 MCPI Annual Conference 32
Thank you very much! Jennifer Oomen joomen@habitat.org Toolkits, case studies, white papers www.habitat.org/cisf