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Lessons Learned Scaling Up Housing Microfinance

Lessons Learned Scaling Up Housing Microfinance. Richard Shumann Technical Officer, Housing Finance CHF International SEEP Annual Meeting 2006. Housing Microfinance and CHF -2000. 64% of CHF’s microfinance portfolio Loans as means to the goal of better housing

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Lessons Learned Scaling Up Housing Microfinance

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  1. Lessons LearnedScaling Up Housing Microfinance Richard Shumann Technical Officer, Housing Finance CHF International SEEP Annual Meeting 2006

  2. 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

  3. Housing Microfinance and CHF - 2006 • 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

  4. CHF Loan Portfolio 2000 - 2006

  5. 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

  6. 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

  7. Challenges to Scale MARKETS Research Respond COSTS Expenses Income STAFF Profile Training

  8. 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

  9. 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

  10. 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

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