Lending to Small and Growing Businesses (SGBs) Introduction

1. Lending to Small and Growing Businesses (SGBs) Introduction SBI is dedicated to expanding access to capital, information and services for small & growing businesses, entrepreneurs and households, to build an inclusive global financial system Gimme Shelter Microfinance Club of New York April 18th, 2012

2. Housing finance: providing roofs and financial foundations

3. Definition of affordable housing Supply: Limited market rate housing, non-profit and private sector involvement Finance: Micro-mortgages Formal employment and title, can obtain mortgages Supply: Market rate housing, private sector Finance: Mortgage • Supply: Social/self-built housing • Finance: Housing microfinance,home improvement lending Slum redevelopmentand upgrading

4. Key stakeholders in the affordable housing market Ministry of Land, Housing, Urban Development, Municipal government, Central Bank Commercial banks, Specialized housing finance providers, Housing microfinance providers/MFIs Commercial developers, Non-profit developers, Self-built/incremental builders Housing sector actors should understand their role as part of the broader affordable housing market, working together with the range of stakeholders. SBI works primarily with Housing Finance Providers, but interfaces with broader community

5. Lending for affordable housing brings new challenges Many concerns plague banks deepening their affordable housing lending line of business Bank

6. Challenges specific to the affordable housing finance • Difficulty of verifying income/ cash flows, especially for small business owners • Determining alternative sources of information and income verification will help alleviate this difficulty • Limited availability of staff with experience, technical skills • SBI provides classroom and on-the-job training for employees of all levels • Limited data available for development of credit scoring techniques • SBI has helped other banks build the data management techniques to work towards the development of credit scoring models SBI has worked with banks in developing markets in Eastern Europe, South East Asia, and Latin America to develop successful mortgage lending capacity.

7. Mexico: potential market players & channels

8. SBI Housing Practice around the world AFRICA: Feasibility of a Social Housing Programme, (2011): Target Countries: Kenya, Uganda, Tanzania, Nigeria, Zambia, Botswana Feasibility Study SBI developed recommendations for expanding lending for low income housing development and finance MENA: Market Research for Home Improvement/ Housing Loans (2012) Target Countries: Egypt Institutional Assessment: Assessed the capacity of MFI to expand their HMF portfolio Market Assessment: Conducting a survey in the Dakahlya governorate to estimate effective demand of HMF ECA: EBRD Minimum Lending Standards (2011) Target countries: Regional Mortgage Manuel: Review and adaptation of the LMS document, updating it to reflect more ‘responsible mortgage lending’ strategies and local currency lending; Review and revision of the Mortgage Manual to reflect updates to the LMS ASIA: Housing Finance Capacity Building in South and Southeast Asia (2010 – 2013): Target Countries: Sri Lanka, Indonesia Core Mortgage Lending Manual: The team developed a core lending manual for commercial banks Bank Capacity Building –Bank technical assistance will follow investment transactions by the ADB.

9. Mexico Cajas Housing Project Assist 5 Cajas with strong market potential to develop their mortgage lending capacities in accordance with best practices to downscale housing loans to the Bottom of the Pyramid Source: Internal Data Base of each Institution

10. First Microfinance Bank, Afghanistan INVESTOR International Finance Corporation SOLUTIONS SBI assessed a housing microfinance pilot that FMFB-A had previously launched. Based on the results of the pilot, SBI assisted in strengthening the product offerings, marketing strategy, policies and procedures and staff skills. Developed a Shariah-compliant Housing Microfinance Toolkit for Afghanistan. Incorporated energy efficiency components into the housing microfinance product. RESULTS The revamped program was rolled-out to eight additional branches. Today the portfolio is over $10 million and is 25% of total portfolio outstanding. The FMFB-A housing microfinance product serves as a model for the MENA region.

11. HMF Risk Factors -- Mitigants RISK FACTORS • Inadequate analysis of borrower income • Construction cost overruns and poor use of materials • Building seasonality in cold climates • Over-indebtedness; In Afghanistan 21% of arrears had HMF plus business loan • Security of land tenure MITIGANTS • Use financial analysis tools period of time • Construction technical assistance • Market internal repairs during off-season • MFI should impose lending overall limits on borrowers; monitor debts • Tenure screening tools

12. Making the business case for housing finance….

13. Thank you Ms. Lauren Moser Counts Vice President; Head, Housing Finance Practice lmoser@sbksbi.com