Operational Guidelines for Sustainable Housing Microfinance

This article offers practical guidance to MFIs that want to adopt housing finance programs in addition to their existing line of services. It provides inputs on market analysis, customer analysis, product design and pricing, operational procedures, risk management and technical backup. MFIs branching out into housing finance enjoy the advantages of portfolio diversification, mortgage liens, real collateral guarantees, and a new clientele. MFIs that want to provide housing products should carefully assess their management and technical capacity to do so. Further, they need to ascertain if housing microfinance suits their strategy from institutional and financial perspectives. The article recommends that MFIs:

• Initiate rural housing demand studies to generate information for designing housing loan products;
• Conduct affordability analysis to estimate income thresholds of customers;
• Employ field officers to critically assess borrowing and repayment capacity;
• Provide technical assistance to reduce construction costs for the customer and reduce risks on repayment.