Housing Microfinance: An Overview (Presentation)

This presentation discusses housing microfinance (HMF). It defines HMF as a combination of housing finance and microfinance and argues that there is a need to scale up HMF.

The presentation states the following reasons to link housing loans:

• Income generating loans can be precedents to asset building housing loans;
• Since housing loans are provided only to existing clients, there is knowledge of the client's repayment history and therefore a guarantee of repayment;
• MFIs can also provide non- financial, technical assistance in the building of houses.

The presentation argues that though HMF has arrived as an important product for MFIs, yet it covers only a miniscule fraction of demand. The challenge is to scale up HMF, and with it, low/ moderate-income home lending to a size relevant to national shelter and settlement problems.

The presentation suggests three approaches to scaling up:

• Second-tier liquidity facilities;
• HMF funds;
• Business alliances between HMF lenders and building material suppliers.

Finally, the presentation lists the following implications of scaling up HMF:

• Governments become more involved;
• Strategic alliances between HMF lenders and firms that supply building materials and land are a crucial tool for expansion;
• Finance through establishment of HMF funds and capital markets is likely to play an important role;
• For financial institutions, HMF is a core product for low/ moderate-income home finance, and for cross-selling other products, particularly savings.