Expanding Microfinance for Housing
This article describes the status of microfinance for housing (MFH). It looks at the institutions involved, typical loan products, constraints on MFH expansion and the role it can play in relieving poor peoples shelter problems.
MFH aims to meet the housing needs of the poor and very poor, especially those without access to the banking sector, including to formal mortgage loans. A variety of institutions offer MFH, including MFIs, NGOs and NBFIs. MFH loans are used for home improvement, incremental building, new construction, at home production and storage and home purchase. They help MFIs to strengthen business by expanding their customer base and fostering customer loyalty through multi product financial services.
The article states that there are three types of barriers to MFH. They include institutional barriers, inability of the formal financial sector to address liquidity constraints and failures of urban housing policy. It suggests that policy makers and donors should continue to increase private sector involvement in housing, to get over these constraints. The article recommends:
- Expanding the number of MFH institutions;
- Improving formal sector mortgage markets;
- Improving microfinance regulation,
- Developing comprehensive shelter policies.
