Lessons LearnedScaling Up Housing Microfinance

Richard ShumannTechnical Officer, Housing Finance

CHF InternationalSEEP Annual Meeting 2006

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

• 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

Housing Microfinance and CHF - 2006

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006

US

$ M

illi

on

0%

10%

20%

30%

40%

50%

60%

70%

Housing CHF Total % Housing

CHF Loan Portfolio 2000 - 2006

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

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

Challenges to Scale

MARKETSResearchRespond

COSTSExpenses

Income

STAFFProfile Training

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

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

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