Organized by

HOUSING FINANCE FROM

A MICROFINANCE PERSPECTIVE
HOUSING FINANCE: OPENING
FRONTIERS THROUGH
MICROFINANCE

September 12, 2017

 Micro Housing-an effective vehicle for financial inclusion
• Housing has a direct impact on employment & income-engine
of equitable economic growth

• Indirect impact through improved living conditions and

educational, cultural and social standards

• Social economic benefits through improved productivity

Repayment
potential
savings
Income

• Sustainable human settlement is an effective tool to meet the

end goals of financial inclusion, imbibing financial stability and
social inclusion Value
Creation

• IFC’s approach:

Aspiration Better & safer housing in emerging markets Leverage Impact

Creating a COMBINED PLATFORM to offer synergetic

Approach solutions through INVESTMENT AND ADVISORY
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Housing Finance structure within IFC: An integrated approach

Coordination
IFC Housing
with the
Finance Offering
World Bank

Investment Advisory

 Access to Finance
 Sustainable Energy Finance
 Investment Climate
Financial Real Estate
Institutions Department

 Mortgage Finance  Property Development

 Capital Markets  Construction Finance
 Home Improvement  EDGE Tool
 Housing Microfinance  ASHA Tool
IFC Approach towards Housing Finance Advisory Services:

Scope and Proposal to Execution and Controlling

Direction proceed delivery results

• Diagnose • Work plan • Implementation • Review

operations,
• Timeline • Restructuring • Refine
procedures,
processes • Staffing • Testing and • Reap results
piloting
• Review
strategy,
business plan
 The Opportunity for Housing Finance in the Micro Space-Trends

Increasing urbanization
Opportunity to diversify risk,
cross sell, forge longer and
Growing populations deeper relationships

Graduating clients

Scalable & sustainable Rising housing

consumption
Loans are harder to be fungible
Loans can be longer and larger
Secured and unsecured loans

• More pollution and congestion in cities

• More green house gas emissions
• More disasters
• Rise in informal settlements
 Challenges to Micro Housing Finance and IFC solutions

Low Income housing issues:

• MFIs access to funding
• May not have capacity for one time large project-generally go for ‘Progressive build’
• Regulatory Issues: Regulations restrictive in terms of loan size cap along with income level
constraints as well. Other restrictions may control the portfolio mix etc. (Can help policy
making as well through IBRD)
• Banks ability to assess credit risk associated with low income group
• Lack of documentation, clear property titles etc. available guarantees etc.

Some approaches to address these:

• Liquidity facility approach-synergies with IBRD-for example in Pakistan, the PMRC is being
financed through IBRD and advised through IFC
• Product design could address progressive build-or home improvement loans as a starter,
rather than a full home finance
• IFC can play an advocacy role as well as leverage the IBRD link-eg. Inform them about
land titling and other policy needs
• Capacity building approach
• Home Technical assistance can deepen the institutions offering
 Synergies: WBG departments co-ordinate across housing
finance value chain to support market development

City Planning & Infrastructure End-user

Building Regulations & Services Subsidies Finance

Access Construction & Developer

to Land Building Materials Finance
Sectors

SURR F&M
Micro finance,
City planning, mortgages,
SURR regulations, land, developer finance,
infrastructure, capital markets,
subsidies, F&M subsidies
slum upgrading
IFC

Other GPs
IFC
FIG & MAS
Materials,
developers, micro
finance, mortgages,
capital markets
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What can an IFC partnership do?

• Specialized product offerings in housing finance (investments and advisory

services)
• Specialized group consisting of housing finance and banking experts with
significant deal and implementation expertise obtained in developed countries
and emerging markets
• Large network of contacts across the globe which can be mobilized to
leverage and enhance expertise and knowledge of our housing finance experts
• Since 30 years, IFC has pioneered new product innovations in emerging
market with tangible results
 Recent experience in low cost home finance

• Capacity building/training programs

 Harvard University
 African Union for Housing Finance
 KfW

• Working with microfinance institutions

 Holcim/Lafarge
 Pipeline in Nigeria, Kenya, Rwanda, Bangladesh, India and others

• Supporting development of funding instruments

 National and regional liquidity facilities
 Investments in lenders
 Case studies-Pakistan
Engaged with the largest Microfinance Bank, Khushhali Bank

The Market: Central Bank estimates backlog of 10m units, there is a need to build 1.1m units
per year. Most of the housing finance is arranged through personal sources while the formal
financial sector caters to only one to two percent of all housing transactions in the country,
whereas informal lending caters to 10-12 percent of such transactions.

“Unsecured Lending Through Secured Approaches”

IFC designed a product that addresses the endemic issues across all MFBs/MFIs in the
housing finance context.

 Home ownership proof through acceptable list of documents-not security but equitable
mortgage

 Introduction of technical advice

 Addressing both urban and rural needs of both self employed and salaried class
Road Map
Market •Product Technical Loan MIS
Skills designing Training Pilot
study Prototype Process
Egypt: Dakahleya Businessmen Association for Community Development
(DBACD)

IFC has recently been engaged with DBACD (implemented over the period Housing Loans Disbursed as % of Total Disbursed
of 2013-2014) in Egypt on a comprehensive housing product development
8.00%
module, which comprised of the following key activities:
7.00% 6.78%
• Market Assessment 6.00%
• Product Design
5.00%
• Pilot Test
• Pilot Review and Roll-Out 4.00% 3.79%
3.00% 3.02%
The TA assistance was very well received and had a significant effect on
2.00% 2.05%
the institution, allowing them to scale up housing finance (today it makes 1.59%
1.29% 1.19%
up nearly 9% of their overall outstanding loan portfolio). 1.00% 0.86% 0.99%
0.32% 0.31% 0.54%
0.00%
As of the end of 2015, DBACD had an outstanding housing portfolio of EGP 2010 2011 2012 2013 2014 2015
28M (approx. USD 3.6 M) and approximately 4,000 active clients. The total
% of HL Disbursed from Total Portfolio
number of housing loans disbursed has reached 7,600 with a
corresponding value of EGP 70 M (approx. USD 9 M). % of Value of HL Disbursed from Total Portfolio

Outstanding Housing Portfolio Housing Loans Outstanding as % of Total Outstanding

5,000 35,000,000 Portfolio
10.00%
Value of Loans Outstanding (EGP)
4,500
Number of Loans Outstanding

30,000,000 9.00% 8.96%

4,000
8.00%
3,500 25,000,000
7.00%
3,000 20,000,000 6.00% 5.81%
2,500 5.00%
15,000,000 4.50%
2,000 4.00%
1,500 3.00% 3.27%
10,000,000 2.91%
1,000 2.00% 1.99% 2.13% 2.13%
1.71%
5,000,000 1.00% 1.18%
500 0.72% 0.78%
0.00%
0 0
2010 2011 2012 2013 2014 2015
Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16
Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15
Dec-09

Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15
Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

% of HL Outstanding from Total Portfolio

Number Value % of Value of HL Outstanding from Total Portfolio
Afghanistan: First Microfinance Bank Afghanistan

Market: strategic importance to IFC due to FCS and IDA status

Cash based economy, weak legal & financial regulatory structure, HR capacity limited, high
operation costs, lack of property valuators, enforcement of building codes

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Afghanistan: evolution of housing finance at FMFB

Increased access to housing microfinance with construction advisory

services
to improve the quality of housing for Afghanistan’s urban & rural poor

Demand and Product evaluation Contract with Aga

Capacity and toolkit Khan Planning & Construction
Assessment development with Building Services Advisory Manual
IFC finalized
Q1 2008 Aug 2010 2010/11 Q4 2011 - 13
2007 2008/10 2010/11 Q1 2011

Pilot in Hirat & Agreement signed with Training and Development and
Kabul USAID and AKF – USA construction of roll-out of rural
for scale up and demo houses in product with
bundling of Kabul, seasonal
Construction Advisory Samanghan & repayment
Kishm schedule

Innovations
Earthquake resilient, sanitation, ventilation, and energy efficiency

Advisory services to Construction Seasonal repayment

Demo houses to
select building manual (AKPBS) to to match rural cash
illustrate techniques
materials apply techniques flows
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 Critical Success factors

• Healthy and functioning enabling environment

 Titles
 Bankruptcy/foreclosure procedures
 Investor protection
 Sustainable financial sector

• Transparency and access to information

 Supportive monetary policy

• Lending standards
 Consumer protection
 Primary market first
Mapping the way forward for Micro Housing-parting thoughts

 Specialized Microfinance
Institutions
 Partnership approach
 Regulatory support
 Customized, segmented
offerings
 Suitable credit
infrastructure
 Building/technical
partnerships and
increased supply of low
cost buildings
Micro Housing Finance solutions: IFC toolkit

Structure of HMF Toolkit:

• Market assessment plan
• Strategy formulation and business plan preparation
• Product (including shariah-compliant HMF products)
• Sales and outreach
• Processing and servicing of HMF loans
• Construction technical assistance program
• Risk management and funding
• Training programs for staff and managers
 Challenges to Micro Housing Finance and IFC solutions

Low Income housing issues:

• Capacity to assess informal incomes
• MFIs access to funding
• Lack of potential market knowledge/segmentation: whom to target
• Regulatory Issues: Regulations restrictive in terms of loan size cap along with income level
constraints as well. Other restrictions may control the portfolio mix etc. (Can help policy making as
well through IBRD)
• Banks ability to assess credit risk associated with low income group
• Lack of documentation, clear property titles etc. available guarantees etc.
• Management of costs while scaling

Some approaches to address these:

• Liquidity facility approach-synergies with IBRD-for example in Pakistan, the PMRC is being
financed through IBRD and advised through IFC
• Product design could address progressive build-or home improvement loans as a starter, rather
than a full home finance
• IFC can play an advocacy role as well as leverage the IBRD link-eg. Inform them about land
titling and other policy needs
• Capacity building approach
• Home Technical assistance can deepen the institutions offering
 Micro-Finance for
Affordable Housing
Cambodia

Sothany Chun, First Finance CEO

05 September 2017

20 VERSION: 1.1 © 2016

 About First Finance
• Founded in 2009 with
vision to make home
ownership possible for
everyone.
• Portfolio of over USD 19m
• Currently offering four
products with housing
finance as core business:
 Home loan
 Home Improvement
loan
 Residential Land
Purchase Loan
 Home Equity Loan

As Cambodia’s only licensed, specialist mortgage provider, First Finance provides under-served
Cambodians access to Long-term housing finance to grow their security
and wealth.
21
 43%

2%

55%

As Cambodia’s only licensed, specialist mortgage provider, First Finance provides under-served
Cambodians access to Long-term housing finance to grow their security
and wealth.
22
As the only housing finance provider, First
Finance faces number of challenges.

As Cambodia’s only licensed, specialist mortgage provider, First Finance provides under-served
Cambodians access to Long-term housing finance to grow their security
and wealth.
23
Over these many years, First Finance learnt some
lessons

As Cambodia’s only licensed, specialist mortgage provider, First Finance provides under-served
Cambodians access to Long-term housing finance to grow their security
and wealth.
24
First Finance Plc

Website: www.firstfinance.biz
Facebook: firstfinance
LinkedIn: firstfinance microfinance plc
Phone: 023 997 937

As Cambodia’s only licensed, specialist mortgage provider, First Finance provides under-served
Cambodians access to Long-term housing finance to grow their security
and wealth.
25
Thank You