Lessons Learned Scaling Up Housing Microfinance Richard Shumann Technical Officer, Housing Finance CHF International SEEP Annual Meeting 2006

Housing Microfinance and CHF % 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

CHF Loan Portfolio

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 MARKETS Research Respond COSTS Expenses Income STAFF Profile 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