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> Posted by Patrick McAllister, Asia-Pacific Housing Finance Director, Habitat for Humanity
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
Housing remains one of the most pressing issues in Asia. United Nations estimates show that more than 500 million people, or one in eight, still live in slums on the continent. That figure will surge as the Asian population increases from the current 4 billion to 5 billion by 2050, according to Asian Development Bank projections. Low-income people can improve their living conditions, but with much difficulty if they are excluded from the markets that provide goods and services to their wealthier compatriots, including affordable financial services that can be used for home repair and improvement.
Despite recognition in recent years that low-income people need a variety of financial services to manage their surprisingly complicated financial lives, progress in offering new products has been slow. The lack of financing to repair or improve homes is a case in point. Evidence of the need is clear, both from the statistics on the shortage of decent houses, and from the actions of low-income families themselves: studies have shown that 20 to 30 percent of microfinance loans intended for income-generating activities are actually diverted towards home improvements.
Perhaps things are about to change. Recent research by Habitat for Humanity’s Center for Innovation in Shelter and Finance (CISF) shows that in 10 MFIs around the world, offering housing microfinance loans is good business: risk is more diversified, administration costs are lower, and client retention and repayment rates are higher. Reasons for these trends certainly include the higher loan size and longer terms of housing loans. It could also be that MFIs are watching these new products closely, or are still in a “honeymoon period.” But speaking to customers and MFI staff, one gets the sense that perhaps the most important reason is the increased motivation by clients to repay loans that are tied to a family’s most valuable asset – their home.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
In this decade, Africa is undergoing urbanization at a faster rate than Latin America, Asia, or anywhere else in the world. In these burgeoning areas, the majority of people are building their own housing, and doing so in an incremental fashion – adding what they can, when they can, and developing their facilities as their means allow.
There are a few big challenges to this. In Africa’s urban centers, there is a limited supply of affordable housing, and financial services to aid housing development are also scarce. Global Findex Data indicate that access to and usage of credit in sub-Saharan Africa is among the lowest in the world. Specifically looking at mortgages, a recent study from FinMark Trust revealed that across the populations of Zambia, Malawi, Botswana, and Tanzania, less than 1.5 percent of individuals utilize mortgages.
Enter microfinance. Typical mortgages don’t fit well with the financial profile of most Africans. Compared to microloans, they’re generally for longer terms, larger amounts, and they are less flexible. Most mortgages require clients to provide documentation of regular incomes. Many Africans operate in the informal sector and lack regular income streams. In Tanzania, for example, only 28 percent of the population is able to satisfy this income requirement.
> Posted by Patrick Kelley, Director of Housing Finance and Market Development, Habitat for Humanity International
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion.
June 2012 has been on my calendar for a while. Three years ago this month, I was lured into my first home purchase with the federal homebuyer tax credit, and all my requirements as a purchaser will now soon be over.
Before committing to buying a home, I poured hours into research, comparison shopping, and badgering friends and family for advice. I was aware that prudent research and good decisions could be a springboard for the financial future of my family. A misstep could be treacherous and weigh on us for years.
Indeed, buying a home is usually the largest financial decision in our lives in the U.S. And, we are increasingly finding that housing and property play a similar role in the financial lives of the poor. Consider the following evidence: Read the rest of this entry »