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Download African Union for Housing Finance Conference: Housing Finance Workshop DID Microfinance Housing Experience in Africa

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With more than 46 cities in Africa swelling to populations of a million people or more — and 17 of the world's 100 fastest-growing cities located in Africa — there is an acute need to develop housing solutions for so many urban residents. But raising the capital to meet that growing demand for housing remains a significant challenge. In 2013, the African Union for Housing Finance (AUHF) will host a conference under the theme "Raising Capital for Housing Finance.” The Africa-China Urban Initiative will organize a conference panel discussion on "Understanding (and harnessing) Chinese investment interest." Chinese investment in residential development in Africa is increasingly having an impact and demonstrating a track record of opportunity and experience. Panelists invited include Chinese investors setting out their experiences and expectations for the market and an African corporation that has received Chinese financing. http://urban-africa-china.angonet.org/content/29th-annual-conference-mobilising-capital-housing-finance

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  • 1.HOUSING FINANCE Housing Finance Workshop DID Microfinance housing experiences in Africa September 11th, 2013

2. Examples of DID Housing Mandates o Burkina Faso Housing Finance Market Study (on behalf of IFC) o Support to the Bank of Africa (BOA) (financed by FMO and BOA) o Project to Support Housing Finance for mortgage guarantee funds (FGHM Mali) (financed by CIDA and World Bank)o Russia Primary Mortgage Market Development Project (IFC) o AFHAB Pilot project: Burkina Faso, Senegal, India, Zambia, Panama o Training and support Banks in Algeria + advice re. policy making and broad parameters of national development plan for housing finance (CIDA) o Design credit rating system for housing (CIDA and FMO) o Study on mortgage guaranty offer in UEMOA countries (BOAD) 3. Principles and lessons acquired from those experiences Housing finance o Enable family wealth to be built up, improving living conditions, security, self-confidence and inclusion o Enable institution to make significant social contribution o Is a very advantageous product for a financial institution as they represent a low to moderate risk 4. Banks & MFIs, same approach? Both share the same benefits: o Expansion of its role, scope and accomplishment of its mission; o Earning the loyalty of its customers; responding to one of peoples priority needs; o Strong potential for attracting new costumers; o Diversification of the credit risk; o Possibility of cross-selling other products; o Long term loans that generate higher interest (lower loans rotation). 5. Advantages from MFIs MFIs have already changed the paradigm of personal finance through innovation by offering poorer communities or non-salaried people accessible and viable services 6. Clear distinction in microfinance Traditional mortgage Micro-mortgage 7. For most of the population o The cost of complete housing solution is prohibitive; o Income is limited and uncertain over a long period; o Prefer to take out smaller loans for shorter periods; o Fear putting at risk a home that they have sometimes spent years to build and in which they have invested all of their savings. 8. House improvement loan Approach based on a reality observed almost everywhere : low-income families build and improve their dwelling little by little when they have funds available. Progressive self help construction o Self-help construction of a first significant phase of a home; o Completed later as funds flow in, which may be saved funds or a new loan in time and place; o Middle-class employed borrower who already own a piece of land. Addition and improvement of existing home o Addition of a room or improvement of an existing house (example: addition of a bathroom facility) o Existing debt-free house already owned by the client to be rented out or to house a business or a workshop. o Built partially by the owner and hired employee. 9. House improvement loan West Africa (UMOA)East Africa (Zambia, Tanzania)Credit amountMax 12 000$1 000$ 60 000 $ Average disbursement 6600$Annual interest rates (declining balance)10% to 18%Zambia 42 % Tanzania 36%Term loanMaximum 60 monthsMaximum 60 monthsLoan to value ratio30% to 60%CollateralMortgage promises Mostly mortgages Saving 20% of the amount of loan Third party 10. Funding MAIN ISSUE TO OPTIMIZE THE OUTREACH OF MICRO HOUSING Deposit and saving account : freezing the house saving product Local funds (from local banks and subsidiaries) Currency risk mitigation : hedging funds, local bank loan with liquidity as collateral Funds costs Interest rate :13% to 14% (west Africa) 14% to 20% (East Africa) Maximum : 5 years 11. Networks profile Global portfolio Nb loanscredit $Housing portfolio Par 30 %Nb loanscredit $Par 30 %Nyesigiso - Mali208 87527 49113,57662 82011,4Pamecas Sngal590 40689 72710,77602 0253,5FUCEC - Togo291 910122 4019,96353 2191,72 10613 8493,84624 2911,74784 6113,8546711,9EFC Zambia Owned and operated by DIDEFC Tanzania Owned and operated by DID 12. Lessons learned Housing loans processed in a different way from other products they are more complex to analyze, evaluate and disburse: a higher amount, a longer term, heavily influenced by the nation's economic context (real estate bubble, abrupt fall in value, etc.)..We need to accompany the demand There is not a spontaneous demand despite the needs and poor supply for housing loan Approach : Market Maker For instance (Zambia)Devoting specialized staff to housing finance and managing them in a centralized fashion is recommended 13. Learned lessons The average loan is 4 to 5 times higher than all types average loan Longer loan term of 3 to 5 years Higher loans and less loans rotation = improved productivity 14. Housing finance Project Implementation Partners 15. Thank You Questions ?

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