Commercializing Housing Support Services Through Housing Microfinance (A case study of Microhousing Africa Limited) Sustainable Housing Microfinance Conference.
Post on 17-Jan-2016
Commercializing Housing Support Services Through Housing Microfinance
(A case study of Microhousing Africa Limited)
Sustainable Housing Microfinance Conference in Sub-Saharan Africa: Turning Loans into Homes, Nairobi Kenya. April 12 15, 2010.
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IntroductionName of Company-Microhousing Africa LtdPurpose-Housing MicrofinanceTarget Market-Low - Middle IncomeBusiness Model-Up to 2-year Loan Interest Rate-36% p.a.
PartnersRoland Igbinoba Real Foundation for Housing and Urban Development
Pison Housing Company
Microhousing Africa Ltd(Institutions Operational Strategy)
1ST Year OperationsTotal Lending Amount-$11.8 millionClient Base-1,900 clientsTarget Market-Police and Civil ServantsAverage Loan Amount-Up to $6,250Payback Period-Up to 2 years (Incremental loan)
MHA Products & ServicesLand AcquisitionLand TitlingHome BuildingHome Improvements
MHA Sector Development Services Grant Funded/Pro-bonoAdvocacy and Lobbying Popularize the concept Consumer Training & EducationDevelop the micro-industryEncourage community and cooperative programs
Building Supply StrategyConsumer Building;This applies to MHAs clients that will be involved in the building process of their house (i.e. they will develop their house).
Wholesale BuildingMost of our clients will need the assistance of a developer to build their house either individually or through their Co-operatives.
Repayment Risks/CollectionsStart granting Loans from the very conservative and less risky clients before moving down to the risky ones
Deductions will be from source and will be paid monthly
We will be dealing with Civil servants and government agency workers entirely in the first year.
SecurityFor all our home building loans we will ensure to take collateral which will be the landed property the loan is acquired for or upon which the incremental building is being developed.
MHA Loan ProcessExample:
Customer seeks loan for the purpose of home building;Total loan needed as home developmental cost for example $26,666;Loan will usually be spread over 4 phases of 2years per phase with an average loan size of $6,250.
MHA Loan Process (Contd)Phase 1 (Example)
This can entail buying and titling the land at a cost of US$4,333;The loan will be paid monthly over a 2-year period at an interest rate of 36% p.a.;Only after phase 1 loan has been paid will the phase 2 loan be disbursed;This minimizes risks against defaulters
This next stage could include foundation and partial framing at a cost of US$6,600;The Loan will be given to an accredited third party developer on behalf of the home owner;MHA will accredit the third party developer as part of its technical assistance programme for the home owner;At the end of the 2nd year the home owner has an option to refinance his/her loan;
ContdThis form of incremental building is more affordable to the customer than a one-off loan;It also helps the institution and the customer reduce losses due to default;Find in the next 2 pages a comparison between an Incremental loan and a One-off loan;This comparison was developed by Select Africa Limited, South Africa
Interest RateTo determine the Interest Rate, complete yellow blocks PV 5,000,000 FV0 Always 0 for a loan Period120 In months Installment 86,899 Monthly Installment1501.42% Rate per Month17.00% Rate per Year18.39% Effective Interest Rate
InstallmentTo determine the Instalment Rate, complete yellow blocks PV 5,000,000 FV0Always 0 for a loan Period120in months Rate17.00%Yearly Simple Interest Rate86,899
TOTAL COST OF LOAN 5,427,859
TERMLOAN VALUEINTERESTTOTALLOAN 1120 months 5,000,000 5,427,859 10,427,859 10 years
Interest RateTo determine the Interest Rate, complete yellow blocks PV 1,000,000 FV0Always 0 for a loan Period24in months Installment 59,047 Monthly Installment1503.00% Rate per Month36.00% Rate per Year42.58% Effective Interest Rate
InstallmentTo determine the Instalment Rate, complete yellow blocks PV 1,000,000 FV0Always 0 for a loan Period24in months Rate36.00%Yearly Simple Interest Rate59,047
TOTAL COST OF LOAN 417,138 TERMLOAN VALUEINTERESTTOTALLOAN 124/24 1,000,000 417,138 1,417,138 LOAN 224/48 1,000,000 417,138 1,417,138 LOAN 324/72 1,000,000 417,138 1,417,138 LOAN 424/96 1,000,000 417,138 1,417,138 LOAN 524/120 1,000,000 417,138 1,417,138 10 years 5,000,000 2,213,508 7,213,508
Microhousing Africa Ltd(Finance and Support Services)
Financial & Technical supportMajority of our clients will need Technical assistance during their home development phases;MHA will be involved in both the technical and finance aspect of Incremental housing;The financial and technical support we will provide to our clients will be phased in 4 major areas;
Financial & Technical support ContdLand acquisition and Title support
Construction and Building Support
Financial and Legal education support
Post construction support
Land Acquisition and Title SupportMHAs clients seeking land purchase will be provided with an accredited lawyer to ensure the clients has proper and verifiable land title;This loan will usually form the first tranch of loan disbursed to the client;The title documents also secures MHA in the event the client defaults
Construction and Building SupportAll loans disbursed for the purpose of construction and building will go to the developer on behalf of MHAs client;All developers building for our clients will need to be accredited by MHA;All accredited developers will need to show capacity to build for a certain number of low income clients incrementally.
Financial and Legal Education SupportIt is MHAs responsibility to ensure that the client understand the Loan product and services rendered;Our legal partners (not part of MHA) will provide legal advice to clients on the financial implication of the debts undertakenAll our clients will need to have passed our prequalification and assessment criteria before any loan can be disbursed.
Post Construction SupportMHA also has home improvement loan products that can be assessed by our clients;Offer advisory for additional loans, etcAll our home loan products will be paid directly to the dealer or its accredited agents and not to the client;MHA will engage in loan monitoringHome improvement loan products have a maximum loan size of $4,000 per client and payable within 2 years.
MHA Support Services SummarySupport services for home finance is rare in Nigeria;
MHA will be the first housing microfinance institution in Nigeria and will also be the first to provide financial and technical support services to its clients.
As part of our risk management criteria we will ensure most of the financing disbursed will go directly to the technical parties involved (Lawyers, Developers, home improvement dealers e.t.c).
Keeping their smile, and profitably too