Housing Microfinance (HMF):For the Filipino Micro-entrepreneurs

Meliza H. Agabin(With thanks to colleagues Anthony Petalcorin and Mark Guillermo)

2009 RBAP-MABS National Round table ConferenceMay 12-13, 2009

Hyatt Hotel and CasinoManila

What is HMF?“The application of microfinance principles and methodologies to the provision of shelter finance.”*- small loan amounts

- short-terms loans- alternative forms of collateral

- regular amortization

*/CGAP

What is HMF?Loans and other financial services to low-income households:•Improve or repair existing homes, •Construct a new home in stages•Purchase a new home, •Buy land•Install or improve utilities and other basic services.

Excluded: the financing of consumer items such as refrigerators, ranges, furniture, TV sets, etc.

Microenterprise vs. Housing Microfinance Loan

RBAP-MABS Program has submitted the Micro Housing Loan Product Procedures to the BSP for final approval. Loan sizes are consistent with HUDCC approval.

Market Research Findings:

ClientsSurveyed 485Owns a House (72%) 349

30% No Legal Title 10517% Living for Free/Renting 5911% Renting 3837% Own a land 129

Survey conducted by MABS & MICRA in August 2008 shows:

- Excellent potential - Majority owns a home- Majority of businesses are home based

Market Findings:

• More demand for home improvements.

• Home repairs e.g. roof, walls, kitchen and extensions, are funded mainly from personal cash savings (72%) including savings in building materials.

• Some have already used some of their previous bank micro loans for home improvement.

Rural banks should develop a range of housing microfinance products intended to respond to the need of low-income entrepreneurial families to improve the quality of their homes or build new ones.

Who needs HMF?

Benefits:

Results of the Pilot Test:Pilot tested in August 2008 in Green Bank, Cantilan Bank & GM Bank with 2 branches each initially participating.

Comparative Performance:

CLIENT STORIES FROM PILOT BANKS

A vegetable vendor & microenterprise bank client of Cantilan Bank for over seven years.

Cantilan Bank Client Mr. Hingpit received a loan to complete construction of new home

Green Bank Client Sonia Melo, has received 3 loans for various home improvements

Green Bank Client, Herminia Ferrer, with existing micro agri loan, borrowed P20k home improvement loan with 6 mos. term.

Ceiling

Window Grills

Overhead cabinet

Carpenter husband does repair works.

Green Bank Client Herminia ferrer The couple plans to improve their store – including cementing the flooring

Proposed Improvement

Next project is productive housing- improve store space

GM Bank Client Angelina Valerio

• Poultry supply & grocery business• Applied for P60K, 6 months

Present and Future Plans for Roll Out

Plans Targets

Seek BSP approval to increase loan size and loan term for lot and house acquisition loans

2nd Quarter 2009

Rollout to additional banks 3rd Quarter 2009

The potential of housing microfinance depends on the (rural bank’s) ability to move beyond the confines of its original product characteristics and more deeply understand and respond to the needs of its clients. - ACCION

THANK YOU.