Women’s World Banking’s Approach to Housing Microfinance

Anna GinchermanDirector, Formalization and New Product Development

Women’s World Banking

Tunis – May 2008

• About WWB

• Why housing microfinance?

• WWB’s approach to housing loan development

• Institutional implications

• Access to housing microfinance by low income women

Agenda

About Women’s World Banking

Our Mission

Our Network

Our Impact

To have a major impact on expanding the economic assets, participation, and power of low income women as entrepreneurs and economic agents by opening their access to finance, knowledge and markets

Building a network of high performing financial institutions committed to empowering poor women: 70% of our members are among the three highest-

rated MFIs in their countries More than 70% of their clients are women Our members grow by an average of 30% each year

• 53 MFIs and banks in 29 countries• Serving over 10 million customers and $1.2

billion in portfolio outstanding among network members (largest network in microfinance)

How we work with our Network Members

Relationship Management

• Strategic advice to senior management• Market & regional insight• Brokering of relationships & services

Technical Assistance • Field-based intensive project work with individual institutions in specific areas i.e. New product development, customer insight, marketing, etc.

Capital Markets • Capital Markets Advisory & Brokering• Financial Risk Management• Loan Guarantee Program, Collateralized Loan

Obligation, Equity Fund (under development)

Network Building and Lateral Learning

• Best Practice & Learning Workshops• Network Member Exchanges• Global & Regional Events• Network ‘Performance Management’ /

Reporting

Communications & Knowledge Sharing

• Publications: how-to guides, innovation briefs, etc.

• Knowledge Sharing (e.g. website)

Microfinance Industry Context:Improving Impact

Birth(C, S, I)

Education(C, S, I)

Marriage Of Children(C, S)

Old Age(I, S)

Death(I, S)

Marriage(C, S)

Starts A Business(C)

Housing(C, S, I)

C = Credit; S = Savings; I = Insurance

Responding to Clients’ Lifecycle Needs for Financial Services

Copyright © 2008 Women’s World Banking

Health (S,I)

Why Housing Microfinance?

Client Perspective

• Low income clients systematically consider housing as a top 3 financial pressure exerted on the household (WWB research in 15 emerging markets).

• Funds invested in housing expand household assets

• Housing is perceived by clients as a source of income for the present – and as security and retirement income for the future

• For women, investing in housing reduces financial vulnerability in the event of abandonment by their husbands (particularly, in contexts where women can have property titles).

• «I had a little wooden house when I got together with him. Then we built a house. I would not call it a residence, but a little house with a cement roof. Then with the small loan I got from Adopem .. they started by lending me 4,000 pesos, I continued building… because my husband was working. Now he can’t work because of high blood pressure. Later I continued building extra rooms upstairs, which I rented. Downstairs I have one with two doors, which I rent out. Now I have also rented the little wooden house next door where we used to live. So I have eight rented rooms which bring in money. »

Client of the ADOPEM Bank, Dominican Republic

MFI Perspective

• More accurately matching client needs with appropriate products (studies indicate that 20-30% of clients use business loans for housing purposes) would bring long-term benefits to MFIs, especially in terms of client loyalty.

• Housing loans can be a tool for diversification (attracting a new segment, i.e. salaried employees) and retention of clientele.

• Introduction of housing products can improve risk management by diversifying MFIs’ product lines.

• It can decrease administrative costs as housing loan terms tend to be longer.

Why Housing Microfinance?

Over 50% of WWB Network Members already offer housing loans, and the rest plan to introduce the product in the near

future.

WWB Approach to Housing Loan Development

Repairs Purchase

Types of Home Improvements/Upgrades

Improvements Expansion

• Emergency repairs – leaking roof, windows • Repaired doors• Repaired sewer system• Painting• Repaired electricity

• Enclosed porch• Improved kitchen, bathroom• Fixed floors • Improved windows

• Built a floor• Built a room• Built a wall – divided rooms•Built a porch

• Bought a house• Built a house•Purchased land

Emergency, on-going

Elective

Renters Owners

Phase 1: Segmenting clients by home ownership status and determining common types of home improvement in the market

Phase 2: Understanding clients’ future needs for home improvement

Repairs PurchaseImprovements Expansion

• Emergency repairs – leaking roof, windows • Repair doors• Repair sewer system• Painting• Repair electricity

• Enclose porch• Improve kitchen, bathroom• Fix floors • Improve windows

• Build a floor• Build a room• Build a wall – divided rooms•Build a porch

• Buy a house• Build a house•Purchase land

Renters OwnersRenters/ Owners

Types of Home Improvement Future Needs

WWB Approach to Housing Loan Development

Phase 3: Designing products according to clients’ needs and financial capacity

Repairs PurchaseImprovements Expansion

• Emergency repairs – leaking roof, windows • Repair doors• Repair sewer system• Painting• Repair electricity

• Enclose porch• Improve kitchen, bathroom• Fix floors • Improve windows

• Build a floor• Build a room• Build a wall – divided rooms•Build a porch

• Buy a house• Build a house•Purchase land

Renters Owners Renters/ Owners

Types of Home Improvement Future Needs

Consumer Loan

Home Improvement

LoanMortgages

WWB Approach to Housing Loan Development

Mission: If an MFI decides to expand its client niche and target low-salaried employees as well, it should be reflected in the mission of the organization.

Pricing and Product Design: An MFI must manage.the risk of existing clients being attracted away from business loans as housing loans are often offered at more attractive terms.

Human Resources: Institutions with individual lending methodology often use same loan officers to extend business and housing loans. However, significant investment in training loan officers on specifics of housing lending is required. Processes and Procedures: MFI’s loan documentation, manuals, credit assessment process, and internal controls need to be adjusted to the requirements of housing lending.

Systems: MIS adjustements are required to enable the institution to track the performance of the housing loan portfolio.

Marketing and Branding: All field staff should be proficient in cross-selling products. The brand of the organization should reflect the expanded product offer, i.e. financing beyond business expansion needs.

Funding:An MFI must secure financing that matches the terms of housing loans (which are often longer term and lower priced than business loans) to avoid liquidity issues.

Institutional Implications: Key issues

Access to Housing Microfinance by Women

Key challenge – a limited access to property title due to:

•Lack of legal literacy: women have limited information about their legal rights and access to mechanisms to enforce them.

•Lack of legal enforcement: many communities settle legal issues outside of state law (i.e. customary law) which puts women at particular disadvantage due to traditional attitudes and prejudices.

Interviewer: “What about your property? You said that you don’t own it your husband does. But both of you built it?”

Client (female): “He didn’t want me to. We talked together. He said that I was implying that there was a difference between us…..When he just said no, I did not argue, even though my brother advised me to be strong.”

Interviewer: “Why?”

Client: “Well, we were good before and I didn’t want to put ideas into his head…The first thing he would say is that you don’t trust me. I asked him why I couldn’t own the bottom floor and him the middle floor and he started pushing me into saying that I doubted him.”

Client of Al Amana, Morocco

Some MFIs have mandated that women be on the property title in order to access a home improvement loan……

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Copyright © 2008 Women’s World Banking

Access to Housing Microfinance by Women

“My husband and I bought a new house with a loan from SEWA Bank. One of the conditions was that the house had to be under my name. I am very happy that my husband cannot through me out of the house even he wants to remarry. I feel secure.”

Client of SEWA Bank, India

Thank you for your attention