Housing Microfinance: A Guide to Practice
This presentation provides an overview of approaches, products, and issues in housing microfinance. It suggests areas for further research, dissemination, and product development.
Housing microfinance is an important part of financial operations for many MFIs around the world. The presentation defines the scope and clientele of housing microfinance, and compares it with typical microenterprise lending. It describes the purpose and characteristics of two types of products, namely, linked housing microfinance and stand-alone housing microfinance. While MFIs offer linked housing loans as a part of a graduation process for established clients, they view stand alone products as tools for diversification and client retention.
The presentation states that housing microfinance products may require non-financial assistance in addition to credit analysis. Key challenges for the sector include:
- Opportunity cost, as MFIs have to ensure the best use of providers' funds;
- Issue of liquidity crunch due to long-term loans;
- Provision of non-financial services to clients;
- Managing institutional adjustments;
- Legal issues such as land construction permits and asset repossession;
- Impact of new product on organizations' existing products.
