Inclusive Finance for Housing: Exploring Viable Business Models

This paper provides an understanding of the challenges and solutions involved in introducing housing microfinance (HMF) and complementary services at scale. The study is based on analysis of grants issued by USAID to three global networks: Opportunity International, Habitat for Humanity, and the Aga Khan Foundation. The objective of these grants was to develop and deliver HMF products in Afghanistan, Ghana, and India. The paper discusses lessons learned through the implementation process of these grants, reviews the supply and demand constraints affecting HMF, and provides guidance to MFIs, donors, and policymakers seeking to implement HMF programs. The study concludes that:

• Donors should facilitate and support partnerships across MFIs and actors in the housing ecosystem;
• HMF benefits when government housing programs and policies stimulate healthy housing finance markets, rather than crowding out or over-regulating market based solutions;
• Investing in a well-designed, client centric product is critical to achieving scale and meeting client needs;
• Introducing housing loans diversifies lending risk while simultaneously building client retention and loyalty for MFIs;
• MFIs should weigh the costs and benefits of offering construction technical services and other complementary add-ons to the product;
• Affordable urban housing represents the largest financial opportunity for impact investors.