The 2016-17 State of Housing Microfinance: Understanding the Business Case for Housing Microfinance

Based upon a survey of 101 housing microfinance practitioners, this publication includes insights and findings regarding practitioners’ perceptions of the challenges and opportunities facing housing microfinance, successful implementation strategies, and the performance of housing microfinance portfolios. Using a simple framework to analyze these responses at the regional and global levels, this paper explores the market-level, institutional-level, product-segmentation-level, and profitability drivers that make differentiated housing microfinance products a viable and attractive option for financial service providers. Findings include:

• At the market level, competitiveness has contributed to the expansion of housing microfinance products;
• At the institutional level, housing microfinance aligns with the social mission of many microfinance providers while enabling the expansion and deepening of market reach;
• At a product level, housing microfinance currently represents an array of product offerings that are being adapted for differing housing-related purposes and client affordability levels, even extending to customer segments beyond the micro-entrepreneurial focus of traditional microfinance products;
• Regarding profitability drivers, considerations include the cost increase of shifting to an individual lending methodology and of offering nonfinancial housing support services to clients, along with concerns regarding the inconsistent income of potential clients.

With these considerations in mind, the survey reveals that housing microfinance continues to emerge as a differentiated product that has the potential to provide financial institutions with double bottom line returns and to become a relevant subsector within the microfinance industry.