Housing Finance

Access to affordable finance is a broadscale barrier to decent housing for many of the world’s poor. Mortgage lending to our homepartner families is a complementary but critical element in enabling us to help those living in poverty access a safe, decent place to live.

Originally, Habitat for Humanity administered its own affordable non-profit loans. But in recent years, in order to scale up our programme worldwide, we have developed alternative approaches to housing finance:

  • Save and Build: About twelve families form a saving group and club together to save enough money to build one small house. When this level is achieved, it triggers the release of an equal amount of funding each from the relevant Habitat for Humanity country office and Habitat for Humanity International, enabling three houses to be built. This process was pioneered in Sri Lanka where repayments are now between 95 – 100%. After two years or so everyone in the group has a house and many will take part in another scheme to add more rooms. Sri Lanka is one example of where we operate Save and Build schemes.
  • Microfinance loans: This is where we work in partnership with an established microfinance institution. They effectively take on the administration and collection of the homepartner’s loan over time, releasing the full finance back to us immediately, enabling us to utilise the finance in the construction or repair of further homes. This speeds up the rate at which we can help further families with their housing needs. Egypt is an example of where we operate microfinance partnerships.
  • Traditional loans: In countries where microfinance organisations do not exist, or Save and Build is not the appropriate solution, we still offer our traditional home loans, which homepartners pay back over a period of time.

Microfinance Partnerships

Microfinance organisations (MFIs) operate on the principle of offering small staged loans to the poorest members of society who cannot access finance from traditional sources such as banks. The loans tend to be small, and used for the establishment of businesses. As loans are paid back, further larger loans may be offered.

Housing products are still very new for microfinance institutions. They are more complex because usually they are larger: Consider the fact that the average microfinance loan to start a business may be under £50, whilst the average cost of a Habitat for Humanity home is £1235.

Habitat for Humanity employs housing microfinance specialists in each of our Regional Offices. We work in partnership with MFIs in one or more of the following ways:

  • Programme design assistance: Assistance provided to an MFI that seeks to establish a housing loan product. Includes market research, product development and development of institutional systems. We also seek investors to help leverage our contributions to MFIs, to enable them to scale up their ability to offer housing finance products.
  • Technical assistance: Assistance that includes construction services and efforts to link families or clients financed by an MFI to government land, infrastructure or subsidy provided by a Habitat national programme.
  • Direct investing: Grants (for pilots of research) or loans (for product rollout) transferred by Habitat to MFIs.
  • Investment brokering: Involvement in negotiations that encourage public and private investment in MFIs to expand housing finance.
  • Credit service outsourcing: Habitat loans that are managed by MFIs to serve Habitat partner families, clients and beneficiaries.

CGAP Working Group on Housing Finance for the Poor

CGAP (the Consultative Group to Assist the Poor) is a consortium of 33 public and private development agencies working together to expand access to financial services for the poor in developing countries.

The CGAP Working Group on Housing Finance for the Poor is a group of donors and practitioners in housing finance who exchange lessons learned, best practices, ideas and innovations and, where possible, collaborate and partner to achieve complementary goals. They share resources and make information and technology available for learning and developing innovation.

Habitat for Humanity is currently serving as the working group coordinator and secretariat.

(Link to a homepartner story – e.g. Egypt, Macedonia)