Housing Micro Finance

45
POWERING INNOVATIONS IN MICROFINANCE conference on microfinance July 24 - 25, 2008 * Asian Development Bank, Manila, Philippines

Transcript of Housing Micro Finance

Page 1: Housing Micro Finance

POWERINGINNOVATIONSIN MICROFINANCE

conference on microfinanceJuly 24 - 25, 2008 * Asian Development Bank, Manila, Philippines

Page 2: Housing Micro Finance

CONCURRENT WORKSHOP SESSIONSCONCURRENT WORKSHOP SESSIONSCONCURRENT WORKSHOP SESSIONSCONCURRENT WORKSHOP SESSIONSCONCURRENT WORKSHOP SESSIONSFriday, July 25, 2008

11:00 a.m. - 12:30 p.m.11:00 a.m. - 12:30 p.m.11:00 a.m. - 12:30 p.m.11:00 a.m. - 12:30 p.m.11:00 a.m. - 12:30 p.m.

Early Experiences in Housing Microfinance

Resource speakers:

Auditorium Zone A & B

Housing microfinance cater to the financing needs and affordability of the poor in a sustainable and non-subsidized approach. The practiceinvolves the application of microfinance principles and best practices to the provision of housing finance for home improvements, houseconstruction as well as house/ lot acquisition. It is seen as a powerful way to improve the living conditions of the enterprising poor and the low-income households which will contribute to better health, increased productivity and improved quality of life.This session will consist of presentations from Mr. Eduardo C. Jimenez, who was part of the Development of Poor Urban Communities SectorProject (DPUCSP), which is an Asian Development Bank-assisted social housing and community development program jointly executed by theHousing and Urban Development Coordinating Council (HUDCC) and the Development Bank of the Philippines (DBP). The DPUCSP presentedthe Housing Microfinance Product to the Bangko Sentral which was approved last 14 February 2008. There will also be a presentation by Mr.Ignacito Alvizo of Enterprise Bank, one of the early adopters of the Housing Microfinance Product of the DPUCSP. The session will be rich withboth concepts as well as practical applications of the housing microfinance.

Facilitator:Pia Roman, Bangko Sentral ng PilipinasEduardo C. Jimenez, Microfinance Consultant,

Bangko Sentral ng PilipinasIgnacito Alvizo, Director, Enterprise Bank

Documenter:Noemi Bonaobra, Bicol Microfinance Council

For Evaluation Only.Copyright (c) by Foxit Software Company, 2004 - 2007Edited by Foxit PDF Editor

Page 3: Housing Micro Finance

HOUSING MICROFINANCE HOUSING MICROFINANCE and the and the

HOUSING MICROFINANCE HOUSING MICROFINANCE PRODUCT MANUALPRODUCT MANUAL

JULY 2008

Page 4: Housing Micro Finance

Outline of the Presentation

• Definition and importance of housing Definition and importance of housing microfinancemicrofinance

• Housing microfinance and mortgage financeHousing microfinance and mortgage finance• Microenterprise lending and housing Microenterprise lending and housing

microfinancemicrofinance• Policy action plans for pro-poor housing Policy action plans for pro-poor housing

provision provision • Housing Microfinance Product Manual: Housing Microfinance Product Manual:

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures

Page 5: Housing Micro Finance

What is Housing Microfinance?

Housing microfinance Housing microfinance involves the application involves the application of microfinance principles and methodologies to of microfinance principles and methodologies to the provision of shelter finance and consists the provision of shelter finance and consists mainly of loans to the poor and low-income mainly of loans to the poor and low-income households for (i) home improvement/repairs, (ii) households for (i) home improvement/repairs, (ii) housing construction, (iii) house and/or lot housing construction, (iii) house and/or lot acquisition, and/or (iv) access to basic acquisition, and/or (iv) access to basic infrastructure or public services. infrastructure or public services.

Source: Consultative Group to Assist the Poorest (CGAP), World BankSource: Consultative Group to Assist the Poorest (CGAP), World Bank

Page 6: Housing Micro Finance

Mortgage FinanceMortgage FinanceHousing Housing

MicrofinanceMicrofinanceMicroenterprise Microenterprise

financefinance

Housing microfinanceHousing microfinance links mortgage finance and links mortgage finance and microenterprise finance and constitutes microenterprise finance and constitutes a more a more appropriate lending methodology for serving the appropriate lending methodology for serving the housing finance needs of the working or housing finance needs of the working or entrepreneurial poor.entrepreneurial poor.

Page 7: Housing Micro Finance

Importance of Housing MicrofinanceImportance of Housing Microfinance •Considered a non-subsidized, sustainable approach tailored to meet the Considered a non-subsidized, sustainable approach tailored to meet the housing needs of the entrepreneurial and working poorhousing needs of the entrepreneurial and working poor

•Results in asset creation for the poor at the needed scale as demand for Results in asset creation for the poor at the needed scale as demand for social housing continues to growsocial housing continues to grow

•Addresses poor cost recovery efforts in past government housing Addresses poor cost recovery efforts in past government housing programs and corrects market distortions caused by iprograms and corrects market distortions caused by interest rate nterest rate subsidiessubsidies

•Supports mass housing which has been reaffirmed as the centerpiece Supports mass housing which has been reaffirmed as the centerpiece program of government in poverty alleviation program of government in poverty alleviation

•Increases the value of services received by MFI clientsIncreases the value of services received by MFI clients

•Increases transparency of MFI transactions by treating housing loans Increases transparency of MFI transactions by treating housing loans distinctly from microenterprise loansdistinctly from microenterprise loans

Page 8: Housing Micro Finance

MORTGAGE FINANCEMORTGAGE FINANCE HOUSING MICROFINANCEHOUSING MICROFINANCE•Bigger loan sizes •Loan sizes are smaller than mortgage

finance but larger than microenterprise finance

•Requires a mortgage lien; full legal title to property

•Works with paralegal or substitute titles

•Formal employment sector; middle and upper income households

•Low-income and informal sector

•Long repayment periods (typically from 15 - 30 years)

•Repayment periods are shorter (often 2-10 years; may be up to 15 years)

•Housing units are constructed commercially and sold as a complete unit

•Fits the incremental building process and self-help home improvement and expansion needs of the clients

Mortgage Finance and Housing Microfinance

Page 9: Housing Micro Finance

Typical Microenterprise LoansTypical Microenterprise Loans Housing Microfinance LoansHousing Microfinance Loans

•Loan affects borrower’s income •Loan affects borrower’s asset base and may impact income (home based enterprises)

•Offer smaller loan amounts •Relatively larger incremental amounts

•Lending methodology can be individual or group loans

•Usually individual loans

•Repayment capacity often based on generation of future income

•Repayment capacity based on borrower’s current income

Microenterprise Lending vis-à-visMicroenterprise Lending vis-à-visHousing MicrofinanceHousing Microfinance

Page 10: Housing Micro Finance

Forms part of the inter-agency policy action plan Forms part of the inter-agency policy action plan developed in October 2002 (Urban Land Reform developed in October 2002 (Urban Land Reform Conference)Conference) Improving the proclamation, land conversion and registration Improving the proclamation, land conversion and registration

processes for pro-poor housingprocesses for pro-poor housing Distributing secure tenure through rights-based secure tenure Distributing secure tenure through rights-based secure tenure

approachesapproaches Adopting appropriate methodologies to make shelter financing Adopting appropriate methodologies to make shelter financing

more catered to the needs of and more affordable to the poor. more catered to the needs of and more affordable to the poor.

Housing microfinance is one of the key initiativesHousing microfinance is one of the key initiatives Approval of DPUCSP>>> ADB/HUDCC/DBP PartnershipApproval of DPUCSP>>> ADB/HUDCC/DBP Partnership Submission by HUDCC of Policy Paper and Housing Submission by HUDCC of Policy Paper and Housing

Microfinance Product Manual to the BSP Microfinance Product Manual to the BSP

Policy Initiatives to Accelerate Pro-poor Housing

Page 11: Housing Micro Finance

Policy Initiatives to Accelerate Pro-Poor HousingPolicy Initiatives to Accelerate Pro-Poor Housing

BSP/Monetary Board approval on February 14, 2008BSP/Monetary Board approval on February 14, 2008 Signing of MOA between BSP and HUDCC on April 2, Signing of MOA between BSP and HUDCC on April 2,

20082008✓ Define the roles and responsibilities of the BSP and

HUDCC in the implementation of the program ✓ Set the applicable accreditation standards and procedures Set the applicable accreditation standards and procedures

for banks that will be offering housing microfinance for banks that will be offering housing microfinance services to their existing or new low-income clients.services to their existing or new low-income clients.

Page 12: Housing Micro Finance

Housing Microfinance Product: Housing Microfinance Product: Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures

ELIGIBILITY CRITERIAExisting Clients Existing Clients ::• Must be an active borrowing member for at least 2 years Must be an active borrowing member for at least 2 years • Consistent 95% repayment record and at least 90% attendance in center meetings if Consistent 95% repayment record and at least 90% attendance in center meetings if

applicable for the past 2 yearsapplicable for the past 2 years• Should have an operating and earning enterprise Should have an operating and earning enterprise • With other verifiable sources of income With other verifiable sources of income • Capacity to put up the required equityCapacity to put up the required equity• For housing construction and house and/or lot acquisition, with tenure security or proof of For housing construction and house and/or lot acquisition, with tenure security or proof of

legal use, possession or ownership of their residence (for both house and lot, when legal use, possession or ownership of their residence (for both house and lot, when applicable)applicable)

New Clients:New Clients:• Generally, low-income earners with no access to conventional home finance institutions Generally, low-income earners with no access to conventional home finance institutions (e.g. (e.g.

Pag-IBIG, SSS, GSIS)Pag-IBIG, SSS, GSIS)• With verifiable proof of regular income and savings With verifiable proof of regular income and savings • Capacity to put up the required equityCapacity to put up the required equity• Willing to participate in all activities that will be undertaken within the framework, systems and Willing to participate in all activities that will be undertaken within the framework, systems and

principles of microfinance such as training and transformational activitiesprinciples of microfinance such as training and transformational activities• For all housing microfinance loan types, with tenure security; proof of legal use, possession or For all housing microfinance loan types, with tenure security; proof of legal use, possession or

ownership of their residence (for both house and lot, when applicable)ownership of their residence (for both house and lot, when applicable)

Page 13: Housing Micro Finance

In the context of housing microfinanceIn the context of housing microfinance, , a client or a client or borrower has secure tenure when the following borrower has secure tenure when the following conditions exist: conditions exist:

• The client has legal use, possession or ownership of The client has legal use, possession or ownership of the property at the time the loan application is made or the property at the time the loan application is made or will be acquiring those rights because of the loanwill be acquiring those rights because of the loan

• It is determined that the client will not be forced to It is determined that the client will not be forced to vacate the property during the time it takes to repay the vacate the property during the time it takes to repay the loan; andloan; and

• The client’s right is supported by valid proof or legal The client’s right is supported by valid proof or legal documentation.documentation.

Page 14: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and ProceduresLOAN TYPES AND PURPOSES

Home improvement/ Home improvement/ repair loan repair loan

• finance improvements (both finance improvements (both major major and and minorminor) to the ) to the structure of the home, including but not limited to replacing structure of the home, including but not limited to replacing doors, windows and roof, adding rooms, installing utilities, doors, windows and roof, adding rooms, installing utilities, toilet facilities, connection to basic services, painting, toilet facilities, connection to basic services, painting, repairing walls, ceiling or floors, replacing foundations and repairing walls, ceiling or floors, replacing foundations and building second floors above the client’s businessesbuilding second floors above the client’s businesses

New housing New housing constructionconstruction

• finance the construction of a new house on a lot owned finance the construction of a new house on a lot owned by the borrower; by the borrower; • finance the purchase of housing materials in relation to a finance the purchase of housing materials in relation to a planned housing projectplanned housing project

House and/or lot House and/or lot acquisition loanacquisition loan

• finance the purchase of serviced land parcels for finance the purchase of serviced land parcels for individual householdsindividual households• purchase of an existing house purchase of an existing house (includes acquisition of a (includes acquisition of a house or unit such as those in a low-cost or socialized house or unit such as those in a low-cost or socialized housing subdivision)housing subdivision)

Page 15: Housing Micro Finance

Housing Microfinance Product: Housing Microfinance Product: Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures

LOAN SIZEDetermining Factors:• Purpose of the loan:Purpose of the loan: House repair, construction, or house and lot purchaseHouse repair, construction, or house and lot purchase

• Client’s capacity to repay:Client’s capacity to repay: Demonstrated ability to repay based on the Demonstrated ability to repay based on the household income; a benchmark for affordability is that the loan payment household income; a benchmark for affordability is that the loan payment should be less than or not exceed 60% of the client’s income as determined should be less than or not exceed 60% of the client’s income as determined by an analysis of the client’s total household cash flow.by an analysis of the client’s total household cash flow.

• Amount of savings with the MFI:Amount of savings with the MFI: The amount of savings a client has in the The amount of savings a client has in the bank can determine the maximum loanable amount that he/she may be bank can determine the maximum loanable amount that he/she may be entitled to during a particular loan cycle.entitled to during a particular loan cycle.

• Type of tenure security for collateral: Type of tenure security for collateral: The type of tenure security or legal The type of tenure security or legal right enjoyed by the client over the house and/or lot may be used to right enjoyed by the client over the house and/or lot may be used to determine the value of the loandetermine the value of the loan

Page 16: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures TERMS AND CONDITIONS OF LOAN

Home ImprovementsHome Improvements House ConstructionHouse Construction House and/or Lot House and/or Lot PurchasePurchase

MINIMUM AMOUNTMINIMUM AMOUNT

MAXIMUM AMOUNTMAXIMUM AMOUNT P150,000 P150,000 P300,000P300,000 P300,000P300,000

LOAN TERMSLOAN TERMS Up to 5 yearsUp to 5 years Up to 10 yearsUp to 10 years Up to 10 yearsUp to 10 years

INTEREST RATESINTEREST RATESMarket-basedMarket-based

Home improvement loans Home improvement loans may have the same or may have the same or lower interest rates as lower interest rates as

enterprise loansenterprise loans

Market-basedMarket-based Market-basedMarket-based

DELIVERY DELIVERY METHODOLOGYMETHODOLOGY Groups or IndividualsGroups or Individuals

REPAYMENT REPAYMENT TERMSTERMS

Daily, weekly, semi-Daily, weekly, semi-monthly, monthlymonthly, monthly

Daily, weekly, semi-Daily, weekly, semi-monthly, monthlymonthly, monthly

Daily, weekly, semi-Daily, weekly, semi-monthly, monthlymonthly, monthly

Depends on the project cost Depends on the project cost (typically higher than the average enterprise loans)(typically higher than the average enterprise loans)

Provided to individuals rather than groupsProvided to individuals rather than groups

Loans for housing construction and house and/or lot Loans for housing construction and house and/or lot acquisition that have longer terms may have lower acquisition that have longer terms may have lower interest rates than short-term enterprise loansinterest rates than short-term enterprise loans

Page 17: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures TERMS AND CONDITIONS OF LOAN (continued)

Home ImprovementsHome Improvements House ConstructionHouse Construction House and/or Lot House and/or Lot PurchasePurchase

GUARANTEESGUARANTEES

•Co-makerCo-maker•SavingsSavings• Household goods and Household goods and business assetsbusiness assets•Spouse’s signatureSpouse’s signature•Postdated checksPostdated checks•Assignment of insurance Assignment of insurance proceedsproceeds•Land, property rightsLand, property rights•Government guaranteesGovernment guarantees

PENALTIESPENALTIES

OTHERSOTHERS

If the loan funds are not used for the purpose applied for and approved by the If the loan funds are not used for the purpose applied for and approved by the bank, the loan shall be automatically become due and demandablebank, the loan shall be automatically become due and demandable

Same as home improvement lloans; other guarantees Same as home improvement lloans; other guarantees may include the mortgage or assignment of:may include the mortgage or assignment of:

• Land title (OCT/TCT)Land title (OCT/TCT)• Deed of SaleDeed of Sale• Contract to sellContract to sell• Other proof of ownership such as tax declaration, Other proof of ownership such as tax declaration,

order of award, sales / free patentorder of award, sales / free patent• Proof of legal use and possession such as Proof of legal use and possession such as

usufruct, lease contract, certificate of entitlement usufruct, lease contract, certificate of entitlement for lot award and other rights-based instrumentfor lot award and other rights-based instrument

•Clients will be required to open an account with the bankClients will be required to open an account with the bank•Qualified clients will be allowed to have simultaneous loans provided they have the Qualified clients will be allowed to have simultaneous loans provided they have the ability to pay both loansability to pay both loans

Page 18: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures LOAN PROCESSING

Loan Application Loan Application • Borrower prepares and submits loan proposal to the Account Officer Borrower prepares and submits loan proposal to the Account Officer (AO). AO assists the borrower where necessary.(AO). AO assists the borrower where necessary.• Payment of loan application fees, if any.Payment of loan application fees, if any.

Loan AppraisalLoan Appraisal •The bank will base credit decisions on a client’s demonstrated The bank will base credit decisions on a client’s demonstrated capacity and willingness to repay as determined by a detailed analysis capacity and willingness to repay as determined by a detailed analysis of the client’s financial situation.of the client’s financial situation.

Loan Loan DocumentationDocumentation

• Completion of basic loan documents must be done before loan can Completion of basic loan documents must be done before loan can be disbursed.be disbursed.

Loan Loan Recommendation Recommendation and Approvaland Approval

•The Account Officer makes a recommendation. The Account Officer makes a recommendation. • Approval is done at the Branch Level (Credit Committee)Approval is done at the Branch Level (Credit Committee)

Loan disbursementLoan disbursement • Directly to the client, either through the client’s account with the bank Directly to the client, either through the client’s account with the bank or a check unless a different arrangement is agreed upon by the bank or a check unless a different arrangement is agreed upon by the bank and client.and client.• Must be disbursed within 5 working days from time of application Must be disbursed within 5 working days from time of application

Page 19: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures LOAN PROCESSING (continued)

Loan Monitoring Loan Monitoring (current loan)(current loan)

•Conduct of loan utilization checksConduct of loan utilization checks

Loan Collection Loan Collection (Past due loan)(Past due loan)

•Zero tolerance to arrears shall be strictly observedZero tolerance to arrears shall be strictly observed•For home improvement loans, the bank will follow BSP Circular No. For home improvement loans, the bank will follow BSP Circular No. 409 409 •For housing construction and home acquisition loans, the bank will For housing construction and home acquisition loans, the bank will apply Appendix 18 of the Manual of Regulations for Banks.apply Appendix 18 of the Manual of Regulations for Banks.

ReportingReporting •Generation of up-to-date reports on loan portfolio and client status Generation of up-to-date reports on loan portfolio and client status

Page 20: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures INTERNAL CONTROL

• An efficient internal control system is essential for An efficient internal control system is essential for managing financial and operational risks, in particular the managing financial and operational risks, in particular the risk of fraud.risk of fraud.

• Compliance with the bank’s internal control policies as Compliance with the bank’s internal control policies as contained in the internal control and/or audit manual of the contained in the internal control and/or audit manual of the bank. bank.

Page 21: Housing Micro Finance

Summary of Credit Policies and ProceduresSummary of Credit Policies and Procedures MANAGEMENT INFORMATION SYSTEM (MIS)

• An MIS that can handle a new product, use differing An MIS that can handle a new product, use differing repayment schedules such as weekly versus monthly, service repayment schedules such as weekly versus monthly, service clients with more than one loan outstanding at any one time, clients with more than one loan outstanding at any one time, and handle longer loan terms.and handle longer loan terms.

• Covers the entire loan process from client information, Covers the entire loan process from client information, investigations, loan appraisal, loan recommendation and investigations, loan appraisal, loan recommendation and approval, repayment schedule, loan disbursement, approval, repayment schedule, loan disbursement, repayment/savings transactions, and post-loan performance repayment/savings transactions, and post-loan performance analysis. analysis.

Page 22: Housing Micro Finance

•For home improvement loans that are similar to For home improvement loans that are similar to microfinance loans, BSP Circular No. 409 will apply.microfinance loans, BSP Circular No. 409 will apply.

•For HGC guaranteed loans, HGC guidelines will govern.For HGC guaranteed loans, HGC guidelines will govern.

•For all other loans, general loan loss provisioning rules For all other loans, general loan loss provisioning rules will apply (Appendix 18, Manual of Regulations for will apply (Appendix 18, Manual of Regulations for Banks). Banks).

Loan Loss Provisioning Loan Loss Provisioning

Page 23: Housing Micro Finance

Key Reforms and Features Approved by the BSPKey Reforms and Features Approved by the BSP

• Distinguishes housing microfinance loans from Distinguishes housing microfinance loans from microenterprise loans but entitled to the same incentives microenterprise loans but entitled to the same incentives as microfinance loans as microfinance loans

• Authorizes bank MFIs to provide lot acquisition, house Authorizes bank MFIs to provide lot acquisition, house and lot acquisition, and home improvement loans to and lot acquisition, and home improvement loans to clients up to 90% of appraised valuesclients up to 90% of appraised values

• Allows banks to give non-collateralized housing Allows banks to give non-collateralized housing microfinance loans and/or to accept collateral substitutes microfinance loans and/or to accept collateral substitutes

• Alternative compliance to Agri-Agra Law (PD 717)Alternative compliance to Agri-Agra Law (PD 717)• Availability of HGC guarantee (0% risk-weighting of loan Availability of HGC guarantee (0% risk-weighting of loan

assets)assets)

Page 24: Housing Micro Finance

MICRO HOUSING LOAN PROGRAM

Page 25: Housing Micro Finance

Enterprise Bank’s Beginnings

• Founded on May 10, 1976

• Lianga, Surigao del Sur

• Mission:

To provide credit to local businessmen and spur economic development in Lianga

Page 26: Housing Micro Finance

Enterprise Bank’s Beginnings

Founding Name

New Rural Bank of Lianga

Manpower Compliment

11 employees

Page 27: Housing Micro Finance

EBI today

Enterprise Bank, Inc. has expanded to a network of 10 branches and 16 service outlets all over Mindanao, with a total manpower complement of 368 employees as of June, 2008

Head Office

Davao Branch

Page 28: Housing Micro Finance

The core values of hard work, loyalty, sense of belonging and commitment have

sustained EBI for 32 years.

Personalized service to every client’s need will carry the bank through the years

ahead.

Page 29: Housing Micro Finance

Loan Products

Microfinance

Small Business LendingSmall Business Lending

Consumer (Salary) LoansConsumer (Salary) Loans

Page 30: Housing Micro Finance

Portfolio – 617 M as of May, 2008

361,427,

146,665,

109,261,

Php361 M Consumer Loans

Php109 M Small

Business Loans

Php146 MMicrofinance

(18%) (24%)(24%)

(58%)

Page 31: Housing Micro Finance

EBI’s Flagship Product

Kalisod Mo, Tabangan KoA credit program which adopts the basic Grameen Bank model of solidarity lending, paved the way for EBI to become a leading microfinance institution in Mindanao today.

Page 32: Housing Micro Finance

KMTK Microfinance Loan Products

• KMTK Regular - Livelihood

• Microfishing

• Micro agri

• Micro transport

• KMTK Kahayag (solar panels)

• KMTK E-load (Smart, Globe and Sun Cellular)

• KMTK Pabahay (home repair and improvement)

• Health Plus (generic drug distribution)

Page 33: Housing Micro Finance

The KMTK – Pabahay Program (Micro Group Housing)

Objective:

Provide KMTK Clients with access to credit with flexible terms and effectively utilize the proceeds for

house repairs and other improvements that will make their homes more habitable and fit to live in.

EBI believes that a decent home will enhance the clients’ well being and ultimately, their

ability to sustain their livelihood and capacity to pay off their loans.

Page 34: Housing Micro Finance

KMTK Pabahay priority projects:

• Building and repairs of toilets

• Construction or de-clogging of septic tanks

• House repair and improvements or building of additional room

Page 35: Housing Micro Finance

KMTK Pabahay priority projects:

Walling, ceiling, roofing, flooring, replacement of foundations,

drainage, fencing, gate construction, plumbing

Connections to basic services like water and electricity

Page 36: Housing Micro Finance

Product Updates

Product launched on June 30, 2006

1,141 clients as of May, 2008

Currently implemented in Tagum, Davao, Cagayan de Oro, Tandag, Butuan and San Francisco (Agusan del Sur)

Php 4,959,791 portfolio

Page 37: Housing Micro Finance

Features of the KMTK- Pabahay Loan

70% of the loan amount is provided in the form of materials30% in cash

Loan Disbursements

WeeklyRepayment Terms

7%Gross Receipt Tax

5% of the loanService ChargeOther Fees

24% per annumInterest Rates

6-12 months (with options to preterminate or pay in advance

Loan Terms

P6,000 (based on the most frequently issued loan size)

Average

P5,000.00Minimum

P25,000.00MaximumLoanable Amount

Page 38: Housing Micro Finance

Who are eligible to avail

• A bonafide KMTK Class A client for 1 year with continuous availment and savings of not less than P3,000

• No past due account upon application

• Attendance rate is at least 80%

• Resident of a 1st Class Municipality

• 18 to 60 years old

• Borrower owns the property being upgraded

• If rented, must have a valid lease contract during the entire period of the loan

Page 39: Housing Micro Finance

Early Challenges

• MIS of the bankThe system could not separate the micro housing product from the livelihood loan; the information had to be extracted manually.

• Quarterly loan payment scheme was difficult to monitor

Hence, the bank decided to change the loan payment into weekly, along with the payment for the livelihood loan.

Page 40: Housing Micro Finance

Early Challenges

• Capacity of AO to market the loan product

Marketing house repair loans was extra load to AO thus affecting their productivity and efficiency.

To resolve this, the bank created a separate unit that handled the marketing, client evaluation and monitoring of housing loans.

Page 41: Housing Micro Finance

Success Factors• Top to bottom involvement of the EBI management in product development and implementation

• Clear target market and eligibility criteria • Control measures

The Bank imposes a Maximum Credit Limit (MCL) using the formula “amount of savings x 230%”.

This ensures savings as well as fair and transparent administration of the loan

The 70-30 disbursement prevents the loan from being diverted to another use.

Page 42: Housing Micro Finance

Success FactorsBy understanding client needs, demand and preferences, EBI was able to design a demand-driven loan product that complements the KMTK Livelihood Program and meets the clients’ need for access to credit for home improvements.

Page 43: Housing Micro Finance

“microfinance - the core ofour institutional strength -is also our invaluable tool

and meaningful participationin helping eradicate poverty”

IGNACITO U. ALVIZOFounder, EBI

Page 44: Housing Micro Finance

Thank you.

Page 45: Housing Micro Finance

For E

valuation Only.

Copyright (c) by F

oxit Softw

are Com

pany, 2004 - 2007E

dited by Foxit P

DF

Editor