RURAL HOUSING LOAN FUND RURAL HOUSING LOAN FUND A National - - PowerPoint PPT Presentation

RURAL HOUSING LOAN FUND RURAL HOUSING LOAN FUND

A National Incremental Housing Finance Institution

Contents

• HMF in SA
• RHLF establishment & Mandate
• RHLF Business Model
• RHLF Development Impact (2011/12)
• Concluding Remarks

DEVELOPMENT OF HOUSING MICROFINANCE IN SA

• HMF as a sub-sector of microfinance has grown in line with the

growth of the microfinance industry in South Africa SA’s democracy



Access to housing microfinance started in earnest in 1996 after Strauss Commission recognized the need to enable access to finance to poor areas of South Africa—rural areas



In 1996, nobody knew at the time if the market even existed



Since 1996 a lot has happened as will be shown in the following slides through the Rural Housing Loan Fund experience

 Result of German-South African bi-lateral agreement  Established by SA govt. in September 1996 as a Section 21 company as a wholesale financial institution (wholly owned by SA government)  Report to NDHS and the National Parliament (via Portfolio Committee

• n Human Settlements)

 Focus on facilitating access to housing finance by low income earners  Funding:

 Initially capitalised with DM50 million (R150 million) grant from German Development Bank, KfW, to the SA government  Raised loan of €12.5 from KfW via DBSA—fully drawn  Government: R49.5m (2010//11 & 2011/12) & R32m(2012/13)

RHLF’s Establishment & Funding

RHLF is a world class rural social venture capital fund that creates new financial arrangements and opportunities for rural families to improve their housing, economic and living environments.

RHLF’s Vision Statement

Core Principles Core Principles

 Wholesale Housing Finance to viable Retail Lenders /

Intermediaries

 Targets working low income households / end-user

borrowers earning ≤ (R9800p.m) currently

 Supports incremental housing construction,

extensions & improvements

 Targets Rural Areas— defined in mandate as non-

metropolitan

Types of Funding Types of Funding Instruments Instruments

 Core Product :

 Structured Loan Facility

 Investment Instruments :

 Pilot Loans  Equity  Subordinated debt

 the political and external market pressures to reach financial

sustainability versus poverty alleviation/development impact as evidenced by the high Total Cost of Credit (TCOC) charged to end-users

 the financial difficulties at some retail partners that hold the

potential to deplete the capital base of the fund

 the issue of a substantial proportion of RHLF-funded loans

leaking into consumption and thus missing the housing finance and personal development mandate

SOME STRATEGIC QUESTIONS THAT RHLF HAS HAD TO DEAL WITH

 Entails Growth Strategy premised on new

strategic business initiatives, grouped as follows:

a) Operational Enhancement:

• Community based loan origination—stokvels,

cooperatives

• Savings linked housing credit
• Financing alternative building technologies

RHLF RESPONSE TO STRATEGIC QUESTIONS: MORE HOUSING, AT A LOWER TOTAL COST OF CREDIT

RHLF RESPONSE TO STRATEGIC QUESTIONS: MORE HOUSING, AT A LOWER TOTAL COST OF CREDIT…cont.

Savings linked housing credit

• Objective is to tap into groups of low-

income borrowers displaying superior financial discipline

• Targeted with lower cost, longer tenor

housing finance product

• Result in achieving housing aspirations

quicker and less expensive than conventional housing finance approach

• Idea is to leverage the social capital of rural

communities in the expectation of higher dev impact and better repayment behaviour

• Accept the small volumes that volunteer-based

community channels can handle

• Possibility of operational efficiency if multiple

community organizations feed their loan

• riginations to a capacitated MFI: disbursements,

loan admin & collections

Community based loan origination

• Low income rural households are facing steep

materials prices, mainly due to transport costs.

• RHLF has identified building material suppliers
• perating in non-metros and has linked them

with RHLF approved lenders.

Linking with building materials suppliers

INFORMAL SETTT UPGRADING

14

15

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RHLF DEVELOPMENT IMPACT 2012/13 FY

Impact performance: Disbursements

Cumulative Number of Loans

Impact performance: Loan Usage

Impact performance: Income Levels

Impact performance: Employment

Impact performance: Gender Split

Impact performance: Provincial Distribution

Impact performance: Provincial Distribution

Impact performance: Presidential Rural Nodes

This concerted effort will be undertaken within 3 (three) years from the 30 November, 2012

CONCLUDING REMARKS

• Each of the strategic initiatives (models &
• perational enhancements) has potential for

higher development impact; but equally there are inherent risks in each that need to be well managed in order to achieve broader goal of enhancing housing development for the low- income households in rural areas

• Strong and working partnerships have to be in

place for any low income housing finance to succeed

• Housing Microfinance is proof that market based

interventions/solutions can and do address the needs of the poor

Thank You

Tsaliko Ntoampe B.A (Econ), Pdm, M(DevF)