!"#$%&' )%*+",%&-&*.

Analysis of Cuiient Tienus anu Challenges in the Fielu of

Bousing Niciofinance





Repoit piepaieu by }ohn uibbons anu Negan 0lson
29 Apiil 2u14




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'() *+$,-./0$ 1-22"34

'(' 56/$7. 8$9-$:.; Bitoishi Chakma iequesteu the Notie Bame Bevelopment
Auvisoiy Team (BAT), maue up of Negan 0lson anu }ohn uibbons, ieseaich anu
assess available miciofinance piouucts foi housing. Bis employei, BRAC, is
seeking new, innovative ways to auuiess housing neeus foi the uiban anu iuial
pooi. BRAC wants to look towaius successful piactitioneis foi financially viable
methous of pioviuing low-income clients with loans to impiove, constiuct, oi
buy housing. BRAC is inteiesteu in the types of piouucts oiganizations aie
offeiing, the inteiest iates that aie chaigeu, taiget clientele, significant costs they
aie encounteiing, how they manage extia cost, the success (oi failuie) of offeieu
piouucts, how oiganizations maintain sustainability, anu any innovations oi
goou piactices that coulu be of use to BRAC.
'(< =>? =$6/0$3"@6$; The BAT woikeu with Bitoishi on the vision foi the final
ueliveiable anu came up with a uocument auuiessing the abovementioneu
conceins, cases of paiticulai inteiest to BRAC, anu what they consiuei most
impoitant foi making housing miciofinance piouucts baseu on theii ieseaich.
They have oiganizeu it into a shoit histoiy of the fielu of housing miciofinance,
key conceins in the inuustiy, the majoi takeaways fiom theii ieseaich, anu
synopses of the most impoitant cases. Loan piocesses aie geneially coveieu in
the synopses when infoimation was available.
'(A B"CD3 ?"E$"F"4:; The BAT consiueieu the following points the most
impoitant items foi BRAC to consiuei when cieating its housing miciofinance
piouucts:
'(A(' ?$,G7/,"6 >::/:."7,$; The inclusion of Technical Assistance in the foim
of a Technical Auvisei is pait of an ongoing uebate about its efficacy.
Incluuing this seivice is a means of combating low-quality housing
uesign anu insufficient loan amounts. Baseu on a pilot stuuy conuucteu
by Accion anu Integial as well as eviuence foim othei cases, the BAT
uoes not iecommenu offeiing in-house specifieu constiuction technical
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assistance, but uoes suggest conuucting some foim of technical ieview to
ensuie the askeu foi loan amount is sufficient.
'(A(< HD"7 B/:-:$; 0ne of the piimaiy ieasons foi offeiing housing
miciofinance piouucts is to pievent the misuse of othei loans foi
housing, but this can go both ways. Some oiganizations institute ieviews
conuucteu by loan officeis two months following loan uisbuisal to
ensuie piopei use of the loan anu piogiess in the constiuction.
'(A(A !"3.7$3:G/I:; Theie aie a vaiiety of uiffeient paitneiships engageu in
by cuiient piactitioneis of housing miciofinance foi myiiau ieasons. The
two most consistent aie between NFIs offeiing housing loans paitneiing
with low-income housing uevelopeis anu NFIs paitneiing with
chaiitable institutions. The fiist is uone to finu eithei clients foi the NFI
oi housing foi the NFI's clients, anu the seconu is geneially to
supplement the activities of the NFI, especially with iegaius to ieaching
pooiei clients oi offeiing technical assistance.
'(A(J HD"7 1.3-,.-3$; The challenge of loan uuiations is offeiing a loan with a
long enough lifespan to allow clients to boiiow the necessaiy money foi
theii house anu balancing this iisk against the NFI's own lenuing
situation. The BAT's ieseaich suggests offeiing loans of at least five yeais
foi laigei piojects. If this is not possible though, the BAT suggests
offeiing piouucts that piomote piogiessive lenuing; home impiovement
loans that can be useu foi inciemental builuing.
'(A(K 5D66".$3"6; Collateial foi miciofinance housing loans is pioblematic
because miciofinance clients often uo not own the title to theii lanu anu
sometimes uo not have othei assets to secuie loans with. 0iganizations
auuiess this pioblem by taking what collateial uoes exist (weuuing
jeweliy, owneu-assets, etc.) as well as auuing guaiantois to the loans.
'(A(L >M2/7/:.3"./0$ 5D:.:; BRAC is conceineu with the auueu
auministiative costs of pioviuing housing loans. 0ne impoitant way to
cut uown on these costs is to give supplemental tiaining to cuiient loan
officeis insteau of hiiing specialists. While the piocess will be uiffeient, it


!"#$ & A
is still cheapei anu moie efficient to use geneialists. 0sing existing loan
piocesses will ieuuce extia auministiative costs, such as the appioval
piocess, veiification of client income, maiketing, etc. A noticeable cost
inciease will be hiiing a technical auvisei to ensuie boiioweis buuget
coiiectly. This can be coveieu by the highei piofits of housing loans uue
to theii longei teims, oi by auuing a fee to housing loans.
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<() 5-33$7. 5D7.$+.

Sheltei is a funuamental human iight that helps ensuie peisonal safety anu health;
eveiyone shoulu have access to a safe, secuie, habitable, anu affoiuable home. Yet,
millions of low-income inuiviuuals woiluwiue aie left without secuie housing.

Banglauesh is no exception. Accoiuing to a 2uu8 stuuy, 77% of uiban uwellings anu
ovei 98% of Banglauesh's iuial uwellings aie not peimanent. Neaily half of the low-
income population cannot affoiu a ioof to piotect themselves fiom natuial
elements. The booming population anu iapiu uibanization of majoi metiopolises
like Bhaka is only exaceibating the pioblem, leaving many migiants no choice but to
pay exoibitant ient fees foi cheaply built shacks.

In this context, uevelopment oiganizations like BRAC aie seeking to extenu housing
options to these inuiviuuals by ensuiing all people have equal access to housing
finance options.

<(' 56/$7. N$$M

BRAC is looking foi new, innovative ways to auuiess housing neeus foi Banglauesh's
uiban anu iuial pooi. uiven its expeiience with miciofinance, it is looking to expanu
its loan poitfolio to incluue a housing piouuct. Theiefoie, BRAC is looking foi an
analysis of successful piactices anu ciitical challenges in the fielu of miciofinance
housing. To help BRAC answei this question, this iepoit offeis an oveiview of
leaueis in the fielu anu an analysis of theii successes anu challenges. BRAC has
expiesseu paiticulai inteiest in the types of piouucts oiganizations aie offeiing, the
inteiest iates that aie chaigeu, taiget clientele, significant costs they aie
encounteiing, how they manage extia cost, the success (oi failuie) of offeieu


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piouucts, how oiganizations maintain sustainability, anu any innovations oi goou
piactices that coulu be of use to BRAC.

<(< OD-:/7# B/,3DP/7"7,$

Bioauly speaking, housing miciofinance can involve the financing of a vaiiety of
activities incluuing the ienovation oi expansion of existing home, constiuction of a
new home, acquisition of lanu, anu installation of basic infiastiuctuie. It biings
togethei numeious actois fiom NFIs, iegulateu financial institutions, anu cieuit co-
ops to uiban uevelopeis, goveinment agencies, anu Nu0s.

Tiauitionally, low-income housing finance existeu in the iealm of chaiitable non-
piofits via Nu0 slum upgiaue piojects anu goveinment uevelopment stiategies;
howevei, such methous weie often ciiticizeu foi being unsustainable. In iecent
uecaues, theie has been a push foi moie sustainable options to uelivei much-
neeueu seivices to low-income customeis who aie unable to access the housing
financial seivices auministeieu by commeicial banks. This has laigely been iealizeu
by the auuition of housing miciofinance piouucts to both establisheu NFIs anu
Nu0s; these two appioaches aie often uistinguisheu as !"#$%#$&'"( (% *%+,"-.
/"-0-#& anu ,*&1(&$ 0'2%#0#3 (% *%+,"-. /"-0-#&. 4*&1(&$ 0'2%#0#3 (% *%+,"-. /"-0-#&
categoiizes Nu0s focusing on uiban housing, like Babitat foi Bumanity, who aie
beginning to offei a miciofinance housing option while !"#$%#$&'"( (% *%+,"-.
/"-0-#& uenotes NFIs focusing on entiepieneuiial loans, like NiBanco, that aie
beginning to expanu theii poitfolios to incluue housing loan piouucts.

uiven BRAC's existing miciocieuit piouucts, it woulu best be locateu in the
!"#$%#$&'"( (% *%+,"-. /"-0-#& categoiy. Niciofinance institutions offeiing cieuit to
small anu meuium scale entiepieneuis have fiequently obseiveu theii clients using
business loans to funu housing impiovements uespite the fact that business loans
aie not piopeily stiuctuieu foi this activity; theiefoie, ovei time, these institutions
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have iesponueu to client neeu by expanuing theii lenuing poitfolios to offei a iange
of housing finance piouucts. An incieasing numbei of miciofinance institutions aie
beginning pilot piogiams to auu on a housing loan to theii cuiient poitfolio. In the
past uecaue, theie aie even miciofinance institutions emeiging that specialize solely
in housing miciofinance, such as Fiist Finance in Cambouia (staiteu in 2uu6) anu
Nicio Bousing Finance Coipoiation Limiteu in Inuia (incoipoiateu 2uu8).

A() Q$4 ?"E$"F"4:

This section incluues a list of majoi points that we thought woulu be impoitant foi
BRAC to consiuei when foiming its miciofinance housing piouucts. Theii
impoitance is baseu on BRAC's iequests anu the BAT's opinion baseu on theii
ieseaich finuings.

A(' ?$,G7/,"6 >::/:."7,$

Technical Assistance can be incoipoiateu in loans in a vaiiety of ways. It is mainly
useu to auuiess two pioblems:
1. Loans being useu to finance low-quality constiuction using pooi mateiials
anu insufficient oi incoiiect plans
2. Clients occasionally not boiiowing sufficient amounts to finish theii uesiieu
piojects, impiopeily accounting foi mateiials oi laboi
a. Clients with incomplete piojects aie moie likely to let the loan
become uelinquent anu possibly uefault
0iganizations use uiffeient methous to auuiess these pioblems. Babitat foi
Bumanity in Cambouia conuucteu a pilot stuuy in which they chaigeu a nominal fee
foi a technical auvisei (a constiuction specialist) to ieview all builuing plans anu
make iecommenuations. Fiist Finance employs an engineei that will ieview plans
befoie loans aie appioveu to ensuie theii quality. TPC follows a similai piocess.



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In 2uuS anu 2uu4, Integial anu Accion conuucteu a pilot stuuy on offeiing
constiuction auvice to clients. At one bianch they tiaineu constiuction specialists to
be loan officeis, at anothei they tiaineu loan officeis to offei constiuction auvice,
anu they kept the iemaining bianches as contiol. The stuuy founu that the
constiuction specialists took moie time to leain how to be loan officeis than the
loan officeis to offei constiuction auvice. Tiaining ieuuceu the efficiency of loan
officeis foi a few months, but they ietuineu to pievious levels of piouuctivity
following that peiiou. Nost impoitantly, it showeu that constiuction assistance uiu
not have an impact on constiuction quality while still incieasing the cost of offeiing
the loan. The two hypotheses pioposeu weie that clients weie not willing to spenu
money foi highei quality mateiials (iegaiuless of whethei they coulu affoiu it) anu
clients may not be capable of implementing the auviseu constiuction piactices. In
iesponse to this, Integial uevelopeu constiuction pamphlets in an effoit to infoim
clients on piopei constiuction piactices. Constiuction assistance uiu ieuuce the
numbei of incomplete piojects by helping clients buuget piopeily. The pilot stuuy
concluues that NFIs shoulu outsouice intensive constiuction auvice to a uiffeient
agency if they still want to offei it. This is anothei way that Babitat foi Bumanity in
Cambouia has been functioning in tanuem with TPC.

The BAT iecommenus that BRAC eithei look into tiaining its loan officeis in
iuuimentaiy constiuction piactices to analyze whethei boiioweis aie auequately
buugeting foi theii piojects, oi outsouice the entiie piocess to anothei oiganization
(possibly Babitat foi Bumanity). Intensive technical assistance will not likely
impiove constiuction quality; insteau it will just make the loans moie expensive.

A(< HD"7 B/:-:$

Nisuse of loans is pait of the ieason to offei specializeu housing piouucts, but
misuse of those housing piouucts is also a concein. Since many oiganizations offei
slightly ieuuceu inteiest iates on theii housing loans anu longei loan teims, clients
might finu them piefeiable to moie suitable piouucts. This is pioblematic because
!"#$ &S
clients may be tiappeu in a long-teim loan that they uo not neeu anu will eithei be
foiceu to pay moie money in inteiest ovei the life of the loan oi uefault. Clients
might also piefei to use a uiffeient loan piouuct foi ienovating theii house if they
believe the teims aie moie favoiable. Bespite having ueuicateu housing loans,
SEWA Bank allows this to be uone without penalizing the boiiowei, but this has
iesulteu in extiemely high uelinquency iates (49% foi 0nsecuieu Loans, which
make up 4u% of SEWA's housing loan poitfolio). It is not auvisable to follow the
same policy.

To pievent a similai situation fiom aiising, Integial iequiies loans be useu foi theii
intenueu puipose. As a means of enfoicing this, loan officeis will ieview piojects
two months aftei uisbuisal to ensuie the funus aie being useu piopeily anu
piogiess is unueiway on constiuction. In auuition, the iisk officeis can make
ianuom visits to any sites they want to. If a client is founu to be using the loan foi
puiposes othei than housing, theii loan is ieconsiueieu. Theii inteiest iate is iaiseu
to the maximum, oi theii loan is cancelleu anu calleu uue immeuiately. The BAT
iecommenus that BRAC peifoim similai ieviews to ensuie piopei use of loans.

As anothei means of pieventing the misuse of othei loans to ienovate housing, it is
impoitant to offei uiveisifieu teim lengths foi home impiovement loans. Theie
shoulu not be one single loan teim-length oi extiemely high minimum loan
amounts. Insteau the loans shoulu be easy to apply to a wiue aiiay of home
impiovement activities so clients aie not tempteu to misuse othei loans they believe
aie moie suiteu to theii piojects.

A(A !"3.7$3:G/I:

NFIs can paitnei with Nu0s to help pioviue seivices to pooiei, iiskiei clientele.
This can be uone thiough iisk-shaiing oi specific housing piogiams. F0SAI anu
Integial pioviue community housing loans to pooiei clientele suppoiteu by F0SAI's
uonoi funuing. F0SAI will obtain a piece of lanu (eithei thiough puichase oi


!"#$ & T
goveinment-giants) anu uevelop infiastiuctuie on it, putting in watei anu
connecting it to sewage lines. Each family in the gioup is then given a plot of lanu;
they take out a loan fiom Integial to use foi constiucting a new home, oi a basic
housing unit. These loans aie geneially subsiuizeu thiough uonoi funuing as well.

Anothei paitneiship common between Nu0s anu NFIs is founu in the piovision of
technical assistance. Babitat foi Bumanity will often seive as the specialist agency
able to pioviue constiuction auvice wheie neeueu. TPC conuucteu a pilot piogiam
with Babitat seiving in this function, anu Fiist Finance has a Nemoianuum of
0nueistanuing that allows its clients to ieceive technical assistance fiom Babitat.
While this may seem like a goou way to auuiess quality of constiuction conceins, it
is not always guaianteeu that clients will follow constiuction auvice foi the
pieviously mentioneu ieasons oi otheis. Also, the cost of pioviuing technical
assistance woulu then piobably fall on the client as a sepaiate expense insteau of
being calculateu as pait of the inteiest iate, making the loan less attiactive.

A common, mutually beneficial paitneiship that aiises in this maiket is between
NFIs anu piivate ieal estate uevelopeis. If uevelopeis builu low-income housing,
they can eithei senu potential puichaseis to the NFI, oi the NFI can senu clients
seeking housing to the uevelopei. The CE0 of Fiist Finance saiu that this coulu
manifest auuitional benefits like clients being able to move in eaily oi moie
uevelopeis consiueiing the neeus of low-income gioups. It is piimaiily applicable to
uiban oi peii-uiban settings since this is wheie most housing piojects aie
unueitaken.

A(J HD"7 1.3-,.-3$

Loan uuiation is a significant challenge in pioviuing housing-specific miciofinance
piouucts. Bousing anu ienovations geneially cost moie than the maximum of most
miciofinance loans. In auuition, housing is geneially not consiueieu (at least in the
shoit-teim) a piouuctive asset. Foi these ieasons, housing loans neeu to be foi moie
!"#$ &')
money anu longei teims. But this means that lenueis have to take on moie iisk.
Since it is uifficult foi most lenueis to get access to long-teim capital, theii iisk is
extenueu. Because housing is not a piouuctive asset, boiioweis neeu to pay back
with theii othei incomes, which can be subject to a vaiiety of thieats.

0iganizations ueal with this iisk in a vaiiety of ways. Fiist Finance, which offeis 1u
yeai anu 1S yeai teim maximums foi Bome Impiovement Loans anu Bome
Puichase Loans iespectively, builus the iisk into its inteiest iate as best it can anu
opeiates on an aveiage of five yeais of unsecuieu iisk. But Fiist Finance iequiies
lanu title as collateial, so even if a client uefaults they can still iecupeiate most
losses.

0thei oiganizations offei smallei loans foi shoitei peiious, geneially as pait of a
piogiam of piogiessive lenuing. 0ne obseivation the BAT maue uuiing its ieseaich
tiip to Cambouia was that most boiioweis woulu builu stiuctuies with the capacity
to auu anothei flooi above, below, oi anothei ioom to the siue. An example of an
oiganization that offeis loans stiuctuieu foi this type of builuing is Nibanco.

This uoes not fully ieplace laigei, longei loans though. Nany builuing piojects
cannot be uone in inciements small enough to waiiant boiiowing on a piogiessive
lenuing scheme. NFIs often offei loans on five to seven yeai teims. It is easiei to
secuie capital to back loans of these lengths, anu it is moie feasible that people will
be able to use them to ienovate oi builu.

A(K 5D66".$3"6

The most impoitant obseivation to be maue is that it is necessaiy to collect on
collateial. While this might seem obvious, seveial oiganizations uiu not iepossess
aftei uefaults. Babitat foi Bumanity nevei iepossesseu because its piimaiy
benefactois woulu not allow it to. They uiu not see it as pait of the Nu0's mission oi
vision. As a iesult, Babitat has an extiemely high uefault iate. This is uue to clients


!"#$ & ''
who weie in uebt to seveial lenueis iecognizing Babitat's inability to iepossess.
Insteau of paying back Babitat, they woulu pay lenueis that woulu actually take
theii collateial.

The othei majoi issue with collateial is that many potential clients uo not have
tiauitional foims. They might not have official title to theii lanu, anu sometimes it
costs a significant amount of money to get the goveinment to piouuce the iequiieu
peimits. To auuiess this, some oiganizations take "soft titles," which aie baseu on
uistiict iecognition of lanu owneiship. 0theis take uiffeient foims of collateial.
SEWA Bank will take women's weuuing jeweliy oi othei assets as collateial foi
some loans. They even offei an unsecuieu housing loan (0nsecuieu Paki Bhit),
backeu by guaiantois anu liens on a client's SEWA saving account. These loans aie
funueu by an Inuian ministiy piogiam anu aie not the noim foi NFIs.

uuaiantois aie a goou option in auuition to assets if they uo not piove valuable
enough. Especially in iuial aieas, social ielationships can foice clients to abiue by
the payment scheuule oi allow the NFI to iecupeiate theii loss.

A(L >M2/7/:.3"./0$ 5D:.:

0ne of BRAC's main conceins is opeiating without significant auuitional
auministiative costs. To a point, it is impossible to avoiu an inciease in
auministiative costs. This can be auuiesseu thiough the natuial life of the loan
without incieasing inteiest iates. Since the loans have longei teims anu aie foi
moie money, BRAC will collect moie money in inteiest. It shoulu still be a piioiity to
ieuuce costs wheievei possible though.

0ne impoitant stiategy to this enu will be to avoiu hiiing housing loan specialists. In
the afoiementioneu pilot stuuy, Integial founu that tiaining geneialists in housing
piotocols was moie efficient than tiaining constiuction specialists in lenuing
piocesses. While the loan officeis' piouuctivity was ieuuceu uuiing tiaining, they
!"#$ &'<
ietuineu to noimal levels of efficiency in a few months. The assessment piocess will
be faiily similai anu iequiie an in-uepth analysis of the client's income. It will take
longei to assess housing loans oveiall, especially when tiying to see if clients
buugeteu auequately. If the client is self-employeu, this will be a moie uifficult task,
but it is something likely alieauy faceu by BRAC's loan officeis. 0sing community
leaueis foi infoimation on potential clients also ieuuces costs anu the assessment
time. Reviewing ongoing loans two months aftei uisbuisal will also auu woik anu
laboi costs, but this shoulu be coveieu in the highei value of home loans.

Naiketing costs woulu not iaise significantly eithei. BRAC coulu maiket thiough
existing channels, using cuiient bianch locations anu community leaueis.
Auministiative costs have the highest potential to inciease baseu on whethei BRAC
wants to hiie an in-house engineei like Fiist Finance anu some othei NFIs. They
coulu avoiu this by paitneiing with othei oiganizations to auuiess the neeu foi
ieview of housing plans, oi they coulu offei housing loans without this step.

The following page featuies a uiagiam illustiating these key takeaways. It outlines
the challenges uiscusseu above, oui iecommenuations, anu cases of inteiest to each
topic aiea.


!"#$ & 'A
Key Takeaways foi BRAC - Challenges, Recommenuations, anu Cases of Inteiest


J() 5":$:

The following aie biief synopses of case stuuies on the housing miciofinance
opeiations of seveial oiganizations. They weie chosen baseu on theii applicability
to BRAC anu inteiesting piactices that might be useful to the oiganization. They
incluue the thiee case stuuies collecteu by the BAT uuiing theii ieseaich tiip to
Loan Stuctuie
Challenge: Access
to meuium & long
teim capital
Recommenuations:
- Best option - 0ffei S yeai
loans
- Alteinative - 0ffei
piogiessive lenuing home
impiovement
Cases: TPC &
Nibanco
Collateial &
Collection
Challenge: Conflict
between mission
anu sustainability
Recommenuation:
Nust collect on
collateial
Cases: Babitat foi
Bumanity & Fiist
Finance
Loan Nisuse
Challenge: Cioss-
lenuing &
Nisappiopiiation
of funus
Recommenuations:
- Loan officei
uiligence & tiaining
- Appiopiiate loan
teims
Cases: SEWA &
Integial
Technical
Assistance
Challenge: In-
house, paitneiship,
none.
Recommenuations:
- Cost Specific
- Paitneiship
Cases: Fiist
Finance & Integial
Paitneiships
Challenge: Bevelop
stiategic paitneis
Recommenuation:
- Taiget Nu0s &
Bousing
Bevelopeis
Cases: TPC &
Babitat foi
Bumanity
Auminstiative
Aspects
Challenge:
Balancing costs &
quality
Recommenuations:
- Biie geneialists
- 0peiate thiough
existing loan
channels
Cases: NiBanco &
Integial
!"#$ &'J
Cambouia as well as thiee othei existing cases uiawn fiom aiticles, jouinals, anu
othei souices.

J(' 1$6$,./D7 53/.$3/"

!"#$ TPC was chosen because it is a NFI that expanueu into housing miciofinance as
pait of its piouuct offeiings. In auuition, it taigets the iuial pooi, similai to BRAC.
TPC's case also has inteiesting innovations anu piactices, incluuing its loan
stiuctuies, its paitneiship with Babitat foi Bumanity, anu othei issues that make it
a useful case to stuuy.

%&'() %&+,+-.$ Fiist Finance was selecteu because of its intense focus on financial
sustainability, something impoitant to BRAC. Also, it opeiates in uiban anu peii-
uiban contexts, aieas that BRAC is inteiesteu in as well. Fiist Finance has stiategic
paitneiships with Babitat foi Bumanity anu housing uevelopeis that help make it
an effective NFI.

/,0&),) 12' /34,+&)5 6#,4027&,8$ Babitat foi Bumanity holus seveial ciucial
lessons, incluuing the impoitance of collecting on collateial. In auuition, the case is
useful because Babitat paitneis with a vaiiety of Nu0s to pioviue uiffeient seivices.
Babitat is in Banglauesh as well anu coulu be a potential paitnei to tackle pioblems
with technical assistance.

9&0,+-2$ Nibanco offeis an innovative loan stiuctuie that seeks to mitigate the
challenges in obtaining long-teim capital. Nibanco offeis successive, shoit-teim
loans that suit the piogiessive builuing of most low-income clients. This offeis BRAC
a mouel foi an alteinative to longei-teim loans.

:;<= >,+?$ SEWA Bank offeis loans accessible to the veiy pooi, something faiily
unique. It also has loosei iestiictions on what can be consiueieu collateial, which
allows it to expanu its client base anu theiefoie its impact. Thiough its piactices, it


!"#$ & 'K
also offeis lessons on the necessity of specializing loans. SEWA also cateis almost
exclusively to pooi women, as uoes BRAC.

@+).A',B$ Integial is of inteiest because of its ieseaich on technical assistance anu
its efficacy. In auuition to this, Integial has goou piactices that BRAC shoulu
consiuei engaging in as well, such as the ieview of loan usage two months following
uisbuisal. Also, its paitneiship with F0SAI allows Integial to woik with the veiy
pooi. 0veiall, Integial is an inteiesting example of a sheltei auvocacy to housing
finance piogiam that spun into miciocieuit anu must maintain financial viability as
a iesult.


J(< ?!5 5":$ 1.-M4

Infoimation foi this case stuuy was obtaineu by peisonal
inteiview with Beputy CE0 Sok voeuin of TPC on Naich 12
th
2u14. TPC seives as an impoitant case foi BRAC because of its
natuie as an NFI that expanueu to offei a housing piouuct. Auuitionally, it taigets
the iuial pooi, similai to BRAC. TPC's case also has inteiesting innovations anu
piactices, incluuing its loan stiuctuies anu its paitneiship with Babitat foi
Bumanity.

J(<(' U",E#3D-7M

Thaneakea Phum Cambouia, LTB. (TPC) is the fifth laigest miciofinance institution
(NFI) in Cambouia by numbei of boiioweis. Catholic Relief Seivices (CRS) oiiginally
establisheu TPC in 1994 to enable iuial micioentiepieneuis to gain access to
financial seivices. In }anuaiy 2u1u, Beveloping Woilu Naikets, a 0S-baseu, socially
iesponsible investment fiim acquiieu a majoiity equity stake in TPC fiom CRS.

TPC focuses on seiving low-income families in iuial Cambouia with a paiticulai
emphasis on women. It offeis a vaiiety of uiffeient loan piouucts incluuing gioup
!"#$ &'L
anu inuiviuual business loans, seasonal loans, anu most iecently, home
impiovement loans (BILs). Recognizing many clients weie impiopeily using
business loans foi home impiovement, TPC ueciueu to uiveisify its loan offeiings to
incluue a loan specifically stiuctuieu foi home impiovement. In 2u12, it began the
pilot of its BILs anu in 2u1S iolleu the piouuct out to its 2u main bianus. By 2u14,
the BILs hau been iolleu out to all 2u main bianus anu 26 sub bianus.

By the beginning of 2u14, the total loan poitfolio of TPC has ieacheu 8uu million
0SB with 1Su,uuu boiioweis; of this, the BIL compiises 2.6 million 0SB with 1,1uu
clients. The expectation is this numbei will inciease to 4 million by the enu of 2u14
with somewheie between 2,uuu to S,uuu clients.

J(<(< HD"7 !3DM-,.:

The BIL is intenueu foi the constiuction of a new home oi the
ienovationexpansion of an existing home. In oiuei to constiuct a new home, the
client must alieauy have puichaseu the mateiials with the plan to use the loan to
pay foi laboi costs. Foi the ienovationexpansion of an existing home, the loan may
be useu foi both mateiial anu laboi costs. 8S peicent of BILs aie useu foi the
ienovation anu expansion of an existing housing stiuctuie. Common ienovations
incluue changing fiom woou anu thatch ioofs anu walls to ones maue of biick, tile,
oi cement; othei clients auu an auuitional ioom, iaise the house, oi ienovate the
bathioom with the BILs. Betails on the specific loan stiuctuie of the BIL incluuing
inteiest iates anu teim length can be founu in the table following the case.

J(<(A 56/$7.$6$ !3DP/6$

The typical BIL client has an aveiage householu income of 2uu to Suu 0SBmonth
anu a householu size of five. Women compiise a laige peicentage of the BIL clientele
with 8S peicent of the BILs given to women, often times with the husbanu as a co-


!"#$ & 'R
boiiowei. The vast majoiity of clients live in iuial aieas, with only 1u peicent living
in the uiban peiipheiy. Nost householus aie suppoiteu by multiple income stieams,
with husbanus woiking in agiicultuie oi constiuction anu the women opeiating
small micioenteipiises oi caiing foi livestock. Nany men suppoit theii agiicultuial
activities with off-season woik as tuk-tuk uiiveis. 7u peicent of BIL clients uo not
have a haiu title (an official lanu title iecognizeu by the national goveinment) anu
insteau use a soft title (a lanu title iecognizeu at the community level) as a foim of
collateial.

J(<(J !"3.7$3:G/I:

0f TPC's many paitneiships, this case stuuy will highlight two in paiticulai: its
ielationship with 0SAIB anu Babitat foi Bumanity.

1) Relationship with the 0.S. goveinment: TPC has an ongoing ielationship with
0SAIB, which has helpeu facilitate a loan thiough 0PIC (the 0.S. goveinment's
uevelopment finance institution). 0PIC has given TPC a S million 0SB loan with a
seven-yeai teim to suppoit TPC's miciofinance lenuing in Cambouia; at least Su
peicent of the funus must be ueuicateu to the BIL piogiam. TPC pays yeaily inteiest
to 0PIC in auuition to senuing quaiteily iepoits.

2) Babitat foi Bumanity: TPC anu Babitat foi Bumanity Cambouia aie cuiiently in a
pilot piogiam in which Babitat foi Bumanity Cambouia acts as a consultant
pioviuing technical assistance to customeis on how to builu homes with low cost
anu high quality. Thus fai, this paitneiship has been limiteu to one TPC bianch
location anu incluues tiaining of TPC management anu scieening officeis.

J(<(K 1."PP/7#

TPC cuiiently employs 2u loan officeis who specialize in BILs, anu it iecently hiieu
an in-house engineei to pioviue tiaining anu assistance to staff at the bianch level.
!"#$ &'S
This tiaining is intenueu to impiove loan officeis' ability to evaluate the feasibility of
clients' constiuction plans anu buugets. Cuiiently customeis come to the TPC
auvisois with a plan at the eaily stages foi auvice; most customeis have cieateu
these plans in auvisement with contiactois fiom theii villages. Loan officeis aie also
iesponsible foi managing payment collection. The methou of payment collection is
baseu on the oiiginal loan teim agieement between the inuiviuual client anu TPC;
ioughly 7u peicent of clients pay at the bianch office while the iemaining Su
peicent have theii payments collecteu within theii communities.

J(<(L B"3E$./7#

TPC piomotes its BIL piogiam thiough leaflets, laige winuow anu fence banneis at
bianch offices, anu iauio anu television aus. It also employs uooi-to-uooi piomotion
anu woiu of mouth iefeiials.

J(<(R H$::D7: "7M 5G"66$7#$:

Aftei its pilot piogiam, TPC maue seveial changes to its BIL piogiam that can foi
the most pait be summaiizeu as aujustments to make the loans moie inclusive anu
expansive. Fiist, it piogiessively incieaseu its maximum loan size fiom S,uuu 0SB to
S,uuu 0SB to wheie it cuiiently stanus at 1u,uuu 0SB. Seconu, it expanueu the BIL
to incluue home constiuction as well as ienovation anu expansion. Thiiu, TPC now
accepts clients looking foi a loan foi theii seconu home. Nany families look to
constiuct a seconu home on theii piopeity foi a chilu who has maiiieu anu wants to
have hishei own home on the family lanu. Lastly, TPC changeu the inteiest iate
stiuctuie to be a ueclining balance inteiest iate. In a ueclining balance inteiest iate,
as the loan capital is iepaiu thioughout the life of the loan, the inteiest chaigeu pei
month ueclines accoiuingly.

Noving foiwaiu, Sok voeuin has expiesseu that the biggest challenge to the BIL
piogiam is secuiing a long-teim souice of funuing. TPC uoes not want to incui the


!"#$ & 'T
iisk of lenuing long anu boiiowing shoit, so theiefoie must finu lenueis willing to
loan it funus foi a minimum of foui yeais. TPC is cuiiently tiying to get one of its
lenueis (Tiiple uem) foi its micioenteipiise loan piouuct to also back the BILs. In
oiuei to offei BILs foi a teim length that allows the clients to affoiu the monthly
payments, TPC must be able to secuie long-teim loans if it iefuses to iun at a iisk.

J(<(S 1-22"34 DP U":/, HD"7 V$".-3$:

HD"7 ?4I$ OD2$ W2I3D0$2$7. HD"7
HD"7 !-3ID:$ Foi the constiuction of a new home oi the
ienovationexpansion of an existing home
!$3,$7. DP HD"7 !D3.PD6/D .SS%
?"3#$. 56/$7. Low income (avg. householu income of 2uu - Suu
0SB mo)
Ruial women
=D,-2$7."./D7 8$9-/3$M Pioof of Citizenship
Resiuency in TPC opeiating aiea
veiifiable Income
Lanu Title (Baiu oi Soft)
Cleai piojection of pioject
=DF7 !"42$7. 8$9-/3$M 1u%
5D66".$3"6 Lanu Title (Soft oi Baiu)
W7.$3$:. 8".$ 2u.4-Su%
W7.$3$:. 8".$ 1.3-,.-3$ Beclining balance inteiest iate
HD"7 =-3"./D7 0p to 4 yeais (avg. of S)
HD"7 5$/6/7# 1u,uuu 0SB
>0$3"#$ HD"7 1/X$ 1,uuu - 4,uuu 0SB
>0$3"#$ BD7.G64 HD"7 !"42$7. $7u
=$P"-6. 8".$ .uS%

J(<(T >II3D+/2".$M 5D:. 1.3-,.-3$ PD3 OWH

- TPC pays 8 peicent annual inteiest on 0PIC loan
- Expenus appioximately 1u peicent annually on opeiating costs
- Asks foi appioximately 21.6 peicent annual inteiest fiom boiioweis
!"#$ &<)
- Net piofit of appioximately S.6 peicent (othei business loans yielu laigei net
piofits)

J(A V/3:. V/7"7,$ 5":$ 1.-M4

Infoimation foi this case stuuy was obtaineu by peisonal inteiview with Kevin Lim
CE0 of Fiist Finance on Naich 12
th
. Fiist Finance is an impoitant case foi BRAC
because of its intense focus on financial sustainability. Also, it opeiates in uiban anu
peii-uiban contexts, aieas that BRAC is inteiesteu in as well. Fiist Finance has
stiategic paitneiships with Babitat foi Bumanity anu housing uevelopeis that help
make it an effective NFI.
J(A(' U",E#3D-7M

Fiist Finance was staiteu in 2uu6 as Fiist Bome by Talmage Payne with the intent of
allowing low income people to own theii fiist home. The oiiginal goal of Fiist Bome
was to builu housing specifically foi this uemogiaphic in auuition to financing theii
puichases of it, but eaily on it was ueciueu to limit it to the finance iole. With a few
othei investois anu cuiient boaiu membeis Ni. Payne cieateu a small loan
poitfolio, lenuing to theii fiist clients. In 2uu8, they ieceiveu an initial equity capital
of Suu,uuu 0SB fiom Phillip Capital. In 2uu9, they ieceiveu anothei equity capital
injection fiom Fiist Bome, Insitoi Funu, anu Phillips Capital, theii thiee
shaieholueis. They officially staiteu the company as the fiist miciofinance housing
company in Cambouia with this capital.

Bue to the global iecession in 2uu9, lanu anu housing piices weie extiemely low.
Speculation on ieal estate was extiemely ieuuceu as well because of the hit the
maiket took. This enviionment was veiy conuucive foi both Fiist Finance anu its
clients. It only took them a yeai to begin tuining a piofit. In 2u12, Fiist Finance
expanueu to two auuitional bianches in Siem Reap anu Battambang. In the same
yeai, they ieceiveu the ASEAN Business Awaiu.


!"#$ & <'

So fai, Fiist Finance has uisbuiseu 1u million 0SB to about 1,uuu householus. They
aveiage between a 1% to S% uefault iate. This uoes not mean a loss, since they aie
able to iepossesses the collateial put up by clients, but because these loans aie foi
longei teims, they geneially take up to a yeai to wiite-off. They also aie iequiieu to
maintain a high level of tianspaiency because of theii status as a NFI. In this light,
they ielease annual iepoits uetailing theii financials (they cuiiently have up to yeai
2u12 on theii website).

Fiist Finance was able to change the intentions of some uevelopeis, getting them to
make moie moueiate housing plans. They focus on peii-uiban aieas anu sometime
small uiban pockets. This is because the majoiity of uiban housing is not affoiuable
to Fiist Finance's taiget clientele. Ruial opeiations aie not cost effective foi the
company since it only opeiates thiee bianches, anu all aie in uiban aieas.

J(A(< OD-:/7# HD"7 !3DM-,.:

Fiist Finance offeis Bome Impiovement Loans anu Bousing Loans. Bome
Impiovement Loans aie foi builuing a house oi the ienovation of an existing
stiuctuie. If the client intenus to builu the house with the Bome Impiovement Loan,
they must alieauy own the lanu title. When intenueu foi ienovation, loans aie
geneially useu foi auuing anothei flooi to the existing house oi an auuitional ioom.
When useu foi constiuction, the loans aie often useu in situations when a son
maiiies anu neeus a house foi his family oi a family inheiiteu the title. Loans aie not
useu foi auuing a toilet oi othei sanitation installments, but Fiist Finance's clients
aie tienuing towaius smallei ienovations.

Bousing Loans aie foi puichasing existing (oi in the piocess of constiuction) houses
as well as the lanu title. The houses aie often pait of new low income uevelopment
in the peii-uiban aieas of cities oi in small pockets within the city limits.
!"#$ &<<
J(A(A !"3.7$3:G/I:

Fiist Finance uoes not have any contiacteu paitneiships with any othei entities.
They uo have infoimal paitneiships though, incluuing an N00 with Babitat foi
Bumanity. This agieement woiks thiough a iefeiial piogiam wheie Babitat can
senu clients to Fiist Finance when they aie not able to finance the loans. Fiist
Finance will then uiiectly uisbuise the loan to Babitat foi Bumanity, anu Fiist
Finance clients can sometimes ieceive technical assistance fiom Babitat.

Fiist Finance's othei paitneiships function in a similai way. They woik with a
vaiiety of uevelopeis anu constiuction companies on a iefeiial basis. When a
uevelopei of low income housing has an inteiesteu client that iequiies a loan, they
senu them to Fiist Finance. These ielationships have helpeu establish Fiist Finance
anu make it a common name in low income housing piojects. This means that when
a client comes to Fiist Finance foi a loan anu can pay theii uown payment, the
uevelopei will geneially tiust Fiist Finance to covei the client's uebt anu give the
client theii new home. 0ne specific company that Fiist Finance has significant ties to
is 0iban village. It was staiteu by Talmage Payne anu is the othei half of what he
hau hopeu Fiist Bome woulu be, but uoes not shaie the cuiient veision of Fiist
Bome as a holuing company.

J(A(J 1."PP/7#

Fiist Finance has S7 employees. It maintains a small staff to cut uown on its cost anu
uevelop a tight-knit team. 0f the S7 employees, 16-17 seive as Cieuit Consultants.
This position is similai to a Cieuit 0fficei but with a softei title. Cieuit Consultants
meet with potential clients anu pioviue a loan consultation foi fiee; this is because
they aie meeting people who hau nevei thought they coulu own a home. Aftei this
initial inteiview, they conuuct site visits, assessments, anu eveiything else they neeu
to uo to ensuie that the client will be a goou boiiowei. If a loan passes the Cieuit


!"#$ & <A
Consultant's appioval, they pass it to the Bianch Nanagei. If it passes this stage, it
goes to the Cieuit Committee in the heau office, fiom which it goes to the Cieuit anu
Finance 0ffice. The Cieuit Consultants aie incentivizeu by finuing moie qualifieu
canuiuates, but they aie penalizeu foi any bau loans they aie iesponsible foi. This is
to ensuie that they seek a balance of quantity anu quality.

The othei piimaiy iole to be filleu is the Cieuit Auministiatoi. Aftei the loan passes
the Cieuit anu Finance 0ffice, it goes to them to woik on to collect the iequiieu legal
uocumentation: payslip, IB caiu, lanu title, whatevei was necessaiy. The Cieuit
Auministiatoi will facilitate the loan thioughout its lifecycle by checking up on the
boiioweis. If the boiioweis have any tiouble making payments, the Cieuit
Auministiatoi will iepoit on it anu help iestiuctuie the loan.

J(A(K 56/$7.$6$ !3DP/6$

Fiist Finance pioviues loans to low income anu low miuule income families in uiban
anu peii uiban aieas. The aveiage inuiviuual income of theii clients is Suu to Suu
0SB pei month. They allow combineu income, so a householu can be consiueieu as
one unit anu boiiow moie. 9u% of boiioweis aie families with an aveiage of foui
people. Nost clients aie couples that aie co-boiiowing leu by the wife. Its piimaiy
clients at the beginning weie local salaiieu woikeis foi Nu0s, anu woikeis with
some foim of salaiy still make up Su to 6u% of theii loan poitfolio. Fiist Finance is
moving towaius having moie self-employeu clientele to pioviue a new uemogiaphic
with the oppoitunity to own a home oi impiove theii oiiginal one.

J(A(L B"3E$./7#

Fiist Finance uoes not have a laige maiketing buuget. This is one of the ways that
they aie able to cut cost. Cuiiently they uo uiiect maiketing in specific aieas, going
uooi to uooi to piomote theii loan piouucts. They also pay foi some iauio aus, but
!"#$ &<J
this is a limiteu effoit. Fiist Finance offeis piomotional mateiials anu banneis at all
of theii bianches, but they uo not pay foi billboaius oi mailings. 0ne of the main
ways Fiist Finance piomotes theii business is thiough talking to constiuction
companies, uevelopeis, anu community leaueis. This netwoik helps uiffuse
knowleuge about what Fiist Finance can offei potential boiioweis.

J(A(R 5G"66$7#$:

Kevin Lim tolu us that the most significant challenge foi Fiist Finance is the piocess
of uoing backgiounu checks on potential clients. Because Fiist Finance is tiying to
giow its clientele beyonu salaiieu employees, this pioblem has been incieaseu. It is
moie uifficult to ueteimine whethei a peison will be able to pay back a loan when
they uo not have a guaianteeu cashflow. The uangei is that if the Cieuit Consultants
make a mistake, Fiist Finance coulu enu up holuing a non-peifoiming (anu piobable
uefault) loan, as well as putting theii client into uebt. To mitigate this iisk, Fiist
Finance tiains its Cieuit Consultants extiemely well, teaching them the best ways to
piove a client's income.

Anothei uifficulty Fiist Finance faceu eaily on was acquiiing enough capital but
now, aftei they have pioven themselves foi a few yeais, it is much easiei to finu
willing funueis. A significant challenge that is pait of offeiing this type of loan is
finuing long-teim loans. They cuiiently have a uiveisifieu loan poitfolio on five yeai
scheuules. But this means that they often opeiate on a ten yeai gap iisk because of
the long teims they offei theii clients.

J(A(S 1-22"34 DP U":/, HD"7 V$".-3$:

!"#$ &'() *"+) !"#$ *"+) ,+(-".)+)$/ !"#$
/"-& 0#+1"$. Foi the puichase of a new
home
Foi the constiuction,
ienovation, oi expansion
of a home


!"#$ & <K
2 ", /"-& 0"+3,"4%" 7u% Su%
5-+'.3 64%.&3 Low Income to Low
Niuule Income
Low Income to Low
Niuule Income
7"*#8.&3-3%"& 9.:#%+.; Pioof of Citizenship
veiifiable Income
Pioof of Citizenship
veiifiable Income
Lanu Title (Baiu oi
Soft)
7"<& 0-=8.&3 9.:#%+.; 1S% of total None
6"44-3.+-4 Puichaseu home functions
as collateial
Lanu Title (Soft oi Baiu)
>?.+-'. @&3.+.$3 9-3. 18% pei month 21.6% pei month
/"-& 7#+-3%"& 0p to 1S yeais 0p to 1u yeais
/"-& 6.%4%&' S7,uuu 0SB 2S,uuu 0SB
>?.+-'. /"-& A%B. 1u,uuu-11,uuu 0SB Less than 1u,uuu 0SB
>?.+-'. )"&3C4= 0-=8.&3 16u 0SB vaiies uieatly
/-3. 0-=8.&3 0.&-43= .S-1% ueteimineu on a
loan specific basis
.S-1% ueteimineu on a
loan specific basis

J(A(T YI$3"./7# 5D:.:

- In 2u12 Fiist Finance hau an opeiating cost iatio of 11.96%
- In 2u12 they spent S47,48S 0SB on opeiation costs anu othei expenses anu
alloweu 7u,766 0SB foi bau oi uoubtful loans
o They maue a net piofit of SS,797 0SB aftei income tax
- In 2u12 Fiist Finance hau a 2.u2% ietuin on equity anu 1.u7% ietuin on
assets (lowei than pievious yeais because they openeu two new bianches
anu incoipoiateu costs into theii stiuctuie)



J(J O"@/.". PD3 O-2"7/.4 5"2@DM/" 5":$ 1.-M4

Infoimation foi this case stuuy was obtaineu by peisonal inteiview with von
Chhimvannak, Bousing Finance Nanagei of Babitat foi Bumanity Cambouia on
Naich 1S
th
2u14. Babitat foi Bumanity Cambouia is an impoitant case to stuuy,
!"#$ &<L
because it seives as a iepiesentative mouel foi the ,*&1(&$ 0'2%#0#3 (% *%+,"-.
/"-0-#& appioach, anu theiefoie auus an impoitant peispective to this iepoit on
housing miciofinance. Things to note in this case aie Babitat's shoit-teim loans,
theii extiemely pooi clientele (those living on less than $1uay), the lessons it holus
foi collection on collateial, anu its potential as a paitnei foi BRAC.

J(J(' U",E#3D-7M

Babitat foi Bumanity Cambouia is an Nu0 offeiing technical assistance, home
constiuction & iepaii, tiaining, financial euucation, anu financing foi low-income
Cambouians. The oiganization iecently electeu to uevelop a small financing
piogiam in oiuei to assist theii clients in financing theii infiastiuctuie piojects.
Initially, only existing Babitat clients weie eligible foi financing; in the last two
yeais, Babitat's piogiam has expanueu to offei financial seivices to any low-income
Cambouian, even if they aie not using Babitat as the constiuctoi oi mateiial
pioviuei foi theii pioject. The funus foi Babitat's financing aim come fiom Babitat
foi Bumanity Cambouia anu fiom Babitat foi Bumanity Inteinational. Since its
inception, the financing aim has seiveu 2,uuu clients with between 7uu anu 8uu
active clients cuiiently.

J(J(< ?4I$: DP HD"7:

Babitat offeis Bome Constiuction loans anu Bome Impiovement loans. Foi both
loan types, the client must alieauy own lanu. The Bome Constiuction Loan is
intenueu foi the constiuction of a new home oi the expansion of an existing home
while the Bome Impiovement loan is intenueu specifically foi infiastiuctuie
impiovements to an existing piopeity, such as lanu filling anu the installation of
watei, electiicity, oi sewage systems. Two unique factois iegaiuing these loan
piouucts aie uiscusseu below; a moie compiehensive oveiview of loan teims,
conuitions, anu inteiest iates can be founu in the table at the enu of this case.



!"#$ & <R
0ne consiueiation is the small loan ceiling of Babitat's Constiuction loan. The Bome
Constiuction loan cap is set at $2,Suu, which is quite small given aveiage home
piices in Cambouia anu compaiable loans offeieu at othei NFIs offeiing housing
piouucts (like Fiist Finance anu TPC). With a loan size cappeu at $2,Suu anu aveiage
iuial home piices at $S,uuu anu aveiage city piices at $2u,uuu, Babitat is tiuly
taigeting some of the pooiest segments of society anu calling foi clients to
contiibute a significant uownpayment of peisonal savings (2S%). Anothei
contiibuting factoi to the uispaiity between these aveiage piopeity piices anu the
loan cap is that the aveiage piices aie a ieflection of the total cost of the piopeity
incluuing lanu title, which is something Babitat uoes not help finance.

Anothei unique factoi is the flexibility in loan payment plans. Babitat offeis a
unique option foi the Bome Impiovement loan that allows foi a seasonal payment
stiuctuie as opposeu to the tiauitional monthly payments. This is specifically foi
home impiovements uealing with sanitation infiastiuctuie, most commonly the
installation of a toilet. The payment plan is intenueu foi iice faimeis with seasonal
incomes.
J(J(A 56/$7.$6$ !3DP/6$

Babitat's taiget clients aie householus with incomes less than $1uay pei family
membei. Babitat opeiates in the uiban aiea of Phnom Penh anu in the iuial aieas of
Siem Reap. Cuiiently, the majoiity (8S peicent) of the active clients iesiue in Phnom
Penh's uiban peiipheiy.

J(J(J !"3.7$3:G/I:

0f Babitat's many paitneiships, this case stuuy will highlight its ielationship with
TPC in paiticulai. Babitat foi Bumanity Cambouia paitneis with many Cambouian
NFIs (such as BKL, Fiist Finance, anu CBIRB); usually the paitneiship involves the
NFI uisbuising loans suppoiteu by Babitat as a technical assistant consultant. The
paitneiship between Babitat anu TPC is an example illustiative of this piocess.
!"#$ &<S

1) Relationship with TPC: TPC anu Babitat foi Bumanity Cambouia aie cuiiently in
a pilot piogiam in which Babitat acts as a consultant pioviuing technical assistance
to customeis on how to builu homes with low cost anu high quality. Thus fai, the
pilot has been limiteu to one TPC bianch location with Su clients paiticipating. The
pioject featuieu the tiaining of TPC management anu scieening officeis. The
finuings fiom the pilot have thus fai suggesteu it is not piofitable foi Babitat,
although it has been beneficial foi TPC. The paitneiship was stiuctuieu so that foi
minoi impiovement loans ($1uu - $1,Suu) TPC uisbuiseu, Babitat woulu consult
without collecting a fee; foi majoi impiovement loans ($1,Suu - $S,uuu), Babitat
woulu collect a $1u - $1S fee. Such fees weie not substantial enough to covei
Babitat's costs. As a socially minueu not-foi-piofit funueu by philanthiopy without
an emphasis on sustainability, Babitat was able to shouluei the buiuen of the cost
while the NFI enjoyeu cost-effective technical assistance consultation foi its clients.

J(J(K 1."PP/7# Z HD"7 !3D,$::

Foi its financing piogiam, seveial key staff aie involveu in the loan piocess. The
piocess begins with a cieuit agent who scheuules meeting with clients to collect
client infoimation, inteiviews clients to ueteimine eligibility, anu assists clients in
filling out the loan application. The next stage biings in the pioject managei, who
ieviews the application anu confiims eligibility. If appioveu, engineeis anu the
constiuction staff then meet with homeowneis to show them options anu piices to
uevise a constiuction plan foi the pioject; if the homeowneis elect to pioviue theii
own laboi anu mateiials, the engineeis sign off on the plan to ensuie quality
constiuction is maintaineu.

The loan is then confiimeu anu uisbuiseu in multiple installments. 9S peicent of the
loan collection occuis at the homeowneis' homes by cieuit agents. Ni. Chhimvannak
stiesseu the impoitance of the use of cieuit agents in the loan collection piocess,
inuicating fiom past expeiience Babitat has leaineu it is not a goou piactice to have


!"#$ & <T
community leaueis collect payments on behalf of Babitat. Although this incieases
auministiative costs, it pioviues a bettei expeiience foi clients, impioves
tianspaiency, anu avoius coiiuption.

J(J(L B"3E$./7#

While Babitat uoes not utilize community leaueis foi loan payment collection, it
uoes leveiage community leaueis as assets foi loan piomotion. Beyonu piomoting
thiough community leaueis, Babitat maikets its financing piouucts uiiectly to
homeowneis.

J(J(R H$::D7: "7M 5G"66$7#$:

Babitat foi Bumanity Cambouia faces a uifficult challenge in tiying to balance the
inteiests of social mission with the uemanus a financially sustainable appioach
iequiies. Babitat has iealizeu, foi example, that theii taiget clientele (householus
eaining less than a $1uay pei peison) is not sustainable.

Foi the most pait, Babitat has leaneu towaiu maintaining its social mission anu
foigoing financial sustainability. This is laigely ieflecteu in its policy to not collect
on collateial when a client uefaults. This has leu to a veiy high uefault iate of 2u
peicent, as clients begin to leain they can "get away" with not iepaying Babitat's
loans; insteau, clients piioiitize othei outstanuing loan payments to othei NFIs who
uo collect on uefaulting loans.

uiven the challenges Babitat has faceu, it is beginning to ieconsiuei the
appiopiiateness of offeiing finance options itself; insteau, it is moving towaius
focusing on its ioles as a technical consultant anu paitneiing with NFIs who uo offei
housing finance.


!"#$ &A)

4.4.8 Summary of Basic Loan Features

HD"7 ?4I$ OD2$ 5D7:.3-,./D7 HD"7 OD2$ W2I3D0$2$7.
HD"7
HD"7 !-3ID:$ Foi the constiuction of a new
home oi expansion of an
existing home
Foi infiastiuctuie
impiovements to an
existing piopeity, such
as lanu filling anu the
installation of watei,
electiicity, oi sewage
systems
HD"7 =/:@-3:$2$7. Loans uispeiseu in multiple
installments
Loans uispeiseu in
multiple installments
?"3#$. 56/$7. Less than $1uay pei family
membei

Less than $1uay pei
family membei

=D,-2$7."./D7
8$9-/3$M
Pioof of Citizenship
Lanu Title (Baiu oi Soft)
Constiuction peimit
Pioof of Citizenship
Lanu Title (Baiu oi
Soft)
=DF7 !"42$7.
8$9-/3$M
2S% - Babitat holus on to savings
anu uispeises it along with its own
capital in multiple installments to
the client
5+$$&-( "-/%$!0("%- -%(
/%+-'
5D66".$3"6 In theoiy, the lanu title, but
homes aie iaiely iepossesseu
In theoiy, the lanu title,
but homes aie iaiely
iepossesseu
W7.$3$:. 8".$ 12% annually 12% annually
HD"7 =-3"./D7 S yeais 6mo-18mo
HD"7 5$/6/7# $2,Suu *ueneial infoimation
not available, but foi
the sanitation loan
specifically, the cap is
$SSu
>0$3"#$ BD7.G64
HD"7 !"42$7.
$6umo 5+$$&-( "-/%$!0("%- -%(
/%+-'
=$P"-6. 8".$ 2u% 2u%



!"#$ & A'

J(K B/U"7,D 5":$ 1.-M4

Infoimation foi this case stuuy was obtaineu fiom a vaiiety of stuuies, aiticles, anu
annual iepoits anu supplementeu by infoimation publically available on Nibanco's
website. As an NFI that initially offeieu miciocieuit to entiepieneuis anu expanueu
to offei a housing piouuct, Nibanco is a goou example foi the type of appioach
BRAC might take in tiansitioning to offei a housing piouuct. Paiticulai things to
note in this case incluue Nibanco's innovative loan stiuctuie that offeis clients
shoitei-teim loans that meet existing consumei builuing patteins (piogiessive
builuing).

J(K(' U",E#3D-7M

Nibanco is Latin Ameiica's seconu laigest iegulateu NFI opeiating in Peiu. Initially
oiganizeu as a Nu0, Nibanco latei tuineu into a piivate bank in 1998. In 2uuu, it
launcheu a new housing piouuct calleu Nicasa that offeieu clients loans to finance
home impiovements. Nibanco has been a populai case analyzeu by seveial
ieseaicheis because of its impiessive showing in the fiist yeai aftei the home
impiovement piouuct launch. In one yeai, the Nicasa piouuct was offeieu to S,uuu
clients anu the poitfolio hau ieacheu $2.6 million. By }une 2uu1, Nicasa was
geneiating $1S,S61 a month in inciemental net income.

J(K(< ?4I$: DP HD"7:

The Nicasa home loan is intenueu to finance on-going investments in impiovement
piojects. Such ienovations often entail conveiting woouen walls to biick, ieplacing
zinc ioofs oi uiit floois with cement, oi auuing auuitional iooms. A unique aspect of
the loan piouuct is its unique stiuctuie, which was uesigneu to meet client builuing
habits anu mitigate the challenge of access to long-teim capital. Because clients'
builuing patteins aie piogiessive in natuie, Nibanco is able to offei successive,
!"#$ &A<
small loans with shoitei teims. The loans theiefoie moie closely iesemble
micioenteipiise loans than moitgage loans. The aveiage loan size is $1,uuu with a
teim of less than one yeai.

As the piouuct has uevelopeu ovei the past uecaue, Nibanco has begun to expanu to
offei the option foi longei-teim loans in laigei amounts. Yet, the piogiessive
builuing loans aie still extiemely populai. Nibanco has also uevelopeu a veiy
nuanceu set of teims anu conuitions that offeis uiffeient conuitions anu iates baseu
on which cuiiency is useu (Peiuvian Soles oi the 0S uollai) anu also the natuie of
the applicant's occupation. Noie uetails on these teims anu conuitions can be founu
at the enu of the case oveiview.

J(K(A 56/$7.$6$ !3DP/6$

The typical client of Nibanco's home loan is a low-income woman living in an uiban
centei. When initially launching the piouuct, Nibanco taigeteu its tiauitional
customei base of micioentiepieneuis in auuition to low-income salaiieu woikeis
living in communities wheie Nibanco was alieauy opeiating.

J(K(J HD"7 !3D,$:: Z 1."PP/7#

Nibanco has ielatively fast loan application piocessing times. Loan applications foi
new clients typically take thiee uays fiom the time of submission to uisbuisement.
Repeat loans (an existing client iequesting a new loan foi continueu ienovation) aie
geneially piocesseu in an even fastei time fiame of one uay. Nibanco is able to
achieve these fast piocessing times uue to a uecentializeu loan appioval uecision
piocess. Essentially, Nibanco gives its loan officeis a laige amount of uiscietion.
Loan officeis typically manage ovei Suu clients at a time.

J(K(K H$::D7: "7M 5G"66$7#$:



!"#$ & AA
Nibanco offeis seveial lessons to othei NFIs like BRAC looking to expanu into
housing miciofinance:
1) Nibanco leveiageu its existing bianch anu lenuing infiastiuctuie to achieve iapiu
scale anu piofitability.
2) Nibanco's innovative piogiessive-builu financing offeis an alteinative to the
tiauitional moitgage lenuing foi NFIs who cannot obtain access to long-teim
capital.
S) Nibanco uoes not offei technical assistance oi assist in any way with the planning
oi supeivision of piojects. The success of Nibanco uespite the lack of this assistance
that noimally accompanies a housing piouuct iaises questions as to the necessity of
offeiing constiuction assistance.

J(K(L 1-22"34 DP U":/, HD"7 V$".-3$:

The infoimation below ieflects the teims anu conuitions foi a loan given to a peison
with a salaiieu position using 0S cuiiency; in some aieas, Nibanco offeis uiffeient
teims when local cuiiency is useu oi if the applicant is a business ownei.

HD"7 ?4I$ B/5":" HD"7
HD"7 !-3ID:$ Finance on-going investments in upgiaues
anu impiovement piojects such as conveiting
woouen walls to biick, ieplacing zinc ioofs oi
uiit floois with cement, oi auuing auuitional
iooms, one at a time.

?"3#$. 56/$7. Low income salaiieu woikeis &
Existing miciocieuit clients
=D,-2$7."./D7 8$9-/3$M Age between 2S anu 69
Pioof of Citizenship
Lanu Title
Noimal SBS (cieuit) iating foi past S
months
Copy of last two pay slips
Copy of utility bill
!"#$ &AJ
Bome ImpiovementExpansion Pioject
Plan anu Buuget
=DF7 !"42$7. 8$9-/3$M None (can qualify foi 1uu% financing)
5D66".$3"6 Najoiity secuieu with householu assets
iathei than moitgages.
W7.$3$:. 8".$ Su% - S9% annually
W7.$3$:. 8".$ 1.3-,.-3$ Nonthly payment with giace peiiou of 2
months
HD"7 =-3"./D7 Ninimum of S months with maximum of S
yeais.
>0$3"#$ HD"7 ?$32 6 -12 months
HD"7 5$/6/7# Ninimum of $1Su with maximum of $1S,uuu
>0$3"#$ HD"7 1/X$ $1,uuu
=$P"-6. 8".$ 5+$$&-( "-/%$!0("%- -%( /%+-'



J(L 1*[> 5":$ 1.-M4

This infoimation is uiawn fiom a vaiiety of stuuies, aiticles, anu annual iepoits.
0nfoitunately, the majoiity of ieseaich on SEWA Bank is faiily uateu, but its
expeiience still holus inteiesting insights.

J(L(' U",E#3D-7M

SEWA, oi the Self-Employeu Women's Association, was staiteu as a tiaue union in
Ahmeuabau, uujaiat in 1972, but was fiist iegisteieu as a bank in 1974. Its fiist
funuing came fiom contiibutions fiom about 4,uuu membeis. The bank became a
legally sepaiate entity anu pait of the SEWA Netwoik. The Netwoik is maue up of
about 1uu uiffeient institutions that staiteu fiom the oiiginal SEWA piogiam oi in a
ielateu mannei, anu focus on similai values. SEWA Bank piimaiily opeiates as a
coopeiative bank, meaning its lenuing funus aie maue up of savings fiom its
membeis. In auuition, it has ieceiveu money fiom seveial oiganizations to help
expanu its opeiations anu fuithei covei auministiation costs.


!"#$ & AK

Bespite being one of many institutions of the SEWA Netwoik, SEWA Bank is one of
the most ciucial. The Bank offeis a vaiiety of miciofinance seivices incluuing
savings, financial liteiacy tiaining, anu a vaiiety of loans.

J(L(< OD-:/7# HD"7 !3DM-,.:

SEWA Bank offeis loans piimaiily uiffeiing on the length of the iepayment peiiou as
well as the iequiieu collateial. SEWA Bank offeis both "secuieu" (backeu thiough
jeweliy oi fixeu ueposits helu at the Bank) anu "unsecuieu" (backeu thiough
uemanu ueposits anu guaiantois) loans. The loan type is ueteimineu by the Bank
staff when clients fill out theii iequiieu uocuments, but clients can use uisbuiseu
funus as they see fit.

SEWA Bank cieateu loans specifically uesigneu foi housing. These loans all have
longei iepayment peiious uue to the size of the loan anu its lack of piouuctivity as
an asset. The most populai loan cieateu to auuiess this neeu is the Paki Bhit loan,
available in both secuieu anu unsecuieu foims. This loan is also calleu a "Bouse
Repaiiing Loan," but is intenueu foi moie than just iepaiis. Boiioweis can use this
money to ieplace a ioof, uooi, wall, auu a ioom, auu watei, electiicity, toilets, oi
othei constiuction piojects. The maximum amount the Bank will lenu foi an
unsecuieu Paki Bhit loan was 2S,uuu INR (SS2 0SB) in 2uu2, but has likely
incieaseu since then. The amount lent though is ueciueu upon what SEWA Bank
consiueis the client's iepayment capacity, something they base piimaiily off of theii
savings patteins anu the managei's assessment, though they also take the family
income, family size, living conuitions, anu past loan peifoimance into account.

0nsecuieu Paki Bhit loans aie paitially financeu thiough B0BC0 (an Inuian
goveinmental coipoiation) funuing, but secuieu loans aie funueu by SEWA alone.
While SEWA Bank has uesigneu these loans foi housing, most othei loan piouucts
!"#$ &AL
can be useu foi housing. The Bank estimates that a significant amount is useu foi
housing (Su% in 2uu2).

0thei fees associateu with the loans aie incluueu in the iepayment package. These
incluue uocument fees (4u iupees foi loans up to S,uuu iupees, 6u iupees foi any
loans ovei), stamp fees (11u iupees foi unsecuieu loan woith moie than S,uuu
iupees), anu SEWA Bank membeiship fees.

J(L(A 56/$7.$6$ !3DP/6$

SEWA Bank's taiget clientele aie geneially pooi women who aie self-employeu,
usually in the infoimal sectoi. The majoiity makes less than two uollais a uay anu is
employeu as micio-entiepieneuis, uepenuent sub-contiactois, oi casual laboieis.
Nost women who take out loans fiom SEWA Bank alieauy have householu uebt, but
stuuies have shown that they geneially boiiow to inciease theii outstanuing uebt
anu not just to pay off existing loans.

J(L(J 1."PP/7#

SEWA Bank's housing loans aie auministeieu along with its othei loan piouucts, anu
it uses the same staff foi both. The Bank has foui main positions: Banu Bolueis,
Banksathis, Recoveiy 0fficeis, anu Loan 0fficeis. Banu Bolueis hanule outieach,
maintaining anu ueveloping ielationships with community leaueis, conuucting
assessments on clients' businesses anu living conuitions, collecting loan payments,
anu a vaiiety of othei activities. Banksathis aie community leaueis who iepiesent
SEWA Bank locally. They help Banu Bolueis by uetailing clients' chaiacteis in the
community anu pioviuing what infoimation they can. They also help auveitise the
Bank's financial piouucts. Recoveiy 0fficeis focus on loan payments anu keep tiack
of clients in aiieais. Loan 0fficeis hanule the application piocess fiom the Bank,
ieviewing guaiantois anu helping veiify applications when possible.


!"#$ & AR

J(L(K HD"7 >II6/,"./D7 !3D,$::

SEWA Bank uses one loan application foi all loans, so it falls to the staff to ueteimine
the best matching loan piouuct baseu on what the potential client's backgiounu anu
intenueu use aie. Since many of SEWA's clientele aie illiteiate, the Bank offeis a loan
wiiting seivice as well. These eaily stage tasks aie conuucteu by a hanu holuei.
Aftei an application, the hanu holuei will visit the client's iesiuence to veiify anu
assess the pioposal. These assessments geneially last foi Su minutes. Baseu on this
visit, the Banu Boluei will aujust the application anu iecommenueu loan befoie
submitting it to a loan ieview committee. This committee ueteimines the final loan
amount. If the loan is unsecuieu, the guaiantoi will have to sign the final loan
uocuments anu pioviue an IB caiu anu pioof of income. This peison is ievieweu by
the loan officei. If they pass the ieview, the client then signs the loan uocuments,
incluuing a piomissoiy note, a contiact, a stamp papei, anu a lien papei.

J(L(L B"3E$./7#

As mentioneu befoie, SEWA Bank staff geneially ueteimines which loan people
shoulu apply foi baseu on theii iequests in each bianch. They uo not specifically
auveitise theii uiffeient loan types. They uo auveitise thiough existing lenuing
stiuctuies to piomote theii ability to help theii taiget population.

J(L(R H$::D7: "7M 5G"66$7#$:

0ne of the most significant challenges SEWA has faceu comes fiom theii leniency on
how loans aie useu once uisbuiseu. While loan types aie ueteimineu by the hanu
holueis, theie is a significant pioblem with clients using non housing uesignateu
loans foi housing piojects. SEWA estimates that about Su% of its loans aie useu foi
housing puiposes uespite having only thiee uesignateu housing loans. 0nsecuieu
!"#$ &AS
loans (not the unsecuieu Paki Bhit, housing specific loans) make up 4u% of SEWA's
housing loan poitfolio, anu 49% of these loans aie uelinquent.
1
0thei non-housing
uesignateu loans being useu foi housing (making up anothei 8% of the housing
poitfolio) have uelinquency iates fiom 17% to 24%.

In auuition, the Bank's piactice of basing theii loan iepayments on S% of the loan
size without consiueiing the loan teim has likely boosteu uelinquency iates. If
clients know that theii loan amount is meant to be paiu ovei a 6u month teim, they
may take the full loan teims to iepay. This means they may be uelinquent when
paying theii loans, paying accoiuing to the actual loan teim insteau of the scheuuleu
payments.

J(L(S 1-22"34 DP U":/, HD"7 V$".-3$:

!"E/ UG/. HD"7 \OD-:/7# HD"7] HD"7 ?4I$
0nsecuieu Secuieu
HD"7 !-3ID:$ Foi the iepaii oi upgiaue of an existing
home (incluuing auuitions)
!$3,$7. DP HD"7 !D3.PD6/D 19.SS% .u9%
?"3#$. 56/$7. Low-income
women without
collateial
Low-income
women with
collateial
=D,-2$7."./D7 8$9-/3$M Photogiaph of iecipient
Pioof of iesiuence
Savings book
Pioof of income (ueteimineu
thiough applicant's inventoiy,
income, oi pay stub)
Impiovements cost estimate fiom
constiuction woikei oi mateiials
company
*6/#/@/6/.4 8$9-/3$2$7.: Bave savings account with SEWA
Bank

1
Belinquency iates aie useu because of its status as a coopeiative bank, SEWA uoes
not wiite off bau loans. The piocess is uifficult foi coopeiative banks in Inuia, anu
since SEWA's clients aie its boaiu of uiiectois, the management uoes not want to
piesent a bau message on loan wiite-offs.


!"#$ & AT
Be a membei of SEWA Tiaue
0nion anu SEWA Bank
Bave shaies in the Bank woith at
least S% of loan amount
=DF7 !"42$7. 8$9-/3$M None
5D66".$3"6 uuaiantois oi
uemanu ueposit
accounts
}eweliy oi fixeu
ueposit accounts
W7.$3$:. 8".$ 14.S% 17%
W7.$3$:. 8".$ 1.3-,.-3$ Nonthly payments, S% of the oiiginal
loan amount with inteiest assesseu
quaiteily
HD"7 =-3"./D7 6u months 6u months
HD"7 5$/6/7# 2S,uuu iupees No ceiling
>0$3"#$ HD"7 1/X$ 2S,uuu iupees 2S,uuu iupees
>0$3"#$ BD7.G64 HD"7 !"42$7. 1,2Su 1,2Su
=$6/79-$7,4 8".$ 4% u%

J(L(T YI$3"./7# 1.3-,.-3$
- Aveiage auministiative costs foi active loans between 1998 to 2uu1 weie
about S2 0SB pei loan
- Aveiage ietuin on assets foi 1998-2uu1 was 1u-1S%

J(R W7.$#3"6 5":$ 1.-M4

This infoimation is uiawn fiom a vaiiety of stuuies, aiticles, anu annual iepoits.
While theie is not much infoimation available on Integial's loan teims anu
conuitions, this case was inteiesting enough to incluue because of theii expeiience
with the pilot stuuy on technical assistance anu methous of pieventing the misuse of
housing loans, as well as seveial othei aspects.

J(R(' U",E#3D-7M

Integial was staiteu in 1992 as the housing cieuit piogiam of F0SAI, an Nu0 in El
Salvauoi. In 2uu2, it split away fiom F0SAI anu became a foi-piofit entity with
!"#$ &J)
shaieholueis. Its shaieholueis aie F0SAI, the Buenas-Beiieia Founuation, anu
Accion Inteinational. Integial initially only offeieu housing miciofinance piouucts,
but since then it has expanueu into loans foi small enteipiises, consumption,
housing, as well as othei puiposes anu it now takes savings too. In 2u12, Integial
hau Su,844 boiioweis with a gioss loan poitfolio of 64.2 million uollais with an
aveiage loan balance of 2,u8S uollais.

J(R(< OD-:/7# HD"7 !3DM-,.:

Integial offeis seveial loan piouucts ielateu to housing (which makes up Su-SS% of
its loan potfolio). It offeis home impiovements, lot puichase loans, house puichase
loans, anu loans foi the constiuction of a house. Each loan has uiffeient teims anu
maximum amounts. Beyonu this, Integial offeis inuiviuual home loans anu
"community" loans. Community loans aie geneially given to pooiei clients who
cannot affoiu a moitgage anu have no lanu title. It is uone in tanuem with F0SAI, the
oiganization Integial split off fiom. F0SAI will builu the infiastiuctuie on a laige
piece of lanu anu then give each family a plot on which they can builu with a loan
fiom Integial. Each family is iesponsible foi paying its own loan.

J(R(A 56/$7.$6$ !3DP/6$

As of 2uu6, SS% of Integial's clientele lives below the poveity line of El Salvauoi,
anu Su% lives on less than two uollais a uay. 8% aie consiueieu extiemely pooi.
Integial's clients aie piimaiily women (7S%) with an aveiage age of 4S yeais-olu
anu an aveiage house size of 4.S membeis. Pooiei householus geneially have S.9
membeis, while the non pooi have fewei. A significant poition has not completeu
any foimal euucation, anu 72% uo not have any type of health insuiance. 71%
woiks in commeice anu all clients woik 12 months out of the yeai. S9% ieceive
economic assistance (iemittances) fiom abioau to supplement theii income. The
aveiage householu income foi pooi clients is $61S, foi vulneiable non-pooi it is
$922, anu foi the non-pooi it is $1,744.


!"#$ & J'
J(R(J !"3.7$3:G/I:

Integial paitneis with F0SAI, the oiganization it split fiom, to pioviue the
community housing loans mentioneu eailiei, as well as on othei piojects. This
paitneiship is ciucial foi Integial to be able to offei its seivices to its pooiei clients.
Integial's othei majoi paitneiship is with Accion. Accion is one of Integial's piimaiy
shaieholueis, anu woiks with Integial in a vaiiety of ways. Accion funus ieseaich
foi Integial, incluuing the pilot stuuy on technical assistance as well as stuuies uone
on Integial's clientele.

J(R(K 1."PP/7#

In 2uu6, Integial hau 2uu employees. Loan officeis woiking foi Integial aie
geneialists; none specialize in housing miciofinance. This cuts uown on Integial's
staffing costs.

Loan officeis visit clients 6u uays aftei a loan is uisbuiseu to investigate the housing
woik in piogiess, anu iisk management officeis make ianuom visits to the sites.
This piocess is in place to ensuie that loans aie being useu foi the coiiect puipose.
If it is founu that someone is misusing the loan, Integial will eithei iaise the inteiest
iate to the maximum available oi call the loan uue immeuiately.

J(R(L H$::D7: "7M 5G"66$7#$:

Integial conuucteu a pilot stuuy with Accion in 2uuS anu 2uu4 on whethei offeiing
loans with technical assistance woulu make a bettei piouuct. They wanteu to
auuiess a few conceins that they hau iegaiuing existing loan piactices, such as the
loans financing pooi constiuction piojects baseu on lack of technical skill anu
quality builuing piouucts, as well as some clients finuing that the loan amounts they
askeu foi weie not enough, which iesulteu in half-completeu piojects.

!"#$ &J<
Integial ueciueu to test the feasibility of technical assistance by using two types of
loan officeis. They tiaineu constiuction specialists to be loan officeis as well, anu
they tiaineu loan geneialists in some constiuction piactices. They then useu these
uiffeient loan officeis at uiffeient bianches anu continueu offeiing the loans without
technical assistance in theii othei bianches.

Fiom this stuuy, Integial founu a few key things:
1. Technical assistance uiu not iesult in piojects with highei quality
constiuction
a. This is eithei because clients uiu not want to pay foi highei quality
constiuction, oi they uiu not have the technical ability to use the
impioveu plans
b. The buuget pait of the technical assistance consultation uiu help
clients plan foi the costs of constiuction bettei, iesulting in fewei
unfinisheu piojects
2. It is much easiei to tiain geneialists in constiuction skills than it is to tiain
constiuction specialists to be loan officeis
a. The extia tiaining anu piotocol make housing loan evaluations a
lengthiei piocess than othei loan piouucts
S. 0ffeiing technical assistance uiu not make the loan piouucts much moie
attiactive offeiings
4. 0veiall, technical assistance is unjustifiable beyonu buuget assistance; it
makes the piouuct moie expensive anu uoes not have the uesiieu iesults

J(R(R 1-22"34 DP U":/, W7M/0/M-"6 HD"7 V$".-3$:

HD"7 ?4I$ OD2$ W2I3D0$2$7. OD-:$ !-3,G":$
HD"7 !-3ID:$ To impiove oi expanu
existing stiuctuies
(incluuing builuing new
walls, auuing
infiastiuctuie oi
sanitation.
To buy a new house
!$3,$7."#$ DP HD"7 1S%


!"#$ & JA
!D3.PD6/D
?"3#$. 56/$7. Pooi to vulneiable Non-
pooi
vulneiable Non-pooi to
Non-pooi
=DF7 !"42$7.
8$9-/3$M
None S%
5D66".$3"6 Bouseholu goous,
guaiantoi, moitgage oi a
combination
Noitgage with a
guaiantoi if neeueu
(iequiieu foi loans above
$4,uuu)
W7.$3$:. 8".$ 2S% 2S%
HD"7 =-3"./D7 S yeais 7 yeais
HD"7 5$/6/7# $S,Suu $9,1Su
>0$3"#$ HD"7 1/X$
=$P"-6. 8".$ Integial's uefault iate foi its poitfolio oveiall is 1.41%


K() 5D7,6-:/D7:

Bousing miciofinance is a uifficult fielu to navigate because of associateu challenges.
In many ways, it is iiskiei than offeiing noimal miciocieuit piouucts uue to its non-
piouuctive natuie, longei teims, anu laigei sums. It is still a ciucial seivice to offei,
howevei, because housing is a basic human iight anu an integial pait of human
uevelopment. This is why it is so impoitant foi BRAC, the laigest Nu0 in the woilu,
to launch its own housing miciofinance piouuct anu give thousanus moie people
the oppoitunity to own oi impiove theii home.

This pioject hau seveial uifficulties in auuiessing this subject, piimaiily because it
has not been as thoioughly stuuieu as othei seivices in miciofinance. Some of the
best infoimation available is alieauy ovei a uecaue olu. Even infoimation fiom six
yeais ago shoulu be consiueieu uateu; the iecession has changeu the playing fielu of
finance anu housing finance possibly most of all. Nuch of the cuiient housing
piouucts aie not auveitiseu in accessible ways foi anyone outsiue theii intenueu
clients, anu as a iesult the teims, conuitions, inteiest iates, etc., containeu within
this iepoit may be inexact. Insteau, this pioject shoulu be tieateu as a set of
guiuelines composeu by the BAT as a iesult of theii ieseaich anu the inteiests that
!"#$ &JJ
BRAC expiesseu. Baseu on both of these, the BAT has asseiteu these
iecommenuations foi BRAC when it cieates its housing miciofinance piouucts:

This list is not exhaustive; insteau it contains what the BAT consiueieu paiticulaily
ielative to BRAC oi impoitant consiueiations foi any NFI beginning to offei housing
piouucts.

L() V-3.G$3 8$:D-3,$:

In this section, the BAT has incluueu the contact infoimation of thiee key contacts
they maue on this pioject. They have also incluueu a bibliogiaphy, which can
pioviue a iich souice of fuithei iesouices foi BRAC if it woulu like to examine a
specific stuuy moie in uepth.
# 1
- 0ffei at least S-yeai loan teims foi majoi piojects anu consiuei piogiessive lenuing
foi home impiovements if long-teim loans aie not possible.
# 2
- Collect on collateial.
#S
- Investigate accepting non-tiauitional foims of collateial.
# 4
- Institute ieviews by loan officeis to pievent loan misuse.
# S
- 0ffei a vaiiety of loan teims.
# 6
- Pioviue technical assistance foi clients' buugets oi pioviue it thiough a stiategic
paitneiship.
# 7
- Taiget Nu0s & Bousing Bevelopeis foi paitneis.
# 8
- Biie anu tiain geneialists anu use existing loan piocesses when possible.


!"#$ & JK

L(' 5D7.",.:

?!5
Website: www.tpc.com.kh
Contact: Acting CE0 Sok voeuin
Contact Email: sokvoeuintpc.com.kh
Phone: (+8SS) 81 8uu uu2
Skype: sokvoeuin2

V/3:. V/7"7,$
Website: www.fiistfinance.biz
Contact: CE0 Kevin Lim
Contact Email: kevinlfiistfinance.biz
Phone: (+8SS) 2S 997 9S7

O"@/.". PD3 O-2"7/.4 5"2@DM/"
Website: www.habitatcambouia.oig
Contact: Bousing Finance Nanagei von Chhimvannak
Contact Email: Chh_vannakhabitatcambouia.oig
Phone: (+8SS) 2S 997 84u


L(< U/@6/D#3"IG4

Agaiwal, Auitya; }ain, vikiam; Kaiamchanuanii, Ashish. "State of the Low-Income
Bousing Naiket: Encouiaging Piogiess & 0ppoitunity to Realize Bieams of
Nillions." Nonitoi Beloitte. }uly 2u1S.

Biusky, Bonnie. "Bousing Niciofinance." Bonoi Biief No. 2u. CuAP. August 2uu4.

Baphnis, Fianck; Feiguson, Biuce. 6%+,"-. 7"#$%/"-0-#&8 9 :+"'& (% ;$0#("#&<
Bloomfielu, Connecticut: Kumaiian Piess, 2uu4.

Bahnis, Fianck; Faulhabei, Ingiu. "Bousing Niciofinance." Siua. 0ctobei 2uu4.

!"#$ &JL
"Beveloping Bousing Niciofinance Piouucts in Cential Ameiica." Accion. August
2uu4.

Bewez, Baviu, Neisa, Sanuia, anu Reuuy, Rekha. "ACCI0N Poveity 0utieach
Finuings: Apoyo Integial, El Salvauoi." Accion. Naich 2uu6.

Ball, }oan. "micioN0TE S9: Bousing Finance foi the Pooi: El Salvauoi" 0SAIB.
Becembei 2uu7.

Baque, Nohu. Shamsul. "Banglauesh's Expeiience with Low-Income Bousing
Finance." Islami Bank Banglauesh Limiteu. 2uu8.

Bokans, }ames. "Naximizing Choice: Biveise Appioaches to the Challenge of Bousing
Niciofinance" 0SAIB. Apiil 2uu8.

"Bousing Niciofinance Initiatives Synthesis anu Regional Summaiy: Asia, Latin
Ameiica anu Sub- Sahaian Afiica with Selecteu Case Stuuies." The Centei foi
0iban Bevelopment Stuuies Baivaiu 0niveisity uiauuate School of Besign.
Nay 2uuu.

Kiuize, Amy Bavis. "micioN0TE SS: Babitat foi Bumanity vietnam Paitneiing with
NFIs to Impiove Bousing foi the Pooi." 0SAIB. Apiil 2uu7.

Nalhotia, Nohini. "Nicasa: Financing the Piogiessive Constiuction of Low-Income
Families' Bomes in Peiu." Washington, BC: Cities Alliance, 2uu2.

Naitin, Cailos. "uoing to Scale with Bousing Niciofinance: The Role of Commeicial
Banks." 0SAIB. Naich 2uu8.

Naitin, Richaiu }; Nathema, Ashna S. "Bousing Finance foi the Pooi in Noiocco:
Piogiams, Policies anu Institutions. 0SAIB. }anuaiy 2uu8.


!"#$ & JR

Neiiill, Sally; Nesaiina, Nino. "micioN0TE 26: Expanuing Niciofinance foi
Bousing." 0SAIB. Naich 2uu7.

Neiiill, Sally; Wambugu, Angela; }ohnston, Catheiine. "micioN0TE S8: Bousing foi
the Pooi in Kenya: Nachu's Coopeiative Appioach." 0SAIB. Novembei 2uu7.

Nesaiina, Nino anu Stickney, Chiisty. "uetting to Scale in Bousing Niciofinance: A
Stuuy of ACCI0N Paitneis in Latin Ameiica." Accion. Nay 2uu7.

Seiuman, Ellen anu }ennifei Teschei. "0nbankeu to Bomeownei: Impioving
Financial Seivices foi Low-Income, Low-Asset Customeis." =+"1'"-. 9,,&(,>
=+"1'"-. 5$&'"(: The Biookings Institution Piess, 2uuS.

Schmiut, Stephanie, anu valeiia Buuinich. "Bousing Solutions Seiving Low-Income
Populations: A Fiamewoik foi Action." Ashoka, 2uu6.