Housing Microfinance: A Guide to Practice

Housing Microfinance: A Guide to Practice

Housing Microfinance: A Guide to Practice

Housing Microfinance: A Guide to Practice

Synopsis

• First book to link housing and microfinance

• Presents international and US experience

As the premier book to provide a comprehensive overview of housing microfinance worldwide, Housing Microfinance sets the standard for future work in the field. The expert contributors combine wisdom from the separate fields of housing policy and microfinance, demonstrating what each can learn from the other.

With solid guidance for practitioners and policymakers, the book reviews important issues for international and domestic microfinance institutions that are considering expanding into housing and for providers of conventional housing loans who seek to offer their services to poor clients who lack collateral or regular income.

Excerpt

Robert P. Christen

The private finance of low-income housing presents the microcredit industry with one of its most dramatic challenges. The purchase of new homes, parcels of land upon which to build, or the major upgrading of a current residence all represent sums of money that require relatively long loan terms to keep payments within the reach of poor families. Yet microcredit operators have built their success on the backs of lending methodologies that keep loan terms quite short, loan amounts low, payments frequent, and that use peer-based knowledge as a basis for assessing a potential borrower’s character (willingness to repay). These techniques were developed precisely to counter the fact that poor families had no collateral to back their credit requests, and that their sources of income, while potentially sufficient, were too unstable and difficult to verify for the longer terms of traditional loans.

Most low-income families would probably be interested in a long-term, lower interest rate loan that they could use to purchase or substantially improve their living quarters. This interest stems from the fact that shelter meets a basic human need and can represent a major capital asset for poor families. Further, land is almost universally seen as an important element guaranteeing old age survival. Land can have a house built upon it; elderly parents who own a house can offer shelter to income-earning children in return for their own maintenance. Or it can be rented for income that provides an old age pension.

In fact, we already know that microcredit clients use the proceeds from their loans, or increased income from their business activities, to improve their dwellings or purchase real estate property.

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