Bankable Frontier Weblog

Franck Daphnis and Bruce Ferguson edited the book Housing MicroFinance, recently released by Kumarian Press.

The publishers’ blurb states that this is the “First book to link housing and microfinance”. This may well be so; books tend to lag developments in the field by several years, in part because of the time to edit and publish, especially of a diverse group of papers as this is.

The book may be first; but to me, it seems already dated. The implicit notion of microfinance in the book is the narrow traditional one—the provision of credit for self employed people, with which the modern field of micro credit was born. The book cites examples of microfinance institutions which have successfully branched into micro credit specifically for housing. The leading example to my mind is certainly MiCasa, the housing programme of MiBanco of Peru, which has reported rapid growth in its housing portfolio since starting in 2000. Cities Alliance has also published an overview paper on MiBanco and others.

However, to my mind, most of the more interesting developments in this broader field—namely, the provision of housing credit to those who lack it, especially for home improvements--has been happening beyond these narrow boundaries. For example, one of the most interesting (and potentially largest) housing microfinance programs in the world has to be the Patrimonio Hoy program of Mexican cement giant Cemex. This was profiled as one of the case studies in CK Prahalad’s The Fortune at the Bottom of the Pyramid. It is building material suppliers which have the most incentive to move their goods by developing both savings (linked to remittances from Mexicans abroad) and credit schemes. They also may have more flexibility than many stand alone lenders who may be more heavily regulated; and who may not be able to recover all of the cost or risk in an interest rate—the supplier can recover in the margin on the materials. This is not to say that it is easy: the experience of the Rural Housing Loan Fund, a social venture capital fund in South Africa, is instructive. One of their largest clients was a building material supplier. The supplier developed its own loan book which subsequently went bad: there were the usual reasons for this, which can lead one to conclude that material suppliers should keep out of credit. But this would be premature; and indeed, RHLF clients are trying again—this time Micro Finance Institutions partnering building material centres, with management experienced in consumer credit. This is the space in housing microfinance to watch!