Housing plays an important role in household asset building – providing both a place of protection from vulnerabilities as well as a base from which to be economically productive. Even low-income people prioritize investment in improving their living conditions. The base of the pyramid is estimated to spend over $330bn annually on shelter. The question is why we lack financing for housing? In Sub-Saharan Africa, the shortage of financing for housing is even more acute. As a result, poor and even middle-class households in pursuit of better shelter are often driven into the informal financial sector. Banks generally fail or ignore the financing of low-cost shelter, as the perceived risks and costs outweigh benefits. This problem is further accentuated by ambiguous property rights and legal precedents that constrain conventional ways of financing shelter. Thus, mortgage markets in the region remain small, providing access to only a small, elite segment of the population.
We are delighted to announce the launch of the European Microfinance Award 2017 with its €100,000 prize, this year on Microfinance for Housing, all details of which can be found on the Award website. Each year, e-MFP launches the European Microfinance Award, in conjunction with the Luxembourg Ministry of Foreign and European Affairs and the Inclusive Finance Network Luxembourg (InFiNe.lu). And like previous years with their focus on agriculture, social performance management, the environment, post-disaster and crisis contexts, or last year’s edition on Education, this year’s Award is looking for applications from financial institutions that are innovating, exploring and testing new ideas, that go beyond their core financial services, and exemplify the evolution of the microfinance sector beyond boilerplate microenterprise credit. Housing is a great example of how to do this. After the health and safety of children, there’s probably nothing more important to people everywhere than adequate housing. It is a core human need and a top investment priority for families anywhere. But 1.6 billion people live without adequate shelter. By 2030 this will have doubled and the need will be mostly in urban areas, where more than half of the world population lives today and where it is estimated that 2 billion people will be living in slums, where, almost by definition, substandard and unsafe housing is the norm.
The European Microfinance Award 2016 addressed how the microfinance sector can increase access to education among children and young adults in low-income communities. Won by Kashf Foundation of Pakistan and presented at a ceremony in November during European Microfinance Week, the Award received applications from 19 countries, showing a broad range of interventions by MFIs to help increase access to education. As in previous years, all the semi-finalists’ outstanding interventions have been profiled in a European Dialogue publication, entitled "Investing in Tomorrow", written by Sam Mendelson, with support from Micol Guarneri, Francesca Agnello – the consultants who oversaw the Award application and analysis – and Gabriela Erice and Daniel Rozas from e-MFP. The European Microfinance Award is one of e-MFP’s most prominent activities. A prestigious annual €100,000 Award which attracts applications from financial institutions around the world, it serves two parallel goals: rewarding excellence, and collecting and disseminating the most relevant practices for replication by others. This second goal is where "Investing in Tomorrow" comes in – describing the challenges facing MFIs, the types of interventions that can increase access to education, practical case study examples of the finalists and semi-finalists – organisations which put these models into practice – and what these excellent initiatives have in common.
Microfinance, a lead sector within the larger impact investing spectrum, has gained prominence from development-minded investors over the past decades. Initially, international funding into microfinance was generated largely from donor organizations, including public development agencies and private foundations. As the market gained traction, the role of private capital grew in importance as not only a means for microfinance institutions (MFIs) to reach scale, but also to increase their social outreach beyond what was possible with donor money. Private investors and donor agencies thus joined efforts in creating microfinance investment vehicles, better known in the industry jargon as “MIVs” or more simply “microfinance funds”. MIVs act as the main link between MFIs and the capital markets and usually provide debt financing, equity financing or a combination of both to MFIs located in emerging and frontier markets.