Nov 22, 2017

In the run up to European Microfinance Week our media partner Microfinance Gateway talks with Sandra Prieto from Habitat from Humanity's Terwilliger Center for Innovation in Shelter and Laura Hemrika from Credit Suisse about the upcoming session "Strategic Funding for Housing Microfinance."

Gateway: At the European Microfinance Week later this month, you will be part of a panel on "Strategic Funding for Housing Microfinance." What are some of the funding gaps that this sector currently faces? How can different types of funding address these gaps?

Sandra: Housing microfinance, like many innovative sectors still proving themselves and embarking on the path to scale, requires a mix of funding from different kinds of donors, development-focused or patient capital providers, and investors interested in funding different parts of the work. We organized this session to showcase how different types of funding can support, in different ways or at varying stages, the growth and expansion of housing microfinance portfolios and reinforce each other. Blended capital is key to continue building and expanding housing microfinance portfolios; it helps spur innovation to support low-income households so that they can improve their housing conditions.

Laura: Different types of investors have an important role to play in specific contexts to help "graduate" the sector along the steps towards maturity. At an early stage, if housing finance is new to a financial institution, traditional grant capital can be very valuable for doing market research, initiating pilots or providing technical assistance for training or further product development to prepare for scale.

Later on, when trying to get to scale, investment capital that considers the larger loan sizes and longer tenors that characterize housing finance compared with traditional microfinance products, is needed. In specific geographies where housing finance for low-income people is still relatively small with little investment, such as in sub-Saharan Africa, more risk-tolerant investment capital would help scale or serve as a demonstration effect and a strong signal to crowd in more mainstream investors.

Grant or innovation capital could also be used to test and develop new housing-related business models and innovations such as more environmentally friendly or durable materials, less costly inputs or improved building techniques, or sanitation and solar solutions that might revolutionize housing and shelter at the base of the pyramid.

Gateway: Donor funding seems to play a critical role in housing microfinance. Can you tell us why?

Sandra: Donor funding is critical to unlock new markets. From our experience at Habitat's Terwilliger Center, we have found that financial institutions that are either market leaders or strong competitors are the likeliest to take the risk of adding housing microfinance portfolios. But in many cases, they lack the knowledge needed to tailor microfinance products to the needs of low-income clients.

That is why donor funding for technical assistance is very important to support them in developing or refining existing housing microfinance products. Thanks to donor funding, we have been able to provide technical assistance to many financial institutions, helping them to grow and expand their housing microfinance portfolios, as well as increasing the appetite for such products by other strong competitors, and even new entrants into the market.

Read the full interview here

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