Housing Microfinance Research Articles

Impact of Housing Microfinance on Socio-Economic Indicators: A Study of Prime Minister’s Low-Cost Housing Scheme in Pakistan

The objective of this paper is to check the impact of dividend policy and firm Housing Microfinance / Low-Cost Housing Scheme has been promoted to fill the national housing demand/supply gap in Pakistan in recent years. Prime Minister’s Low-Cost Housing Scheme (PM-LCHS) was introduced with the aim of providing financial assistance to poor and deserving families enabling raise in their living standards. A total of Rs. 8.54 billion has been disbursed so far through Akhuwat Islamic Microfinance. The study aims to empirically test the impact of PM-LCHS loan utilization on beneficiaries’ welfare in terms of socio-economic indicators. This research also proposes to assess governance and administrative efficiency and design effectiveness of the initiative The total population of 17, 344 beneficiaries is sampled using Proportionate Stratified Sampling; Group 1 (stratum 1) constitutes beneficiaries who are in utilization phase and Group 2 (stratum 2) constitutes beneficiaries who are repaying the loan post 100% loan utilization. The proposed frameworks are tested using data collected from 463 beneficiaries. Key findings show that PM-LCHS utilization improved sense of security, societal standing and psychological conditions of respondents. Moreover, the loan utilization has enhanced multiple components of sanitation conditions and housing infrastructure; yet the repayment amounts causing no negative impact on their financial wellbeing. However, PM-LCHS utilization is not found to have any effect on beneficiaries’ health. Furthermore, Akhuwat has administered PM-LCHS efficiently and beneficiaries are satisfied from its governance. Thus, any other financial institution interested in offering such a HMF initiative must have appropriate human resource and skillset to reach the eligible clientele and address their financial requirements like AIM. Though, respondents are satisfied from the scheme as a whole, the study elucidates concerns about some design elements, namely financing limit, repayment period and number of disbursement instalments. These findings again have policy implications for the institutions seeking to enter the HMF market; incorporate these results to formulate the HMF/LCHS product that better suit the financing needs of low-earning people. The originality of this study is theorizing and empirically testing the effect of Housing Microfinance/ Low-Cost Housing Scheme and analyzing the linkages between PMLCHS loan utilization and beneficiaries’ living standards and welfare in Pakistani context.

Financializing Africa’s urban peripheries: the rise of housing microfinance

ABSTRACT Housing microfinance is transforming Africa’s urban peripheries. While many actors, factors, and processes are driving the financialization of peripheral urban Africa, social enterprises and fintech (financial technology) play a key role in making these spaces the “new real estate frontier”. At the same time, efforts to promote financial inclusion are hampered by longstanding challenges related to informality and state bureaucracy that are becoming important sites of regulatory reform and political contestation. The rise of housing micro-finance in urban Africa poses important questions and calls for more critical geographical research. In this piece, I highlight three themes that deserve particular attention: models and impacts, informality and fintech, and restructuring of states and urban governance.

Improving housing conditions: labelled loans in Kenya and Uganda

ABSTRACT We evaluate a non-governmental housing microfinance intervention that attempts to improve housing conditions for low-income populations by simultaneously offering them a labelled loan and non-financial technical support. Using household survey data from Kenya and Uganda, we first show evidence for the successful targeting of our labelled loans because 95% of clients used the loan for the intended housing improvement. Second, our results suggest that access to small, short-term loans enables households to invest in housing upgrades that can significantly improve both the characteristics of their dwelling and their satisfaction with their dwelling.

The Role of Access to Finances and Poverty Reduction in Developing Countries. A Critical Literature Review

Purpose: Financial institutions improves the well-being of participants through job creation, increasing income and building assets (wealth). It makes poor people to be homeowners through schemes such as housing microfinance. The overall objective of this study was to examine influence of access to finances and poverty reduction in developing countries. A critical literature review
 Methodology: The paper used a desk study review methodology where relevant empirical literature was reviewed to identify main themes and to extract knowledge gaps.
 Findings: This study concluded that access to home improvement finances led to improvement in living conditions from living in shanties to permanent dwellings hence better living conditions and reduction in poverty. Access to school fees loans led to higher enrolment rates in schools improving literacy levels in developing countries and hence reducing poverty. Lower interest rates led to more access to microfinance loans and in the long run a reduction in poverty, availability of collaterals meant ability to pay and credit worthiness of respondent’s hence easier access to microfinance loans which leads to poverty reduction in the long run. Favourable credit policy led to increased access to microfinance loans and vice versa.
 Unique Contribution to Theory, Policy and Practice: This study recommended that financial institutions that are able to give out loans to help serve the poor, should arrange mechanisms to improve technical and business skills of the poorest through training and loan utilization. This will enhance their business skills to use credit and establish market channels for their products.

Determinant residential real estate of millennial generation in adapting housing microfinance case Indonesia chapter

PurposeThis study aims to analyze the variables that affect residential real estate demand by millennials based on hedonic demand functions.Design/methodology/approachThe method of analysis in this study is robust regression ordinary least square using cross-sectional data from Indonesian Family Survey Wave 5 (IFLS-5) with a sample of 1.672 households of male married millennials.FindingsThe aspect of millennial generation characteristics is significant on the variables of income, number of dependents, education level and presence of millennial generation in urban and rural areas. While the variable of age of the millennial generation does not significantly influence expenditure for residential real estate. All aspects of the millennial generation’s spending behavior consisting of spending on food consumption, education, health, telephone and internet, transportation, recreation and the variable of the presence of urban and rural millennial generations significantly affect the spending of the millennial generation for residential real estate with the assumption of ceteris paribus.Research limitations/implicationsThe implication of this study brings together the characteristics of the millennial generation with the aspect of behavior to expenditure for residential real estate assets relevant to the needs of the housing microfinance market.Practical implicationsIn this study, it was found that the character and behavior of the millennial generation towards spending on residential real estate can be factors in determining policies by both the government and financial institutions that will serve the millennial generation through housing microfinance.Social implicationsThis implication study, it was found that the needs and behavior of the millennial generation towards the demand for housing microfinance principles according to their character and behavior.Originality/valueThe difference between the results of this study and previous studies is possible because previous studies did not differentiate the unit of analysis for the millennial generation.

Housing microfinance and housing financialisation in a global perspective

The application of microfinance to the provision, improvement or adaptation of housing—‘housing microfinance’—is an increasingly significant area of practice and research interest. Housing microfinance has proliferated, predominantly but not exclusively in the global South. Its proliferation must be understood in the context of financialisation and the concurrently growing importance of financial self-help and private real estate investment. Promoter perspectives emphasise the affordability of microfinance solutions for housing, their appropriateness for incremental housing strategies, and potentially interesting new business models. Critical perspectives emphasise the high costs and continual need for subsidies, risks faced by borrowers and the discipline demanded from them. To advance the debate, we present an analytical typology which maps different housing microfinance approaches in terms of how they connect finance with housing, whether they are credit-led or savings-led, whether the market or the state dominates, whether they are individualistic or community-oriented, and how formal or informal they are. The five articles in this special issue, presenting material from Kenya, Mexico, U.S.A, Thailand and Argentina, collectively advance six avenues of research on housing microfinance: (1) its immediate social impacts; (2) wider impacts in terms of housing affordability, markets and policies; (3) implications for construction and retailing markets; (4) consequences for urban development and societies, (5) the financial work required from participants; (6) and the significance of the ongoing experimentation in housing microfinance.

World Bank experiments in housing: microfinance for self-organised housing in Mexico in the era of financial inclusion

Framed by an agenda of financial inclusion, housing for and by the poor has become a field of experimentation. These experiments have included the introduction of small, non-mortgage loans dedicated to the construction and improvement of self-organised housing. This paper provides a close reading of how such housing microfinance schemes have been introduced in Mexico with the support of the World Bank since the early 2000s. We highlight how the roll-out of the new schemes has been facilitated through several loans aimed at structural reforms of the Mexican housing sector. Yet while wrapped in a pro-poor discourse, it ultimately served the goal of expanding housing finance to low and middle-income groups. The ensuing implementation, however, was a complex and protracted process. We argue that it was characterised by experimentation, negotiations, and failures, both within state institutions as well as between state actors, World Bank representatives, and civil society. The conclusion presents Mexico’s housing agendas as a field of finance-induced experimentation, in which institutional ruptures resulting from the changes in government rub against the long-term engagement of local housing associations and activists. The latter have played an important role in setting noteworthy limits to financially driven interests.

Contrasting housing microfinance with the social production of habitat in the city of Buenos Aires, Argentina

In a context of the state withdrawing from housing provision, despite a persistent shortage of affordable housing, housing policies in Buenos Aires, Argentina, have increasingly diversified. This paper contrasts two different credit-based approaches to low-income housing provision which have been implemented since the year 2000 in the City of Buenos Aires: collective mortgage loans for self-managed housing construction and improvement projects, embedded in a logic of ‘social production of habitat’; and individual housing microloans, following a logic of financial inclusion for low-income households. We examine a case study of each approach and contrast the institutional shifts that have taken place during their implementation, the learning processes each approach facilitates for participants, and the details of how housing is produced in each approach. We conclude that, although housing microfinance and the social production of habitat may appear to follow contradictory logics, they can also be treated as complementary solutions that could be combined to address each other’s shortcomings.

Micro-credit vs. Group savings – different pathways to promote affordable housing improvements in urban Bangladesh

The housing condition of the urban poor is associated with the provision of housing finance. To address this challenge micro-finance has been considered as an alternative option in different literatures. Bangladesh is no exception in this regard. This paper highlights that the urban poor living in diverse forms of settlements in Bangladesh are making use of micro-credit from NGOs for housing-related upgrading activities that is not officially targeted for housing microfinance, but for supporting livelihood strategies. Another model of housing finance presented in this paper is community group savings programme which has been operationalised in Bangladesh over the last few years and promoted especially through the urban development projects by international agencies. This paper is an attempt to identify the salient features of these two provisions of finance in low-income urban settlements of Bangladesh. The paper follows a tradition of research in understanding different modes of housing provision of the urban poor that is related with the access to different form of finance to improve the housing condition of the urban poor. To do so two different cases from Gopalganj and Khulna city are presented, analysed and compared to deepen the understanding of how housing finance is operationalised in practice.

Housing microfinance, saving and credit cooperatives, and community development in low-income settings in Mexico

Abstract Housing microfinance schemes for self-organized housing have been incorporated into Mexican housing policies since 2007. This is the result of World Bank loans to Mexico but also of housing activists who for decades have advocated for the development of financial instruments to support the ‘social production of housing’—a concept defined by them as a type of housing production geared to meet families’ shelter needs rather than to enhance capital accumulation. While these World Bank housing loans were mainly oriented to strengthen the housing finance sector, the housing activists pushed for the inclusion of saving and credit cooperatives as housing microfinance providers. These cooperatives seek to promote at the local level, alternative development projects built on solidarity economy principles. Taking inspiration from critical literature on the co-optation of progressive actors by international financial institutions we highlight the activists’ agency and examine their role at the community level. We argue that processes of co-optation pushed by international financial institutions can always be contested and negotiated at a local level. We propose that, in this case, the engagement of progressive actors such as saving and credit cooperatives working according to principles of the solidarity economy could open political opportunities to subvert financial rationalities inscribed in the housing finance schemes of the World Bank.

Assisted Self‐help Housing in Mexico: Advocacy, (Micro)Finance and the Making of Markets

AbstractThis article examines forms of housing finance that offer poor households opportunities for sourcing resources for construction work through non‐mortgage microloans. In Mexico, these housing microfinance schemes have recently been incorporated into national housing policies. On a global level, the past 10 to 15 years have seen the emergence of institutional investment in microfinance. I reflect on these processes in this article by bringing critical accounts of financial inclusion in development studies and the debate on financialization within urban studies and beyond into dialogue. I combine micro‐ and macro‐scale perspectives to examine how households become financial clients and how finance gains influence by expanding capitalist markets into the informal housing sector. This discussion is based on policy review and document analyses and an empirically grounded account of an assisted self‐help housing case study. In the article I draw on three focal concepts—risk, debt and marketization—to highlight the ambivalences of the expanded access to finance for poor households engaged in self‐organized building practices. These ambivalences emerge from the multiplicity of operational logics and motivations in the field of housing provision for the poor, and the profoundly conflicting rationalities of financial‐ and social‐sector actors.

The motivations of microfinance institutions to enter the housing market in a developing country

Microfinance is a potential powerful avenue to support the lowest socioeconomic groups in the housing market of developing countries. The purpose of this article is to consider what motivates microfinance institutions (MFIs) to enter the housing market through a factor analysis approach. A survey of 125 respondents was undertaken in two regions of Ghana. Factor analysis was conducted to identify underlying latent variables that had significant effects on MFIs’ decision to enter the housing market. The findings indicate that four important determinants emerge: MFIs' interest for profit, the ease of entry into the housing market, interest for growth, and the perceived desire of the lowest socioeconomic groups for homeownership. The study also implies that some nuances help explain the demand and supply perspectives of housing microfinance in developing countries.

Stimulating growth and improving the delivery of housing microfinance interventions

PurposeThe emergence of housing microfinance (HMF) as a response to the low-income groups’ inability to access traditional housing finance is an innovative strategy by creative Microfinance Institutions. Yet, low-income groups’ still face barriers in accessing these innovative products, particularly in Ghana. This paper aims to examine the critical demand barriers and how to develop and improve the design and delivery of HMF interventions in the low-income housing market in Ghana.Design/methodology/approachThe paper achieves its aim by adopting a focus-group discussion strategy to examine the constraints to the demand for HMF among low-income groups’ in Ghana.FindingsNine factors constrained the design, delivery and demand for HMF – affordability issues; risk; land tenure insecurity; high interest rate; collateralization and insurance challenges; unfavourable HMF loan conditions; lack of social capital; high cost of land and building materials; and ineffective consumer protection.Research limitations/implicationsAlthough limited to low-income groups, strategies to stimulate demand for HMF should focus on three broad problems – affordability, macroeconomic management and institutional development and government intervention.Social implicationsThe paper makes significant contributions to the body of knowledge, regarding understanding the low-income housing market and its financing in the context of a developing country.Originality/valueThe novelty of the paper is founded on the premise of the research methodology adopted to unearthed the barriers to the demand of HMF in Ghana. Future research effort should be directed at exploring the motivations behind low-income groups’ decision to demand HMF and the risk associated with the use of HMF in the context of Ghana.

THE ROLE OF MICROFINANCE FOR HOUSING OF LOW-INCOMES: THE CASE OF BALTIMORE

ABSTRACT Purpose: This study proposes to map the barriers to scaling the microfinance industry in the U.S., as it pertains to home maintenance and improvement for low-income households. The selected context of analysis is the American city of Baltimore, due to the city’s high need for housing repair and large percentage of residents with limited access to finance. Originality/Value: Most research has discarded microfinance as a viable option for a housing market solution in the U.S. This paper discusses how the market of microfinance for housing repair could improve its financial sustainability seizing the smaller dollar value of repair loans, relative to housing purchase, and the high and recurring need for repair. Design/methodology/approach: Qualitative research was conducted on how microfinance for housing repair works in Baltimore City, leveraging secondary government and private research, along with interviews with lenders and borrowers. Data were analyzed through PESTEL framework, describing the macro-environmental context. Findings: The market for Housing Microfinance (HM) loan products in Baltimore matches the academic literature. Similar market demands exist as they relate to an increasingly aging housing stock. Lender supply of financing seems “healthy”, but it is mostly from philanthropic or government sources favoring “affordability” over financial sustainability.

Poverty no longer compounded daily: SDI’s efforts to address the poverty penalty built into housing microfinance

The network of slum dweller federations known as SDI has innovated a form of local financing derived from the collective savings of urban poor groups. This addresses three shortcomings of conventional microfinance: its inability to reach very low-income people, its limited role in community mobilization for longer-term social change, and its constraints in terms of leveraging subsidies from the state and the market. SDI’s national and international urban poor funds have been used, among other purposes, for providing basic services and upgrading homes in informal settlements. Further, SDI’s model of federating urban poor communities and their funds at city, national and international levels has enabled mature federations, capable of financially sustainable projects, to cross-subsidize learning and precedent-setting projects in which full cost recovery is not feasible. This produces an outcome whereby the combined portfolios of all the national funds are able to match financial outflows with inflows. At the same time, the federations that co-manage these funds and the projects that they finance are able to escalate the production of social capital amongst the urban poor and to generate impact through changed relationships with government.

De/motivations in housing microfinance delivery in Ghana

PurposeThe purpose of this paper is to explore the de/motivation variables in the delivery of housing microfinance (HMF) in the low-income housing market in Ghana.Design/methodology/approachThe paper relied on a survey of 125 respondents of microfinance institutions (MFIs) to understand the interactions and effects of these variables on HMF delivery in Ghana. Descriptive and bivariate statistical methods were used to analyse the data.FindingsThe findings revealed that both internal and external variables motivate MFIs to engage in the low-income housing market. These variables are: MFIs desire for expansion, the potential size of the low-income housing market, the market potential for MFIs growth, the availability of local resources, unique features and products of the market, low-income housing offering an opportunity for leveraging resources and the preference for homeownership than rental among individuals in the low-income segment of the population. However, variables such as capital lock-up in HMF delivery, high-interest rates in the country, high cost and land prices, high cost and price of building materials, lack of sufficient collaterals and the different interest rates required on HMF loans also served as demotivation in the low-income housing market in Ghana.Research limitations/implicationsThe paper findings are limited in context to Ghana.Practical implicationsThe paper, although limited to Ghana, contributes to the much-needed body of knowledge on low-income housing finance in developing countries.Originality/valueThe paper is the first of its kind in using empirical data to explore the motivational and demotivational variables in the delivery of HMF in a developing country context such as Ghana.

Another look at housing finance in Africa

Purpose – Most households in Sub-Saharan African cannot afford adequate housing. Most often, their pension benefits are also meagre, usually resulting from low contribution levels and mismanagement. Coupled with low life expectancies, most would not live to enjoy the benefits of pensions, thus validating the need to utilize their hitherto deferred pension benefits for immediate housing investment and consumption. Design/methodology/approach – Quantitative research methodology via the present value technique was used in valuing pension benefits to demonstrate the potential of pension schemes as savings mobilization mechanisms for long-term pension-backed housing financing in Ghana. Findings – Policy wise, the paper provides some evidence to support proposals for the development of pension-backed housing finance systems in Ghana with lessons for Sub-Saharan Africa. The authors demonstrate that the Tier 2 defined contribution mandatory occupational pension scheme could serve the purpose of a savings mobilization mechanism for long-term housing financing. The authors observe that by increasing the Tier 2 contribution rate to 30 per cent, the majority of the sample, mainly of the middle-income class, could accumulate between US$11,000 and US$17,000 over their working life. At the same rate, between US$5,783 and US$9,550 could have been raised as savings between 2010 (when implementation began) and 2014. This could form a substantial equity contribution in a mortgage investment and or borrowed on a housing microfinance basis. Originality/value – The paper contributes to the ongoing debate on the need to develop alternate savings mechanisms and collateral assets using pension assets, other than property, for mortgage financing. The proposals made are aimed at influencing policy by way of advocating for the use of latent pension equity to improve the housing conditions of members while they are alive, and also to suggest pension-backed housing financing as an alternative investment option. A comprehensive study would be required to settle issues of scalability, pricing and model design.

Tenure Security, Land Titles and Access to Formal Finance in Upgraded Informal Settlements: The Case of Dar es Salaam, Tanzania

Pro-poor land policies have recently emerged in reconceptualising access to housing finance in low income settlements in developing countries. In Tanzania, this concept has been adopted to enable dwellers in urban informal settlement to enjoy perceived tenure security. Settlement upgrading has further increased perceived security. Interestingly, titling projects aimed at facilitating access to credit from formal financial institutions have been implemented in already upgraded settlements. Based on empirical investigations in two settlements in Dar es Salaam, the paper explores the take-up of titles and subsequent use to access credit. Findings show that take-up is slow and very few property owners have accessed credit. In contrast to arguments by several scholars, tenure security is not a simple matter of being legal or illegal or formal or informal. In the illustrated cases, loans were neither used to improve houses nor open businesses, but to expand on-going profitable businesses. Loans were repaid and no property has been taken away, presenting a win-win situation. The paper concludes that the use of titles to expand on-going profitable businesses provides new lens with which to look at alternative uses of residential licenses (RLs). Through this lens, property owners were able to use titles to access relatively large microenterprise development loans. It recommends further, that there is a need to promote the acquisition and use of titles. Financial institutions are challenged to design and implement context specific housing microfinance products that make ownership of RLs a necessary condition for accessing loans.

Housing for the urban poor: towards alternative financing strategies for low-income housing development in Ghana

This article aims to provide an understanding of the housing market situation in Ghana, the financing instruments available and the challenges faced by low-income households in accessing housing finance. The gap between income and house prices is shown to be huge across different groups in Ghana. It is also demonstrated that conventional mortgage finance is inaccessible to low-income households due to high payment-to-income ratios, lack of cash for down-payments and long repayment periods. Three alternative housing finance strategies are proposed: first, practical approaches to financing housing development through the spatial planning system; second, strategies to develop and make housing microfinance accessible to low-income households; and third, strategies to mobilise labour for housing development at reduced costs through community-based initiatives. Together, these alternative strategies could provide sustainable and affordable housing finance options for low-income housing development in Ghana.

Islamic Traditional Values: Towards Women Empowerment and Housing Microfinance in Pakistan

Islamic Traditional Values: Towards Women Empowerment and Housing Microfinance in Pakistan