HOUSING MICROFINANCE PRACTITIONERS WORKSHOP Presented by: B.S.Vasu - - PowerPoint PPT Presentation

BASIX

Equity for Equity

HOUSING MICROFINANCE PRACTITIONERS WORKSHOP

Presented by: B.S.Vasu BASIX

BASIX

Equity for Equity

Why one should have the house?

• Housing is one of the three basic human needs viz ;

Roti(Bread), Kapda(Cloths) and Makan(House).

• Ever since the origin of life mankind has been striving to

arrange for these basic requirements and continues to do so even today.

• Housing enables us endure the vagaries of nature.
• Various studies have pronounced that people having house are

more social, Law-abiding and conscientiousness about the

• thers’ inconveniences; besides having better health and

contented life.

• Housing is pre-requisite for individuals’ intellectual

&economical growth and social stability.

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INDIA-Housing Demographic details

Source: NHB report

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Particulars Housing Requirements (2007-12) (in million units) Funds Requirements (2007-12) (INR in ‘000 Millions ) R U T R U T Additional Houses 32 16 48 3440 6450 9890 Of which EWS including BPL, MAPL 14 7 22 360 740 1100 Upgradation of Existing Pucca/ Semi Pucca/ Katcha Houses 23 9 32 350 240 590 Total (Additional Houses + Upgradation / Repairs etc.) 55 25 80 3790 6690 10480

• 48 million additional houses are required during Eleventh Plan Period 2007-12;
• There is need for diverse sources of finance and diverse financial instruments

INDIA -HOUSING & FUND REQUIREMENT 2007-12

Source: NHB report

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• WHAT IS THE NECESSITY OF

INTRODUCING THE HOUSING PRODUCT BY BASIX?

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BASIX Concept on Housing

• Housing, particularly for persons with

low income levels,

–is more than a shelter or an asset that is consumed or invested

• Housing can be an asset for

–protection of the family –production platform –income generation

• Existing formal housing finance system has, by and

large, by-passed the poor.

• Hence the need for housing micro finance

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BASIX concept on Housing Cont’d…

◊Housing has direct impact on employment and

income generation - An engine for Equitable and Balanced Economic Growth

◊Impact is in terms of improved habitat, living,

educational, social and cultural standards leading to human capital formation and thereby the future income capabilities

◊Improved productivity leading to enhanced

income, saving and repayment potentials on sustainable lines

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BASIX Credit business model

• DELIVERY MECHANISM/STRUCTURE
• LOAN PRODUCTS
• HOW HOUSING LOANS FIT IN TO OUR MISSION/OPERATIONS

– LIVELIHOOD – SYNERGY

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FX1 FX2 FX3 FX4 FX5 LSA1 LSA2 LSA3 LSA4 LSA5 LSP5 LSP4 LSP3 LSP2 LSP1

FX: FIELD EXECUTIVE LSA: LIVELIHOOD SERVICE ADVISOR LSP: LIVELIHOOD SERVICE PROVIDER UA: UNIT ACCOUNTANT TA: TRANSACTION ASSISTANT OA: OFFICE ASSISTANT UA, TA and OA

UNIT HEAD

BASIX UNIT STRUCTURE

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BASIX LOAN PRODUCTS

24 18 36 24 24 24&36 36 36 18 11

DURATION (Months)

100000(Max) 8000(Max.) 200000(Max.) 50000(Max.) 50000(Max.) 150000(Max.) 150000(Max.) 150000(Max.) 25000(Max.) 25000(Max.) LOAN SIZE (Rs) Vehicle Loan Employees(114) Education loan for Vocational(122) Education Loan for Professional (120) Water &sanitation(127) Energy Loan(126) Gruha Samruddhi (for new Houses & Extension)- (123) House repairs & extension(113)

• Fed. Of SHGS & MACTS(115)

SHG’s/CAG’s/CIGs (107) LOAN PRODUCT ROSCAS(110)

• Gen. purpose women

JLG.(108) Growth Micro Enterprise (106) Micro Enterprise(104)

• Agri. Allied-

Non dairy(117)

• Agri. Allied-Dairy(103)

Agri.-invest- Irrigation(125) Agri.-invest-land development(102) Crop loans-veg(121) Crop loans(101) LOAN PRODUCT 20000 & 40000 50000 (Max) 150000 (Max) 25000 (Max.) 25000 (Max.) 150000 (Max) 25000 (Max.) No Limit No Limit LOAN SIZE (Rs) 36 24 48 36 36 84 36 36 24

DURATION

(Months)

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WHY BASIX IS INTERESTED IN PROVIDING HOUSING LOANS

• LIVELIHOOD:

As a part of its mission BASIX is providing housing loans to their customers. If any person is not having the house means he has not settled properly and livelihood promotion is not complete.

• SYNERGY:

Some of the customers after getting sustainable livelihood with BASIX services, they will be interested in constructing the house . In such cases we help our customers in constructing the house and in turn they will generate employment for others.

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Demand Survey Releasing of final product

Need of Housing Product for BASIX

Data Analysis Product Design Product Pilot

Collaboration With DID

EVOLUTION OF HOUSING PRODUCT IN BASIX

1

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BASIX-DID COLLABORATION

DID has collaborated with BASIX to Evaluate the potential demand for micro housing in Indian Market and to develop the loan product for micro housing. Need for collaboration in INDIA:

• In India the financial institutions are basically

targeting middle class and upper class sections of the society for providing housing loans and the needs of the lower class are totally ignored.

• To fill this gap BASIX has come forward to launch the

Micro Housing loan Product (Gruha Samruddhi) and help the lower and middle class people in fulfilling the their housing needs.

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DEMAND SURVEY

• Two methods we have used to know the demand for housing

1) survey with questionnaire. 2) Focus group discussions.

• Initially a Pilot Survey was done with 30 households each in

three locations .

• Based on the feedback given by our SMG in pilot study review

meeting, we have redesigned the housing demand questionnaire and conducted the actual survey in all the three locations

• Sample locations:
• Metro – Hyderabad Urban Slums
• Urban – Mahabubnagar Urban Slums
• Rural – Mahabubnagar Rural Villages
• Sample Size: Covered a total of 389 Households in 44

sample locations

• 6 Focus Group Discussions have been conducted in three

sample areas.

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DATA ANALYSIS

1. Proposed type of construction. 2. Estimated Cost of proposed Construction 3. Amount willing to borrow by the households. 4. Expected interest rate for the loan 5. Monthly installment willing to pay 6. Income categories of households 7. Various Sources of Borrowing. Parameters Considered for survey:

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DATA ANALYSIS

(1.Proposed type of construction)

• Among the three sample locations 43%
• f the respondents are willing to

Construct New Houses

• 13% of the respondents have opted for

Extensions for Rental purpose

• And same 13% have opted for

Extension for Household Purpose

• Only 11% of the respondents have
• pted for Repair of Roof.

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0% 20% 40% 60% 80% 100% METRO % URBAN % RURAL %

Sample areas

Propsed type of Construction

Multiple Construction Repair of Floor Repair of Walls Repair of Roof Construction of Bathroom Construction of Toilet Construction of Kitchen Additional room for Household Additional room for Rent Additional room for Business Construction of New house

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DATA ANALYSIS

(2.Estimated cost of proposed Housing)

• Among the total respondents..
• 34% - estimated their cost as above
• Rs. 1,50,000/-
• 19% - estimated between Rs. 1,00,000

to

• Rs. 1,50,000/-.
• 31% - estimated between Rs. 50,000/-

to 1,00,000/-

• 13% - estimated as below Rs.50,000/-.

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Estimated cost of proposed housing Cont’d…

Estimated Cost of the Proposed Project

0% 10% 20% 30% 40% 50% METRO % URBAN % RURAL % ALL % Below 50,000 50,000 - 1,00,000 1,00,000 - 1,50,000 Above 1,50,000

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DATA ANALYSIS

(3.Housing Loan Demand)

• It is observed that among the total

respondents, more than 78% of the respondents are willing to borrow below

• Rs. 1,50,000/-.
• 20% -

below Rs. 50,000/-

• 40% -
• Rs. 50,000/- to Rs. 1,00,000/-
• 18% -
• Rs. 1,00,000/- to Rs. 1,50,000/-
• 22% -

Above Rs. 1,50,000/-

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Housing Loan Demand Cont’d…

Housing Loan Demand

Amount willing to borrow METRO % URBAN % RURAL % All % Below 50,000 10 8% 30 27% 38 24% 78 20% 50,000 - 1,00,000 37 30% 47 43% 71 46% 155 40% 1,00,000 - 1,50,000 27 22% 13 12% 30 19% 70 18% above 1,50,000 46 37% 20 18% 17 11% 83 21% No Idea 3 2% 0% 0% 3 1% Grand Total 123 100% 110 100% 156 100% 389 100%

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DATA ANALYSIS

(4.Costumers Expected rate of Interest)

• Among those total no. of respondents

more than 58% of them are expecting an interest rate less than 12% per annum.

• And 39 % of the total respondents

expected an interest rate ranging between 12 to 24 %.

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Customers Expected Rate of Interest Cont’d…

Expected interest rates Location wise Expected Interest Rate Number and % of respondents METRO % URBAN % Rural % All % Below 12% 67 54% 67 61% 93 60% 227 58% 12%-24% 48 39% 40 36% 62 40% 150 39% 24%-36% 8 7% 1 1% 0% 9 2% Na 0% 2 2% 1 1% 3 1% Grand Total 123 100 % 110 100 % 156 100 % 389 100%

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Status of Housing Ownership

100 389 100 156 100 110 100 123 Grand Total 1 1 1 Others 4 14 1 1 2 2 9 11

• Govt. allotted

2 8 1 2 3 3 2 3 Parents House 84 326 94 146 83 91 72 89 Own 10 40 4 6 13 14 16 20 Rented % All % Rural % URBAN % METRO Location wise Type of house lived in

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Status of Housing Ownership

• It is found that majority of the

respondents 84% are living in own houses and the percentage in all the sample areas is 72%, 94% and 83 %in Metro, Rural, Urban respectively.

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Type of Roof

100% 300 100% 118 100% 78 100% 104 Grand Total 41% 122 41% 48 45% 35 38% 39 RCC 25% 75 6% 7 8% 6 60% 62 Sheets 9% 26 20% 24 3% 2 0% Stones 25% 76 32% 38 45% 35 3% 3 Tiles 0% 1 1% 1 0% 0% Thatched % All % Rural % URBAN % METRO Type of Roof b Type of Roof

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Type of roof

• Among the total respondents who own a

house 41% of the households are having RCC roof and 25% of the respondents are equally having Tiles and Sheets

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Family Income Categories

100 % 38 9 100% 156 100% 110 100% 123 Grand Total 15% 57 9% 14 8% 9 28% 34 above 1,50,000 21% 80 19% 29 19% 21 24% 30 1,00,000 – 1,50,000 46% 17 7 50% 78 48% 53 37% 46 50,000 - 1,00,000 19% 75 22% 35 25% 27 11% 13 Below 50,000 All % Al l Rural % Rura l Urban % Urban Metro % Metro Number and % of respondents Family Income Income Category

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Family Income Categories

• It is seen from the above table that 46% of

the respondents fall between the income category of Rs.50, 000/- to Rs.1, 00,000/- per annum. It means that they fall in the monthly income category of Rs.4000/- to Rs.8000/-

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Various sources of borrowing

100% 555 100% 241 100% 144 100% 170 Total 11% 60 9% 21 9% 13 15% 26 Others 3% 16 2% 4 5% 7 3% 5 SHG 47% 261 43% 104 61% 88 41% 69 Banks 14% 75 17% 40 6% 8 16% 27 Money Lenders 3% 16 5% 11 0% 3% 5 Money Remittances 23% 127 25% 61 19% 28 22% 38 Savings % Grand Total % Rural % URBAN % METRO Number and % of respondents Source of Borrowing Various Sources of Borrowing Money to fulfill their Project

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Various sources of borrowing

• The respondents have described the various sources of income from where

they can avail the loan. Multiple options have been opted by the respondents to fulfill their project needs. The above are some of the sources from which they avail the loan. 47% of the total respondents have expressed their willingness to avail loans from Banks, 23 % are willing to meet from their own savings and 14 % would borrow from money lenders.

• Metro: In Metro’s 41 % of the respondents are willing to avail loan from

Banks, 22 % from their savings and 16 % from money lenders.

• Urban: In the Urban the percentage in more when compared to Rural and

Metro of availing loans from Banks, 61% of them are willing to avail from banks, the percentage of lending from money lenders is less with Urban,

• nly 6 % are availing from them.
• Rural: In rural the percentage of respondents availing from money lenders

is more when compared to Metro and Urban, 17 % of the respondents are availing from them and 43 % are availing through banks. Saving percentage is more in rural compared to urban and metro, 25% of the rural respondents are meeting housing needs from Savings.

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Expected Monthly installment

12 6 10 23 Above Rs.3000/- 17 12 15 24

• Rs. 2000 – 3000/-

40 42 43 36

• Rs. 1000 – 2000 /-

29 40 31 13 Below Rs. 1000/- All % Rural % Urban % Metro % Amount

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Expected monthly installment

• 40% are willing to pay a monthly
• Rs. 1000/- to Rs. 2000/-.
• 29% are willing to pay below Rs- 1000/-
• 17% Rs.2000/- to Rs.3000/-
• 12% Rs.3000/- and above.

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Findings

• Proposed type of construction: As per the primary data among

the total respondents majority of them (43%) are willing to Construct New Houses and an equal percentage of respondents 13% each have opted Extensions for Rental and Household Purpose as second option and 11% have opted for Repair of Roof as third priority.

• In Metro (38%) of the respondents are willing to Construct New

Houses and second majority of the respondents are willing to do Extensions for Rental.

• In Urban area first major priority (41%) was given to Construction
• f New House and second major priority was given to do

Extensions for Rental and Household.

• In Rural area first major priority was given to Construction of New

House second priority was given to do Extensions for Household Purpose.

• Estimated Cost of the Proposed Project: The Estimation of the

Housing Project seems to be high in Metro’s as compared to Urban and Rural sample areas. The reason may be due to increase in cost

• f construction rates and scaling up of real estates in Metro’s. It is
• bserved that 50% of the respondents in Metro have estimated

their project cost to be above Rs. 1,50, 000/-. Whereas in Urban and Rural areas more than 70% of the respondents have estimated their project cost to be below Rs. 1,50,000/-.

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Findings

• Among the total respondents 90% of the respondents are willing to

construct houses or additional room for extension or repairs and also avail housing loan for the proposed construction

• Housing Loan Demand It is observed that among the total

respondents, more than 78% of the respondents are willing to borrow below Rs. 1,50,000/-.

• In Metro: It is observed 40% of the households are willing to borrow

loan above Rs. 1,50,000/- and 60% of them are willing to borrow below Rs. 1,50,000/-

• In Urban and Rural : Whereas in urban and rural is is observed that

more than 80% of the respondents are willing to borrow below Rs. 1,50,000/-.

• Different Income Categories across Housing Loan Demand: It is
• bserved that the households with income category below Rs.

2,00,000/- p.a., have opted for a loan size below Rs. 1,50,000/- and the households with income Rs. 2,00,000/- p.a., have opted for loan above Rs. 2,00,000/-.

• Income Category and willing to pay Monthly Installment: It found

that in all the three sample areas, majority of the respondents in the income category of below Rs.1,00,000/- p.a., are willing to pay a monthly installment of Rs. 1000/- to 2,000/-. Only in Metro the households whose income is above Rs. 1,00,000/-, p.a. are willing to pay a month

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Findings

• More than 45% of the respondents are fall in the income category of

Rs.50, 000 to Rs. 1, 00,000.

• More than 45% of the respondents want to construct their projects as an

when they have the money.

• And 47% of the respondents have planned to borrow the money

proposed from Banks and 23% have done savings for the proposed project.

• 58% of the respondents have expressed the willing ness to pay an

interest rate of below 12%.

• 32% of the respondents who are having deed for their own houses

wanted to do extensions for business purpose.

• Majority of the respondents who fall in the income category of Rs.50,000

to 1,00,000 expected a monthly installment of Rs.1,000 to 2,000

• Majority of the respondents whose main occupation is business are

willing to borrow an amount of Rs. 50,000 to 1, 00,000.

• Majority of the respondents whose main occupation is business are

willing to construct new house and willing to avail ranging between Rs. 50,000 to 1, 00,000.

• More than 80% of the respondents are living own houses and of them
• nly 34% of them possess deed for their houses.
• 60% of the respondents are residing in the same houses for more than

20 years

• 59% of the respondents are living in less than 3 rooms are in nuclear

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PRODUCT PILOT

• After product design, we have piloted in 5

locations of different parts in India.

• We have poilted both in BSFL(NBFC) and

KBSLAB(Bank) branch locations.

• Observed the product movement and

received the feedback on product features and process from both employees of basix and customers.

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FINAL HOUSING PRODUCT

• Based on the feedback from employees

and customers we have modified the product features and released to all the units in India from april’09 onwards.

• Because of weather problems product is

not moving fast.

• We have hope that in the second half of

the this FY this product will move in fast manner.

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GRUHA SAMRUDDHI(123) PERFORMANCE AS ON 31ST OCT’09

S.No Parameter BSFL KBSLAB 1 Disbursed Amount(in INRs 000’s) 9646 17170 2 Disbursed Accounts(No) 210 357 3 O/S Amount(in INRs 000’s) 8926 11010 4 O/S Accounts (No) 210 357 5

• Avg. Loan size (in INRs 000’s)

46 48 6 Female customers (%) 43 38 7 OTRR(%) 100 95.90 8 OD Accounts (No) 59 42

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BASIX HOUSING PRODUCT MAIN FEATURES

2%+ST 2%+ST 3%+ST 3%+ST LPF 18% 18% 18% 24% Interest Rate Repairs, expansion and New construction Repairs Purpose 60 60 36(Min.) and 84( Max.) 24(Max.) Loan Tenure ( Months) 200000 100000 150000(Max.) 25 000 (Max.) Loan Amount( Rs) 90 days 90 days 60 days 60 days Moratorium period 3-4 3-4 3-4 1 Number of Disbursements Individual Group & Individual Individual Group & Individual Actual Nature of client 20% 20% 25% 25% Down payment 1 Good 1 Good 1 Good individual Mutual/1 Good individual Guarantors EC & DEED EC & DEED Above Rs 50000/- compulsory Not compulsory Collateral security

NEW OLD NEW OLD

KBSLAB BSFL

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PRODUCT PROFITABILITY

Product BSFL KBS BSFL KBS 123 113 123 113 % % % $ $ $ Loan size 150 000 INR 12 000 INR 100 000 INR Average loan duration 49 24 60 Gross interest income 18.00% 24.00% 18.00% 65 185 INR 3 267 INR 59 465 INR Cost of funds 12.00% 12.00% 9.60% 40 479 INR 1 435 INR 35 509 INR Net interest income 6.00% 12.00% 8.40% 24 706 INR 1 832 INR 23 956 INR Lost on loan 0.50% 0.50% 0.50% 750 INR 60 INR 500 INR Net interest income 5.50% 11.50% 7.90% 23 956 INR 1 772 INR 23 456 INR Loan processing fees 3.00% 3.00% 3.00% 4 500 INR 360 INR 3 000 INR Insurance income 0.30% 0.30% 0.30% 490 INR 240 INR 600 INR Total Income 11.50% 17.50% 13.90% 28 946 INR 2 372 INR 27 056 INR Operational Cost 12.00% 12.00% 10.00% 2 229 INR 1 435 INR 2 560 INR Net income

• 0.50%

5.50% 3.90% 26 717 INR 937 INR 24 496 INR

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Operational cost calculation

Employees yearly Monthly Daily No of loans/day Cost Per loan LSA 100000 273.972603 1.5 182.6 FX 160000 438.356164 5 87.7

UH

250000 684.931507 23 29.8 FM 350000 958.90411 65 14.8 Home office 300000 821.917808 23 35.7 350.6 Premise 10000 10 Computer 100 Phone 12000 12 Stationary/Mail 75 Electricity 1500 12 209 Head office cost 200 Grand total 759.6 Miscellaneous expenses per month 30

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CUSTOMERS AND EMPLOYEES FEEDBACK

• Loan size is not enough for the project of

construction(20-30%)

• Interest rate is competitive
• Loan duration is adequate
• Demand is existing for housing loans

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LIQUIDITY MANAGEMENT

• BASIX housing portfolio O/S amount is

2% of total O/S

• As of now does’nt impact the liquidity

management

• If our Housing portfolio O/S increases,

we have to search for funding sources to overcome the liquidity problem

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Micro Housing- BASIX Experience

Problem Areas Identified Problem Areas Identified Reasons Reasons

1) Non 1) Non– –Availability of Property title Availability of Property title Many own possession rights but not

• wnerships.

2) Non 2) Non– –Availability of Income proof Availability of Income proof

• Unorganized

laborers, seasonal nature of income .

• Applicants working in their own

farm. 3) Non 3) Non– –Availability

• f

House Availability

• f

House estimates / expenditure budget estimates / expenditure budget Civil Engineers / Contractors are present rarely.

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Micro Housing- BASIX Experience…cont’d

Problem Areas Identified Problem Areas Identified Reasons Reasons

4) Repayment Schedule generation 4) Repayment Schedule generation

With seasonal nature of income and non‐regularity, projecting continuous income stream is difficult

5) Delay in House Construction 5) Delay in House Construction

Unavailability of Building materials like bricks.

6) Minimum margin contribution 6) Minimum margin contribution

There is initial delay in contributing the margin.

7) Abandoning of House Construction 7) Abandoning of House Construction in the middle in the middle

As it is not an income generating activity in most of the cases , they abandon it mid‐way

8) High cost of Administration 8) High cost of Administration

Low ticket size and more frequent need

• f interaction owing to lack of

awareness

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POSSIBLE OBJECTIVES FOR SECOND PHASE

• Developing the check list (State Wise) of legal

documents to support the Field staff

• Training the to employees
• Process and procedures
• Relations building with customers
• Verification of the legal documents
• Preparation of report related to the cost of the project.
• Technical assistance to customers
• Project management skills
• Personal and financial management
• Awerness creation regarding amenities
• Increase / extending the Insurance coverage to

customer and house

• Designing of compound Loan product ( Business and

House)

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• GENERAL INFORMATION ABOUT

INDIAN HOUSING MICRO FINANCE (IHMF)

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IHMF – KEY FEATURES

50

Amount of Loan Generally 2 to 7 times larger than average micro-credit loans Term 2 - 5 years for improvement and up to 10 years for fresh construction Delivery Method HMF to SHGs / JLGs through MFIs Collateral Clear titles are generally not available, hence loan is against hypothecation of book debts of MFI. Other forms of security like Group Guarantees, FDRs, etc. Wherever title deeds are available, they are mortgaged. Selection of borrowers Poor people (in Urban and Rural areas) with means of repayment like artisans, craftsmen and people in the informal

• sector. Should have completed atleast

3 loan cycles successfully with MFI. Other features Sometimes a productive loan is also offered (as co-finance) to enhance repayment capacity.

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51

IHMF: RISKS AND MITIGANTS

Risks

• Affordability
• Viability for financing institutions
• Limited access to medium and long term funds
• Insecure land tenure
• Requirement of high element of savings
• Difficulty in obtaining group guarantee

Mitigants

• Need for co-ordination between formal credit institutions to prevent excess

geographical concentration and to develop HMF as a standardized product

• Proper selection of clients – Seasoned clients
• Capacity building – Training, Research and Development
• Insistence on Standard Corporate Governance of MFIs
• Flexible funding mechanisms
• Use of information technology
• Micro insurance

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SIGNIFICANCE OF IHMF

• Creation of assets
• Enhanced social security
• Increased storage capacity
• Increased productivity
• Increased bargaining capacity
• Increased volume of business
• Saving in recurring expenses
• Providing sustainable employment
• Women Empowerment

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A property owning democracy ensures social stability

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Thank you Vasu.b@basixindia.com