INTRODUCING MICROFINANCE HOUSING LOANS an Initiatives Undertaken By

INTRODUCING MICROFINANCE HOUSING LOANS An initiatives Undertaken by

YOSEFO A presentation at the African Microfinance conference August 12-15, 2013 Durban, South Africa By Altemius Millinga Executive Director P.O.Box 75379 Dar es Salaam Tanzania Email: [email protected] Profile of YOSEFO

• YOSEFO is a Microfinance Institutions • Established in 1997 • To date Operate through network of five branches ( Mbagala and Mizizima in Dar es salaam , Ifakara (Morogoro region), Zanzibar and Kilwa (Lindi region) • 24,860 clients • 33 clients for rural housing (pilot): Portfolio Tzs 22,500,000 • Outstanding loan balance as of June 30th , 2013 ; Tzs 6.24 billion or US$ 3.9 million • 52% of clients (rural) FACTS ABOUT RURAL HOUSING IN TANZANIA • The problem of rural housing is the improvement of its quality and durability. • All families own their own homes • Majority built on non durable materials- mud and pole walls, earthen floor and grass thatched roof • Most rural houses require significant maintenance and pose a serious health risk to the occupants • A rural resident can have own as many as 500 cows but his housing is poor • Policy makers are pre-occupied by urban housing issues A HOUSE OF ONE OF YOSEFO’S CLIENT

• . WHY IS HOUSING/SHELTER IMPORTANT FOR THE RURAL POOR • Improves the quality of life • Creates conditions for attainment of better health, hygiene and education • Stimulates economic activities • Enhances productivity • Motivates savings • It is basic need, a personal asset, and a productive asset- produce goods, store inventory, and conduct business. Housing needs of the rural poor

3 or 4 bed room 1 Bed room for parents

house 2 bed rooms for children – boys and girls

Spare room for visitors

Grain store Other buildings small shop (Kiosk) Animal shed/building

Connecting to Improvement of electricity/solar

services Domestic Water system

Latrine HOUSING MICROFINANCE MODEL

CORE PRINCIPLES • Sequential financing approch • User focus • Client control the building this increases the level of ownership and satisfaction by the clients and also helps ensure that the assistance offered is affordable and fits within a family’s livelihood strategy. • Are priced to ensure long term financial viability of the provider (YOSEFO) Microfinance, Agricultural Microfinance loans and rural housing

Agricultural Microfinance Housing loans microfinance Microfinance A rural microfinance client- Looking at the bigger picture

Low productivity of Low level of Poor markets agriculture education

Shelter Education Use of Surrounded by Poor Microfinance Superstition infrastructure Loans Extended Health Family

Contribution to development Money lenders Taxes- projects

9 Who are the clients

Definition

 Existing YOSEFO clients ( Micro enterprise loans)  Must have joined a the agricultural loans program  Permanent resident in a village  In general, rural poor households that do not enjoy access to traditional housing finance APPROACH: product linked to agricultural microfinance loan

. Target Clientele: Rural YOSEFO clients with an agricultural loan . Average loan size: Tzs 750,000 (US$ 468) . Maturity: 1-2 Years/farm seasons . Security  For linked product: accumulated savings as collateral, or group members,  The house/property . Interest: Market interest ( similar to micro enterprise loans . Required time with YOSEFO: Two years . Construction Assistance: Borrower allowed to determine and secure where necessary . Other conditions: Spouse concern needed Potential customer of Sequential Step in financing of housing microfinance Steps of financing this customer

Step 1: Provide roofing (corrugated iron sheets ) for the main house, doors and windows. Estimated loan size: Tzs 750,000

Step 2: Floor and plastering : Estimated loan size at Tzs 650,000

Step 3: Roofing, doors and windows for kitchen, store and visitors room : Estimated loan size Tzs 750,000 Removing grass and replacing it with corrugated iron sheets The numbers

 Target customers over the next three years: 12,900  Customers participating at pilot stage: 33  Average loan size: 750,000  Total loan fund needed : Tzs 9.7 Billion or US$ 6 million Opportunities and challenges Opportunities

 Customers are ready to pay market interest rates As more clients’ children join secondary schools pressure to parents for better houses mounts Micro enterprise loans has given our rural clients the confidence to change lives  The market is huge Red clays bricks are commonly used and affordable ( can be made with family labour Agricultural waste is available for burning of the red clay bricks. Opportunities and challenges Challenges  Funding sources are limited as many funders are used to micro enterprise funding Build yourself culture is not known among our western partners- always think of selling a house Rural communities face high priced building materials  Quality assurance ( building materials and structures) Thanks and have a nice day