microNOTE # 38 HOUSING FOR THE POOR IN : NACHU’S COOPERATIVE APPROACH This case study is a part of a series of The National Cooperative Housing Union, NACHU, is a not-for-profit housing microfinance and technical services organization supporting microNOTES addressing current issues housing cooperatives throughout Kenya. NACHU’s mission is to in housing microfinance. The experience contribute to improved shelter and quality of life for low-income of the National Cooperative Housing communities through the provision of advocacy, technical, and financial Union in Kenya demonstrates the services. importance of advocacy and technical NACHU’s strength is its holistic approach to shelter development: services in that market. NACHU also housing microfinance combined with advocacy and technical services that allow cooperatives to gain access to land and infrastructure, and provides lessons learned in balancing the ensure quality construction. NACHU also supports member importance of low interest rates for cooperatives with training in financial management, governance, and clients, and the ability to access other important topics including HIV/AIDS prevention. commercial capital in order to reach a NACHU’s key challenges are its small size and heavy reliance on scale commensurate with the immense donor funds. NACHU currently has only 300 totaling $690,000, and total accumulated savings are just $379,000 from 2,300 members. scope of the low income housing The portfolio is financed by donations and low cost loans from problem. donors and foundations, while savings are only used as collateral. Since 2004, NACHU has implemented an aggressive strategic plan to increase member savings and tap commercial funding. However, these efforts are dwarfed by the immense need for low income housing.

NACHU’s supply of funds falls far short of existing unmet demand from current members, which is estimated at over $450,000.

HOUSING AND HOUSING FINANCE IN November 2007 KENYA This publication was produced for review by the U.S. Agency for International Development. Like many other emerging markets, Kenya has struggled to provide It was prepared by Sally Merrill, Urban Institute, basic housing for poor and modest income households. Estimated Angela Wambugu, MicroSave, and Catherine housing demand for urban areas is 150,000 units a year, but formal Johnston, DAI. production of housing by both the public and private sectors is currently only 20,000–30,000 shelter at a rapid rate. Benefiting on consumer lending. Although units. from improved macro-economic some of these loans are no fundamentals and a doubt used for housing Government-supported housing reinvigorated banking and purposes, housing finance has has tended to benefit the middle mortgage finance sector, not been a focus for most of the class and civil servants, and in international banks such as microfinance industry. any event, is no longer being Barclay’s and Standard Charter produced in any quantity. In this context, NACHU has have entered the mortgage Central and local governments been a pioneer in providing market, providing vigorous unsuccessfully struggle to microfinance for housing (MFH) competition for Kenya’s provide land, infrastructure, and for poor and very poor clients. restructured housing lenders transport to serve increasing Only a few other groups offer such as HFCK and Savings and demand for shelter in urban products for low income Loan. areas, and slums fill the housing housing. Jamii Bora, a rapidly deficit for the poor. Kenya also has a well developed growing NGO soon to be microfinance sector, including registered as an MFI, provides a An estimated 5.4 million four large microfinance banks wide range of services to the Kenyans live in slums and (Equity Bank, K-Rep Bank, very poor, and is now engaged informal settlements in Kenya, Family Bank and Cooperative in a low cost housing which are characterized by Bank) which serve the upper development project for its severe poverty, overcrowding, end of the microfinance market, members, providing housing insecurity, high unemployment, and about 50 microfinance microfinance loans to the poor sanitation, and organizations, a number of families involved. Habitat for environmental degradation.1 which are quite large. The Humanity and K-Rep has the largest slum in microfinance banks and MFIs Development Agency, both Africa––with over had $225 million in outstanding NGOs, have provided limited 800,000 residents, and there are loans, 3 million savers, and project-based housing 200 other slum areas in and 500,000 borrowers at the assistance. KUSCCO, the around the city. Previous beginning of 2006. As one national union of urban governments had made almost example, the Kenya Women’s SACCOs, offers housing loans no effort to bring sanitation and Financial Trust, the largest MFI to its members. Finally, Family improved shelter to the slums, in Kenya, has a loan portfolio of Bank offers construction loans and corruption and land over $32 million. Kenya’s to its clients, if secured against grabbing by the political elite SACCO movement, with 3000 other developed land. With the exacerbated ineffective land active societies, is the largest in exception of Jamii Bora, policies. Africa, with outstanding loans of however, these groups target Optimism has increased with $1.15 billion. higher income clients than the advent in 2004 of the new NACHU. With a few exceptions, National Housing Policy and however, the microfinance KENSUP -the Kenya Slum sector has not addressed the Upgrading Program–which NACHU AND THE gap in financing low income reflect a strong commitment to COOPERATIVE shelter. Housing lending has not improve living conditions. MOVEMENT gone very far downmarket, and Kenya’s formal housing market the majority of Kenyans, The cooperative movement is is now providing upper income especially the very poor, still historically significant in Kenya, lack access to formal financial and includes the savings and services. The MFIs are primarily credit cooperatives (SACCOs), agricultural cooperatives, and a 1 Source: Kenya Slum Upgrading engaged in small enterprise Program, Ministry of Housing, Kenya lending while the SACCOs focus large number of housing

2 HOUSING FOR THE POOR IN KENYA cooperatives. Housing improving access to housing for Swedish Cooperative Center, cooperatives are community the poor, relative to the and SACOMA, a UK foundation. based organizations that microfinance industry and the These funds, together with facilitate shelter development SACCOS. Indeed, land and interest income, are held in a for members, through lobbying security of tenure are often the revolving fund which was Ksh. on behalf of the group to key constraints to shelter for 47.8 million as of June 2007. acquire land and infrastructure the poor. This loan fund has been financed for housing, increasing access to 80 percent by donations and 20 NACHU’s cooperative finance, and providing or percent from low cost loans. members are genuinely engaging technical services for appreciative of the changes that Historically, NACHU’s member construction. NACHU has brought not only cooperatives were aware that NACHU was registered in 1979 to their improved shelter but to loan capital was provided by under the Cooperative Society their lives as community leaders donors, and deposited savings Act as an umbrella organization and more productive members with NACHU only as required serving the needs of its member of society. The latter is due in to leverage their housing housing cooperatives. NACHU’s large part to the income borrowing, usually a 1 to 5 ratio. mandate was to improve generation activities often Additional savings were likely to housing conditions for the poor associated with members’ be placed in banks or SACCOs, through lobbying and advocacy, improved shelter, such as adding and NACHU did not promote technical services, and financial rooms for rent or for informal itself as a deposit taking services. For many years business activities. Indeed, this institution. NACHU focused primarily on has become a hallmark of NACHU did not pursue the first two activities. In NACHU’s approach. borrowing at commercial rates, lobbying and advocacy, NACHU Most recently, training in issues preferring to rely on low cost assists self-organized surrounding HIV/AIDS has been funds in order to keep its own cooperatives to work with added to the services, rounding lending rates low. Requests to municipal and national out NACHU’s community-based banks for loans at favored rates governments to gain title to and holistic approach. were rejected, as banks serviceable land. NACHU’s considered NACHU’s low technical services include income clientele too risky for assistance in identifying and NEW EMPHASIS ON preferred treatment. NACHU purchasing suitable land, HOUSING FINANCE has relied solely on donors and quantity surveying and foundations to provide subdivision, development of For twenty years housing “affordable” below market rate affordable designs and materials, finance was not developed as a money. identifying and engaging building sustainable line of business for contractors, facilitating purchase NACHU. Housing loans were NACHU became a “victim of its of low cost building materials, limited to specific projects own success” as demand for and supervising construction. financed by donor or foundation housing finance from NACHU NACHU also conducts real funding. Early funding for members increased. Members estate transactions, buying, NACHU came from USAID whose original housing was selling and leasing property, to through an $18 million loan developed through donor generate revenue for its from the Housing Guarantee funding continued to have needs operations. Fund, and from the Ford for housing improvement Foundation. More recently, financing. These members also NACHU’S holistic view of the funds have been sourced from spread the word to other shelter process and its technical Roof Tops Canada, NORAD communities, who organized to and advocacy services are its (Norway’s aid group), NBBL (a become members of NACHU comparative advantage in Norwegian foundation), the

HOUSING FOR THE POOR IN KENYA 3 Table 1: NACHU’s Housing Cooperative Members saving to leverage loans for NACHU’s Cooperative Members 2004 2005 2006 2007 buying or improving their Total No. of Housing Co-operatives - 220 236 248 housing. The coops have nearly Total No. of Active Housing Co- 50,000 members, and only about - 130 152 180 operatives 2,300 are active savers. NACHU No. of Active Savers (individuals) - 1,108 1,243 2,296 hopes that its savings promotion No. of Active Savers–Housing Only campaign will continue to - 1,096 1,218 2,155 (individuals) increase the number of savers, Total Savings Portfolio 4,875,923 13,222,567 18,710,999 25,467,550 particularly those not planning Total Savings Portfolio–Housing 4,698,323 12,894,387 18,080,389 24,959,293 to borrow for housing. Only No. of Active Borrowers (20%-25% Lending activity since 2004 also 47 82 150 330 groups, 75%-80% individuals) jumped, from Ksh. 5.5 million to No. of Active Borrowers–Housing the current portfolio of Ksh. Only (20%-25% groups, remainder 41 69 130 304 individuals) 45.6 million. NACHU’s net income has grown, reaching a but who did not have a pool of members through capacity return on equity of 2 percent in donor capital for financing. building on leadership and 2007. Despite this growth, NACHU did not have sufficient governance, credit management NACHU faces a chronic loan funds to meet member and financial management. shortage of funds relative to the demand, and membership NACHU is also pursuing estimated demand just from its dropped. commercial funds at market current members. The shortfall rates and donor guarantees for is estimated to be at least Ksh Response to Increased commercial borrowing, while 30 million (about $450,000), Demand continuing to seek below representing a need to increase NACHU’s response to member market funds from donors, the outstanding portfolio by 65 demand for housing foundations and social investors. percent. microfinance has required NACHU’s activities in both changes to both its product savings and lending have taken a NACHU’s Housing offerings and its funding strategy. quantum leap since 2004. As Finance Clients In order to expand and refine its shown in Table 1, total savings NACHU has 248 coop housing loan products, NACHU rose from Ksh. 4.9 million to members, ranging in size from engaged in a market research 2 25.5 million by June 2007. 10, the legal minimum, to one and product development with 9200 members. NACHU There are many more savers process, recruited experienced prefers to limit the size of than borrowers at any one time, microfinance loan officers from housing co-operatives to 15 to since it takes most members a two leading microfinance 35 members for ease of long time to accumulate the institutions, installed a new loan management and monitoring; savings required for a loan of tracking system, and revised its the very large housing co- the desired size. There are also accounting system to separate operatives were formed from many more members than lending from technical and other previously existing groups such savers at any time, since only a support activities. as a coffee coop and a teachers’ portion of members will be In order to increase its available SACCO, which then registered loan capital, NACHU initiated as housing coops to benefit an aggressive savings promotion from NACHU’s technical campaign. As part of this 2 The table distinguishes “housing only” services. campaign, NACHU has savers and borrowers from the totals — the others are members who Low income and very low strengthened its relationships have taken out business or education income households form the with individual and cooperative loans.

4 HOUSING FOR THE POOR IN KENYA bulk of NACHU’s clients, MFI loans. NACHU’s 15 percent buildings specifically for although there are also a few interest rate is also lower than income generating purposes. cooperatives whose members the MFI market rate of 20–24 Title is held by the have modest income (such as a percent. In addition, NACHU’s cooperative. doctor’s cooperative). Typical borrowers can attain better Table 2 provides an overview of income is Ksh. 3000 per month leverage from their savings, NACHU’s portfolio. (about $45) although the better generally 5 to 1 as compared off clientele have an average with 2 or 3 to 1 for the Loan size is based on the income of Ksh. 20,000 ($300). SACCOS. amount of the client’s savings This compares with target and the size of the proposed NACHU has expanded its loan incomes of Ksh. 100,000 to project. All the housing loans products to include business and 400,000 for the commercial are granted at up to 5 times education loans, but housing banks. NACHU’s savers and savings, with various maximums. loans account for 98 percent of borrowers include both men Housing loan terms vary from the outstanding portfolio. and women, although women 24 to 72 months. The interest have contributed over 60 The housing loans include: rate for all loans is 15 percent percent of the savings. fixed on declining balance, • The Cooperative New repayable monthly. Loan Housing Loan–Individual application fees are 1 percent of NACHU’s Housing loan for the construction of amount borrowed with a Loan Products new and decent shelter with minimum of Ksh. 100 and a NACHU engaged in a market emphasis on affordability. maximum of Ksh. 1,000. research and product • The House NACHU also charges a fee for development process to define a Rehabilitation Loan– technical services, described set of housing loan products Individual loan for below. All loans are insured at a that met the needs of its improvement of existing cost of 1.06 percent, payable members. NACHU carried out semi-permanent structures upfront to the insurer. a survey to establish target built on land owned by the income levels and better co-operatives or their understand members’ housing NACHU’s Lending members. finance needs. A second survey Procedures of existing products on the • The Resettlement Loan– Eligibility for NACHU loans. market revealed that neither Group loan that assists NACHU conducts a credit banks nor MFIs were offering members displaced by appraisal once a cooperative or appropriate products for internal conflict to buy land an individual applies for a loan, housing for the poor. Thus, and build basic structures; and educates the cooperative NACHU opted to develop the they can later borrow as members about loan terms and in-house capacity to provide individuals to construct conditions, including recovery medium-term housing loans permanent houses. procedures. Individual suitable to its target market. borrowers must provide either • Infrastructure Loan– land title or a letter of allotment The unique characteristics of Individual loan for issued by the municipal council NACHU’s housing loan installation of electricity, (with a letter from the council products include a longer loan water and sanitation indicating they will not sell the term, lower interest rate, and facilities. land before consulting increased leverage of saving. • Income generating NACHU.) For group loans, Seventy-four percent of project loans–Group loan members must submit minutes NACHU’s housing portfolio has for the housing cooperative of the coop meeting where the terms of 48 to 72 months, to develop houses or considerably longer than most

HOUSING FOR THE POOR IN KENYA 5 Table 2: Loans Outstanding by Type of Loan* have been several cases in which Type of Loan Total Percent # of Average Maximum Maximum members have discovered that a Outstanding of Total Coop Loan Size Loan Size Term Loans (Ksh.) Portfolio Loans** borrower has diverted funds Individual New 17,360,825 38.03% 47 280,000 Ksh. 72 months and have written to NACHU Housing Loans 500,000 asking to withhold further Group Rental 10,538,456 23.08 9 1,855,60 Ksh. 48 disbursements. Income Generating 0 10,000,000 Loans Loan Recovery Procedures: Group 10,229,160 22.41 11 32,115 Ksh. 24 If a title is involved, NACHU Resettlement Loans 60,000 holds it until the loan is repaid. Individual 5,946,519 13.03 23 117,000 Ksh. 48 Rehabilitation Loans 200,000 In all cases, risk management Individual 752,804 1.65 4 157,500 Ksh. 24 relies heavily on group pressure. Infrastructure Loans 60,000 For individual borrowers, there Total Housing 44,827,764 98.2 94 (n.a.) (n.a.) (n.a.) is a “double guarantee” Loans structure: an individual Business Loans 666,659 1.46 10 104,200 Ksh. 24 borrower is guaranteed (1) by 500,000 five members, and (2) by the Children’s 157,569 0.35 23 24,600 Ksh. 12 Education Loans 50,000 whole cooperative. For group Total Loans 45,651,992 100.00% 127 (n.a.) (n.a.) (n.a.) loans, the entire group is liable Outstanding ($690,000) for repayment and must be self- managing in terms of enforcing * Outstanding loans at the end of FY 2007 (June 30, 2007). For individual loan types, the number of loans and average size are calculated for disbursements from June 2003 through payment from each individual June 2007. The exchange rate is Ksh. 66 = $1. member towards the group loan. In the event of default on ** All loans are recorded as loans to the member cooperative. Therefore, “group” or “individual” loans are both recorded as loans to the cooperative, but group loans are made an individual loan, the to the cooperative as a whole, while individual loans are made to individual cooperative guarantors exert pressure on members. the borrower, but repayment by the guarantors is not resolution was passed to take a Loan Disbursement and mandatory. For both individual group loan. Monitoring. The housing loans and group loans, if repayment is are disbursed in two stages. Fifty not made, the case is turned A standard template is used to percent is disbursed on loan over to a debt collector. The obtain information on income approval, and the rest upon final action would be sale of the levels and expenditures of satisfactory utilization of the property, with NACHU individual members. Additional first disbursement. NACHU recovering the outstanding underwriting criteria relate to maintains close supervision of its balance. The cooperative is coop membership and savings projects, and the loan officers given the first opportunity to requirements. An individual make quarterly visits. purchase an individual’s borrower must be an active Cooperatives with group loans property. NACHU reports that member of the housing co- are required to meet monthly, none of the group loans have operative, must attend monthly collect the repayments from been foreclosed in this manner. meetings, and must save for at members, deposit them into NACHU’s portfolio at risk (over least 6 months. The loan NACHU’s account and file 120 days) for the housing application letter is prepared by monthly reports on the project microfinance portfolio over the both the individual borrower implementation. Through past three years averaged 4.8 and the group, with individual training, NACHU has sought to percent. This is higher than loans disbursed to the group on ensure that society members Kenya’s MFI average but behalf of the borrower. are accountable to each other considerably lower than several for their actions. In fact, there of the microbanks.

6 HOUSING FOR THE POOR IN KENYA MORE THAN NACHU also produces a • Assistance with obtaining FINANCE: NACHU’S newsletter featuring coop case land is of key importance. TECHNICAL studies and technical While some coop members SERVICES information. The December had received a plot from a 2006 edition, for example, municipality, most had not. NACHU members pay for featured housing designs and an NACHU assists with technical services for most loans examination of the issues lobbying to obtain land, except infrastructure loans. surrounding Kenya’s mandatory providing loans for Infrastructure (utilities) are environmental assessments. In purchase, and providing legal installed directly by the provider addition, NACHU has partnered assistance in titling. and rarely require any technical with Practical Action, a global • Income-generating services for the individual environmental NGO, focusing properties, especially rooms borrower. Rehabilitation, on low cost building materials, for rent and shop areas for resettlement and new housing infrastructure and slum informal businesses, are very loans include a technical service sanitation. important for improving fee of 2.5 percent of the loan Coop Member overall quality of life. Often, value, which is a subsidized Testimonials. Visits to in a progressive building charge. Technical services for housing cooperatives in the process, the rental rooms group income generating loans cities of Mavoko, now becoming are completed first, are at market rates, ranging a “suburb” of Nairobi, and providing the member with between 6 and 8 percent. Nakuru, in the Rift Valley, income to complete the One of NACHU’s key technical provided ample testimony to personal residence portion services is facilitating land the benefits provided by of the dwelling. acquisition and development, NACHU. While the housing NACHU’s holistic philosophy including processing titles, and microfinance loans were of key and breadth of services are providing building plans and importance, nearly all the coop greatly appreciated. Cooperative technical advice for purchasing members spoke of the benefits and community building, housing contractor services and building of NACHU’s other activities: technical services, and most materials. NACHU generally help in obtaining land, technical recently HIV/AIDS, training does not buy land except in the services, and training. They were cited as very important. case of resettlement loans, were also aware of the funding Members are extremely proud where in some instances constraints currently challenging to be members of coops NACHU has bought the land on NACHU. The coop members’ belonging to NACHU. The behalf of the co-operatives in statements stressed several sense of identity and purpose order to leverage its ability to themes: that they feel in the lobby with the local authorities • Lack of funds for additional cooperatives is unmistakable. In for infrastructure and to assist loans and/or larger loans sum, three themes summarize in land titling. This land is then was clearly the most urgent NACHU’s holistic approach: subdivided into plots for the need. Coop members cited “the house that grows” members and NACHU assists in the problem of delays for (stressing incremental building acquiring title for each member. housing improvements or and the addition of rental rooms The total costs incurred are incremental construction and shops), “NACHU as one- apportioned to the individual because funds were not stop shop” (assistance with members; a member is required available from NACHU. community organizing, land, and to pay his portion before Many had sought bank loans low cost building technologies), receiving title, which is held by and were turned down. and “live to build” (the NACHU. HIV/AIDs prevention and care theme).

HOUSING FOR THE POOR IN KENYA 7 THE NEW keep its interest rates as low as Case 1: The Naivasha Traders Coop, with 832 possible, the organization and at members and 648 plots, borrowed $6600 for a STRATEGIC PLAN water project; 62 plots now have housing, some least some of its members for rental income, but the residents are finding it NACHU’s planned activities for realize that there is a beneficial challenging to build new units. 2007–2009 are summarized in compromise between Table 3: housing microfinance, Case 2: Janet used to live in a small one roomed affordability and reaching a scale house made of carton, nylon and mud together training and mobilization, more commensurate with with her husband and three children. After technical services, and lobby and member demand. Thus, getting a loan from NACHU, she built three rooms made of brick, two of which she rents advocacy initiatives. NACHU has just put in place a out and earns income from and one in which she To fund these activities, major new strategy in hopes of has put up a shop. She also upgraded her house taking another leap in funding and now has three rooms made of iron sheets. NACHU will receive donations She intends to extend the building upwards to and low cost loans from donors and attaining greater self- provide family quarters. sufficiency. The strategy includes and foundations, member Case 3: The Uvumulivu Coop, having letters of savings, and income from buying the following: allotment from the Government, borrowed and selling of land, property $77,000 to develop housing. The housing quality • Borrowing from commercial is good and many rooms are rented, but arrears management and technical banks and wholesale lending were nevertheless at 20 percent. services. institutions. NACHU is Case 4: The Bellevue Housing Coop, located in Donor funds are used to finance currently in discussion with Mlolongo, an informal settlement near Nairobi, two banks and two bought land with a loan from NACHU and were lending, community mobilization, helped by to subdivide. Of 139 plots, two-thirds lobbying, advocacy and wholesale lending have been developed and 30 sold to outsiders. community training activities. institutions, which are Repayment has taken a long time, however, and the default rate was 10 percent. Income from buying and selling offering competitive market land, property management and rate loans. Case 5: A Rift Valley coop learned about NACHU from a neighboring coop, and has been technical services is used to • Seeking loan guarantees helped by NACHU to save, borrow, and build. finance the general from donors and The group has now transformed 12 houses from administrative costs of the mud bricks to stone, with NACHU’s technical foundations to facilitate help. institution. borrowing from the banks. New Sources of Funds • Borrowing from foundations 0 percent, and is pursuing These non-commercial sources at discounted rates. corporate social of funds, however, are no longer NACHU has negotiated for responsibility funds from the sufficient to meet NACHU’s funds from Fechim in private sector both locally expectations for growth. Canada at 5 percent and and internationally Although NACHU would like to Zero-Kap in Netherlands at • Aggressively mobilizing members’ savings in order Table 3: Summary of NACHU’s Planned Services: 2007–2009 to use them in lending. Microfinance Training and Technical Services Lobbying and Advocacy Mobilization Activities NACHU has carefully Facilitate shelter Increase the # of Establish housing Increase capital base for considered the uses for each for 1000 active cooperatives resource center microfinance households new source of funds, and the Maximize coop Increase members Pilot test low Lobby for capital from potential impact on the costs to savings and credit in savings programs income housing banks, donors, govt. members for NACHU’s lending potential designs and other support services. In Increase small Hold courses in Develop demo Sponsor forums on land business loans financial projects & allocation & land titling order to both increase its MFH management environmental regs lending and to maintain its key Increase Certify trainers in Initiate non-member Sponsor forums on services, NACHU hopes that infrastructure financial and credit property infrastructure loans: water, management management different sources of funds will sewer, electric, services finance different activities: road access

8 HOUSING FOR THE POOR IN KENYA • Microfinance: commercial An Improved Housing technical services for housing lines of credit, member Policy Environment for the and other community savings, low cost loans New Strategy. NACHU has development support flows been involved in planning for the through the cooperative • Community Government’s initiative to structure, improves customer mobilization, training, address slum upgrading, as well satisfaction and increases lobbying and advocacy: as sites and services and urban member loyalty. donors renewal. Government has NACHU has used the • Administrative costs: dictated major goals for cooperative structure to internally generated funds KENSUP, hoping to have mitigate the risk of lending to from buying and selling land, dedicated $13 billion by 2020; poor clients with irregular property management and however, limited funds seem to incomes through the “double technical services, donors. have slowed initial efforts. guarantee” of 5 individual Serviced land is a key focus, and If the overall cost of capital guarantors plus the coop NACHU and others will form increases under the new guarantee. NACHU also uses coops and assist people in strategy, NACHU’s lending the cooperative structure to addressing their housing needs. interest rate would ultimately reduce monitoring costs of In fact, the Ministry of Housing need to be raised. This increase individual loans. The holistic expects that NACHU will have would require a careful approach, the cooperative to expand its capacity. explanation for the members. guarantee, and the cooperative’s However, in the immediate NACHU is also assisting the role in loan monitoring have future, NACHU will maintain United Nations’ Water and contributed to the provision of the 15 percent interest rate. Sanitation Project in the Kibera good quality housing for This rate remains viable due to slum. Coop/community NACHU clients, and a healthy reduced risk associated with formation will be the next step and growing housing better loan supervision, and following UN work in providing microfinance portfolio. monitoring and training of Kibera residents with ID cards, Alternatives to the cooperatives. and defining neighborhoods Cooperative Structure. internal to the slum. Finally, as an important new Although the housing coop activity in its growth strategy, These initiatives offer additional structure may not be replicated NACHU plans to leverage its opportunities for donor in many countries, the technical capacity in property support. However, they will also combination of functions development, targeting mid- lead to increased demand for represented by NACHU’s “one income earners who are finance from NACHU and stop shelter shop” is an currently not adequately served greater pressure for NACHU to important model for improving by the commercial banks or expand and diversify its loan housing conditions for the poor. MFIs, and who are not capital. These functions may be necessarily coop members. This undertaken by various will entail building and selling combinations of MFIs, NBFIs, houses, beginning on land that IMPORTANCE OF NGOs, and governments. NACHU currently owns, and THE COOPERATIVE Shelter–including land, then purchasing land for future STRUCTURE infrastructure, and housing - is a development. This activity is The cooperative structure helps complicated product, especially expected to increase NACHU’s NACHU provide holistic for the poor, and assistance is income substantially. services that address the shelter required not only with MFH, but needs of very low income also with access to land, tenure clients. NACHU’s provision of security, and low cost

HOUSING FOR THE POOR IN KENYA 9 infrastructure and housing NACHU is at a critical juncture design. The solutions chosen by in its history. Savings and lending lenders will depend in part on have grown steeply since 2004, the roles played by others: that but NACHU continues to face is, the extent to which funding constraints and cannot government addresses land, aggressively seek new members. infrastructure, and low cost This challenge has led to the building methodologies; whether current aggressive strategic plan other groups, usually NGOs, to increase the scale of provide construction assistance; operations via commercial rate and whether community loans, member savings, and organizing needs to be an guarantees for bank loans. integral part of the shelter NACHU’s new strategy solution. recognizes the diversity of funding sources and has CONCLUSION structured an integrated approach to match the NACHU provides a successful appropriate kind of funding to example of an organization that the variety of services provided. offers a holistic approach to the NACHU’s quest is to grow, challenge of improving housing seeking a new compromise conditions for the poor. among commercial funding, NACHU’s advocacy, technical affordability, the provision of a services, and housing finance broad range of services, and the address the broad range of ability to attain scale. needs of low income clients at affordable rates. NACHU offers insights into issues being assessed by groups offering MFH worldwide: (1) whether the lender should offer construction assistance, (2) whether title or tenure security is a necessary prerequisite for a MFH loan, and (3) for slum upgrading projects, whether and how to address the community organizing aspect of on-site and greenfield projects.3

3 For a discussion of these issues and examples of MFH lenders with and without a broad-based shelter approach DISCLAMER involving construction assistance and tenure issues, see Franck Daphnis and The views expressed in this publication Bruce Ferguson, eds., Housing do not necessarily reflect the views of Microfinance: A Guide to Practice, the U.S. Agency for International especially chapters 3, 6 and 7. Development or the U.S. Government.

10 HOUSING FOR THE POOR IN KENYA