Evaluation Report 6/2011
Evaluation of the Experimental Reimbursable Seeding Operations
Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee 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O. Box 30030, 00100 Nairobi GPO KENYA Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Tel: 254-020-7623120 (Central Office) Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO www.unhabitat.org Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian 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Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX HS/003/12E Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO ISBN(Series): 978-92-1-132028-2 Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba OroDECEMBER NIO Ugandan Shilling UGX 2011 Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee ISBN (Volume): 978-92-1-132420-4 NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Evaluation Report 6/2011
Evaluation of the Experimental Reimbursable Seeding Operations
DECEMBER 2011 ii Evaluation of the Experimental Reimbursable Seeding Operations
Evaluation Report 5/2011 Evaluation of the Experimental Reimbursable Seeding Operations
This report is available from http//www.unhabitat.org/evaluations
First published in Nairobi in December 2011 by UN-Habitat. Copyright © United Nations Human Settlements Programme 2011
Produced by Monitoring and Evaluation Unit United Nations Human Settlements Programme (UN-Habitat) P. O. Box 30030, 00100 Nairobi GPO KENYA Tel: 254-020-7623120 (Central Office) www.unhabitat.org
HS/003/12E ISBN (Series): 978-92-1-132028-2 ISBN (Volume): 978-92-1-132420-4
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Acknowledgements Author: Johan Hyltenstam Editor: UNON Conference Services Design & Layout: Irene Juma
Photos: © UN-Habitat & Julius Mwelu/UN-Habitat Evaluation of the Experimental Reimbursable Seeding Operations iii
Table of Contents
Abbreviations and Acronyms vi
Executive summary 1 I. Introduction 1 II. Methodology 2 III. Key findings and challenges 3 IV. Key conclusions 6 V. Lessons learned 6 VI. Key Recommendation 7 1. Introduction and context of ERSO 9 1.1 Introduction 9 1.2 Mandate 9 1.3 Context of ERSO 9 1.4 Purpose and objective of ERSO 10 1.5 Scope and objectives of the evaluation 11 1.6 Report structure 11 2. Evaluation methodology 12 2.1 Design of the evaluation methodology 12 2.2 Methodological limitations and constraints 17 3. Analysis and findings 19 3.1 Findings on ERSO design and implementation 19 3.2 Findings on the ERSO programme Trust Fund and loan portfolio 24 3.3 Findings on the performance of the ERSO Trust Fund 31 3.4 Findings on comparison between lending programmes in the United Nations system 36 3.5 Findings on the innovative mechanism 37 3.6 Findings on collaboration within the United Nations and with partners 39 3.7 Findings on international best practice with regard to the delivery of finance for low-income housing 41 3.8 Findings on the ERSO programme target groups 41 3.9 Findings on technical and financial risks 47 4. Conclusions, lessons learned and recommendations 51 4.1 Design and implementation mechanism 51 4.2 Performance of the ERSO Trust Fund 52 4.3 Comparison with lending programmes within the United Nations system 53 4.4 Innovative financial mechanism 53 4.5 Collaboration within the United Nations and with partners 54 iv Evaluation of the Experimental Reimbursable Seeding Operations
4.6 Technical and financial risks 54 4.7 International best practice with regard to the delivery of finance for low-income housing 55
Annexes 56
I. terms of Reference 57
II. suggested key questions from the terms of reference 65
III. questionnaire 67
IV. results of the questionnaire 71
V. concept note on a global microhousing facility 74
VI. concept note on first loss arrangements 76
VII. List of people interviewed 79
VIII. Background documents reviewed 83
IX. glossary 85
X. resumes OF THE FORMER AND CURRENT STAFF OF THE ERSO PROGRAMME 86
XI. operational support for lending and project finance portfolios 93
XII. short reports on the ERSO loan projects 94
XIII. Expert Consultation Process 19 October – 5 November, 2007 97 Evaluation of the Experimental Reimbursable Seeding Operations v
LIST OF FIGURES AND TABLES
Figures
2.1. Evaluation process 16
Tables
2.1. Methods used and type of information collected 12 2.2. Stakeholder consultations in the evaluation of the ERSO programme 15 3.1. ERSO programme staff key qualifications 20 3.2. ERSO programme key performance indicators 25 3.3. ERSO programme loan projects as at 31 January 2011 26 3.4. ERSO programme loan projects: design and challenges 28 3.5. ERSO Trust Fund summary as at 31 January 2011 32 3.6. Comparison between lending programmes in the United Nations System 34 3.7. ERSO programme collaboration with financial institutions to connect with target groups 39 3.8. International best practices with regard to the delivery of finance for low-income housing 42 3.9. Gross domestic product per capita in ERSO programme countries or territories 45 3.10. ERSO programme project beneficiaries 46 3.11. ERSO programme objectives collated with evaluation criteria and main findings 49 vi Evaluation of the Experimental Reimbursable Seeding Operations
Abbreviations and Acronyms
AMAL Affordable Mortgage and Loan Corporation ARBAN Association for Realisation of Basic Needs BEA Bank Enterprise Award Programme CBO Community Based Organisation CD Certificate of Deposit CDC Community Development Corporations CDFI Community Development Financial Institution CPR Committee of Permanent Representatives CRA Community Reinvestment Act DED Deputy Executive Director, UN-Habitat DFID Department for International Development of the United Kingdom of Great Britain & Northern Ireland ED Executive Director, UN-Habitat ERSO Experimental Reimbursable Seeding Operations GC Governing Council HFHI Habitat for Humanity International IAS International Accounting Standards IFAD International Fund for Agricultural Development IFC International Finance Corporation IFI International Financial Institutions IFRS International Financial Reporting Services KfW Kreditanstalt für Wiederaufbau MDB Multilateral Development Bank MDG Millennium Development Goal M&E Monitoring & Evaluation Unit, UN-Habitat MEII Middle East Investement Initiative MFI Micro Financial Institutions MLI Multilateral Lending Institutions MTSIP Medium-Term Strategic and Institutional Plan NGO Non-Governmental Organisation OPIC Overseas Private Investment Corporation PRODEL Fundación para la Promoción de Desarrollo Local (Program for Local Development) PSD Programme Support Division SAKAN Palestinian Affordable Housing Association SDI Slum Dwellers International SIDA Swedish International Development Cooperation Agency SMC Steering and Monitoring Committee of ERSO SP4/HSFD Special Programme 4, Housing and Settlement Financing Division SUF Slum Upgrading Facility TA Technical Assistance ToR Terms of Reference UFBT Urban Finance Branch Team UGAFODE Uganda Agency for Development Limited Evaluation of the Experimental Reimbursable Seeding Operations vii
UN United Nations UNCDF United Nation Capital Development Fund UNDP United Nations Development Programme UN-Habitat United Nations Human Settlements Programme UNON United Nations Office at Nairobi WSTF Water and Sanitation Trust Fund viii Evaluation of the Experimental Reimbursable Seeding Operations Evaluation of the Experimental Reimbursable Seeding Operations 1
Executive summary
Local residents outside their home in Kathmandu, © Nepal IRIN/ Nareesh Newar
I. Introduction Trust Fund. What distinguishes ERSO is that it is a loan programme, and some of its 1. The United Nations Human Settlements activities are reimbursable, whereas other Programme (UN-Habitat) is responsible for innovative financing arrangements are grant promoting sustainable urban development, programmes. and is the lead United Nations agency responsible for attaining the target set in the 3. The overall objectives of the ERSO programme Millennium Development Goals of improving are: the lives of 100 million slum-dwellers by the year 2020. One means of achieving (a) To field-test experimental and reimbur- that target is using innovative approaches sable seeding operations and other in- to encourage Habitat Agenda partners to novative operations for financing the engage in low-income housing projects urban poor for housing, infrastructure and schemes that Governments, non- and upgrading through community governmental organizations and community- groups, including where there is an based organizations can use to reach a expectation of repayments mobilizing greater number of low-income households. capital at the local level; and (b) To strengthen the capacity of local 2. The Experimental Reimbursable Seeding financial and development actors to Operations (ERSO) programme was designed carry out those operations and to and implemented in response to UN-Habitat support the capacity of UN-Habitat to Governing Council resolution 21/10 of 20 enhance those operations. April 2007, in order to increase sustainable financing for affordable and social housing and 4. The evaluation described in the present infrastructure during a four-year experimental report was mandated by the Governing pilot period, 2007–2011. The programme Council of UN-Habitat in paragraph 7 (i) of complements the Slum Upgrading Facility its resolution 21/10, in which it decided that Programme and other innovative financial an evaluation would be conducted at the mechanisms such as the Water and Sanitation end of the experimental activities in 2011. Its 2 Evaluation of the Experimental Reimbursable Seeding Operations
strategic intent is to provide information to contributed their views to the evaluation in guide any decision by the Governing Council other ways. at its twenty-third session on potential future 7. The evaluation faced constraints including applications of ERSO. inability to meet all key stakeholders; low 5. The objective of the evaluation is to assess response rate to the questionnaire for progress on implementation of the ERSO comparative analysis with other United programme during the experimental pilot Nations lending programmes; timing of period, and to suggest alternatives for more impact difficulties in the evaluation; and effective implementation of future activities. lack of standards for international best The evaluation was conducted during the practice for comparative purposes in this period from October 2010 to February 2011 new and innovative area of finance. The by an independent external evaluator, Mr. huge geographical distances and the limited Johan Hyltenstam. It assessed the ERSO time available for the evaluation made it programme design, outputs, expected impossible for the evaluator to meet all the outcomes and preliminary impacts. The key stakeholders in person and relevant methodology, key findings, lessons learned actors involved in the ERSO programme. and recommendations are highlighted in the Meetings were limited to Nairobi and the executive summary and detailed in the main project sites in the Occupied Palestinian report. Territory and Uganda. This limitation was, however, minimized by reaching other key stakeholders by phone and/or e-mail. II. Methodology 8. There was limited response to the 6. The evaluation used a variety of methods, questionnaire used to collect information including in-depth review and analysis of on other lending programmes in the United relevant programme documents; interviews Nations system. The Terms of Reference with key stakeholders, face-to-face, by of the evaluation requested a review of telephone and e-mail; a questionnaire, and other lending programmes and operations field visits to UN-Habitat Headquarters and within the United Nations system, such as projects in selected countries. The evaluation the United Nations Capital Development assessed ERSO programme design, processes Fund (UNCDF) and the International Fund and implementation. A risk analysis was for Agricultural Development (IFAD), for also undertaken, including the resource comparative analysis of aims, organizational implications of the proposed mechanisms structure, staffing and operations. Although in ERSO and other activities tested during these organizations were contacted and the experimental period. The evaluation some telephone discussions held, they did was guided by the criteria of relevance, not respond to the survey questionnaire, effectiveness, efficiency, sustainability making a full comparative analysis impossible. and impact. It considered stakeholder participation and contributions vital. More 9. It is too early to assess the full developmental than 50 individual stakeholders, including impact of the loans made under the ERSO members of the Committee of Permanent programme. The ERSO loans were funded Representatives (CPR), the Steering and in the first quarter of 2010 and they have Monitoring Committee (SMC), donors and been outstanding for only one year. As is the Medium-Term Strategic and Institutional usual for urban upgrading or home lending, Plan (MTSIP) Steering Committee members the loans will be outstanding for periods of and relevant staff were interviewed and/or three and five years (for urban upgrading and neighbourhood improvement construction) Evaluation of the Experimental Reimbursable Seeding Operations 3
or three to ten years (for microhousing and persons, including members of the Committee micromortgage lending). As none of the of Permanent Representatives (CPR) and projects to which ERSO has lent money has experts nominated by Member States, was yet been completed, it is too soon to assess established to guide the implementation of the full developmental impact of the ERSO the programme. The programme worked programme. Instead, the evaluation limited with a number of key partners, including its assessment to preliminary impacts of ERSO domestic banks, microfinance institutions in terms of financing affordable housing for and international financial institution partners poor households, and financial investments such as the Overseas Private Investment concluded during the experimental period. It Corporation (OPIC), the International is recommended that UN-Habitat undertake Finance Corporation (IFC), the Department a more detailed analysis of the target for International Development of the United population served when more extensive data Kingdom of Great Britain and Northern are available. Ireland (DFID) and the Swedish International Development Cooperation Agency (SIDA). A 10. It was not possible to carry out a full working operations manual describing the comparative analysis of UN-Habitat ERSO processes for different reimbursable seeding operations with international best practice operations was developed, revised and on the delivery of finance for low-income approved by CPR and SMC. housing and infrastructure, as requested in the Terms of Reference. This is a relatively 13. There were concerns raised about the new sector, with UN-Habitat taking on a governance of the ERSO Trust Fund. The role catalytic role, and there is thus no broadly and independence of SMC is not clear, and accepted international standard for this type its functioning would be improved by the of lending. Developing such a standard would introduction of specific committees, such as require far more time, resources and research for audits, investment and personnel. The than were allocated to this evaluation. oversight by the CPR Working Group on ERSO was effective, but should have been introduced earlier in the process. III. kEy findings and challenges 14. The evaluation notes that the ERSO pro- 11. The findings are presented systematically and gramme was not preceded by a document- cover the areas of programme design; imple- ed feasibility study of how to streamline the mentation arrangements and processes; best banking aspects of the programme into the practices and innovative finance; relevance UN-Habitat administration; rather, the ap- and effectiveness, financial innovativeness, in proach was to proceed directly to imple- addition to the technical and financial risks of mentation using existing resources. Initially, the ERSO programme. the ERSO programme was coordinated by a small in-house management team supported A. Design and Implementation by part-time technical backstopping consult- Arrangements of ERSO ants from Swedbank of Sweden, and was 12. The decision to establish ERSO was taken in reviewed from time to time by volunteer ex- 2007 and since then relevant structures and perts. This type of learning-by-doing strategy implementation arrangements have been can work but experience shows that carrying established and put into operation. A trust out a preliminary feasibility study, and in- fund was established for implementing the cluding full-time professionals with technical experimental lending activities, and received lending expertise on the staff from the outset donor contributions totalling USD 3,629,597. of such a programme, enhances its efficiency. A Steering and Monitoring Committee of 12 4 Evaluation of the Experimental Reimbursable Seeding Operations
15. There was a delay in recruiting senior staff B. Partnership Arrangements with with long-term banking experience to National Governments and Local supervise and direct the implementation Institutions of the lending operations component of 17. ERSO loans have been made to institutions the programme. Although UN-Habitat in Nepal, Nicaragua, the Occupied Palestinian managed gradually to increase staffing, the Territory, Uganda and the United Republic of delay in recruitment resulted in a capacity Tanzania. Some interviewees acknowledged gap in financial structuring, credit review that UN-Habitat gained experience and loan documentation expertise, with the and established relationships with local result that the programme did not succeed authorities, urban poor organizations and in structuring, closing and funding loans domestic financial institutions. As such, its until March 2010, just one year before it catalytic role in lending can perform services ended. Implementation of post-closing loan and meet needs in ways that international administration functionalities was also not financing institutions cannot, and serve as a introduced until late in the programme. bridge for international and domestic financial Overall, there was a consensus among the institutions to reach underserved markets stakeholders interviewed that the design with great need of affordable housing and and implementation arrangements were not basic services. optimal for the ERSO programme to achieve a high level of efficiency. This was largely due C. Best Practice and Innovative to the limited human resources and funds Financing made available to ERSO internally, and the continuing administrative burden of fitting 18. Significant progress had been made by a lending programme into the UN-Habitat the end of the programme in integrating grant accounting system. Implementation of developmental efforts with financially all types of development finance programmes sound banking practices to produce a solid benefit from a balanced approach that investment track record and innovative incorporates both developmental expertise financing structures over the experimental and lending expertise. The implementation of period of ERSO. the ERSO programme achieved this, but with some delays. D. Relevance, Efficiency and Effectiveness of the ERSO 16. The findings on lending programmes within Programme the United Nations system are that the lending programmes of UNCDF and IFAD 19. There was a strong consensus among stake- 1 have a similar strategy and structure. IFAD holders that the ERSO programme was very works exclusively in the agriculture sector, relevant as a mechanism for assisting de- but UNCDF has operations in the field veloping countries with the provision of in- supporting microlending, which may include creased resources for affordable housing and a percentage of microlending for affordable related infrastructure. The ERSO programme housing, with a strategy comparable to that focused on loans of varying types designed to of the ERSO programme. UNCDF is also deliver improved housing and basic services launching an initiative on municipal finance for underserved families by identifying, pre- and infrastructure finance. paring and influencing innovative reimbursa- ble operations. The findings of the evaluation indicate that there were challenges in staff-
1 From in-depth interviews and the questionnaire. Evaluation of the Experimental Reimbursable Seeding Operations 5
ing, resources and having the right processes already begun on four of the five loans and in place at the inception of the programme, the repayment rate is currently 100 per cent. which compromised efficiency and effective- 22. With regard to international best practice ness. delivery of finance for low-income housing, 20. With regard to the programme performance the evaluation finds that the ERSO programme indicators, which were developed with has achieved best practice.4 Most interviewees targets in eight areas2 at the time when stated that the ERSO programme had had the original programme was prepared and innovative financial impacts. However, adopted within UN-Habitat in April 2008, interviewees found it difficult to comment the evaluation concludes that seven target on the extent of the developmental impact indicators were achieved. The fundraising of the programme, because the programme target however, was not achieved. The target had been fully invested for only one year. for donor contributions had been USD 15 Nevertheless, based on field visits and project million and total funding received was USD partner interviews, the preliminary results of 3,629,597, with the Government of Spain projects in Nepal, Nicaragua and the Occupied as the main contributor (79 per cent). The Palestinian Territory already show that low- evaluation notes, however, that potential income5 households have benefitted from funding sources may have been waiting to those projects. The amount of investment assess performance of the programme before stimulated by the USD 2.75 million of ERSO providing additional funding, and that the funding is calculated6 to reach over USD 500 recent scarcity of funding for development million.7 assistance has affected all UN-Habitat 23. Regarding outcomes, the information programmes. The evaluation further notes available indicates that ERSO has potential to that the indicators appear ill-adapted to act as a catalyst for creating demand among measuring the intrinsic value of an innovative financial institutions to partner UN-Habitat financial lending programme. for low-income housing finance. Being a pilot 21. Most interviewees believed the ERSO programme, however, ERSO has not built the programme to be highly effective and that necessary administrative support and staffing funds had been used efficiently. To date, capacity to scale up the programme. ERSO has disbursed five loans, totalling USD 2.75 million or 76 per cent of donated E. Financial Innovativeness of ERSO funds. An amount equal to USD 550,000 (15 24. In terms of innovation, the evaluation per cent of total funding or 20 per cent of observed that the ERSO programme had disbursed funds)3 will be set aside as loan evolved over time. Initially, it experimented reserves to cover credit and foreign exchange with offering very low interest rate loans as risks. The ERSO loan portfolio is performing according to schedule. Loan repayments have
2 Projected budget 2008–2011 contains: number of ERSO operations in the process of implementation, average ERSO contribution per operation, domestic investments/savings mobilized per operation, number of low-income households served, households served under ERSO within the range of income deciles defined per country operation, strengthened capacity of domestic financial institutions in affordable housing finance, strengthened capacity of domestic institutions and development actors in affordable housing delivery, infrastructure provision and upgrading. 3 The balance is due to UN-Habitat overhead costs. 4 See first footnote on the previous page. 5 As per beneficiary income data presented by borrowing partners. 6 Calculation is based on the assumption that the projects would not have been settled without the initial ERSO programme investments. 7 The estimated total project cost for all five ERSO programme loan projects. 6 Evaluation of the Experimental Reimbursable Seeding Operations
a mechanism for attracting private sector from USD 2-4 per day, now gaining access to partner investment in low-income housing small loans for housing improvement in Nepal and community upgrading. Later transactions and Nicaragua. experimented with the creation of new 27. The evaluation also concluded that, with ad- financial products (combined community equate institutional and administrative sup- and municipal loans to bring infrastructure port, UN-Habitat, through ERSO and in part- to low-income communities) in Nicaragua, nership with governmental and non-govern- for example and leveraging of international mental organizations, could play a comple- financial institution investment in affordable mentary catalytic role and offer financing op- housing and micromortgage lending in the tions for reaching lowincome households, a Occupied Palestinian Territory. niche market that is as yet under-represented. The lack of a feasibility study on how to run F. Technical and Financial Risks the ERSO programme within the UN-Habitat 25. The ERSO programme operational bureaucracy, however, led UN-Habitat to un- manuals have been developed over the derestimate the resources required to imple- experimental period to assess the technical ment a lending operation programme within and financial risks of lending activity. The its administration, and implementation of programme successfully implemented a the programme suffered as a result. The pro- cash management system and a manual gramme currently does not have adequate system of loan administration. There are, staff or systems to expand without additional however, several administrative back office investment and support. issues that may impair any future growth in the operation of the ERSO programme, 28. It is clear that management has run the trust if they are not resolved. These include the fund in accordance with the operational need to create specific portfolio accounting, manual. The ERSO loan portfolio is performing automate reconciliation of expected and according to schedule. ERSO projects have actual payments received, and augment been performed in line with best practice in treasury management capabilities for a multi- comparison with the ranking list prepared currency loan portfolio in highly volatile by FinMark Trust, a leading firm monitoring emerging markets currencies. best practice in this field. As regards institutional collaboration, ERSO projects and loans have been cushioned through IV. kEy conclusions funding collaborations with domestic banks, microfinance institutions and international 26. The evaluation has shown that the concept financial institution partners. There have, of the ERSO programme is relevant, with however, been challenges, including limited stakeholders feeling that some form of funding, lack of a feasibility study at the start catalytic developmental lending for housing of the programme and inadequate in-house and basic services should be linked to the UN- capacity to manage a loan programme. Habitat work programme. Most stakeholders consider the ERSO programme successful within the given funding and human resources V. lEssons learned constraints. The programme has reached an underserved population, with beneficiaries 1. Use of Appropriate Technical ranging from lower-income salaried workers Expertise in the Occupied Palestinian Territory with no 29. The successful implementation of projects access to affordable housing, to very low- to finance urban development and housing income informal income households earning depends heavily on having a sufficient level of Evaluation of the Experimental Reimbursable Seeding Operations 7
banking expertise on board from the design target beneficiary populations to be able to stage. This lesson can generally be applied measure the impact of the programme. This to other interventions aimed at creating lesson can generally be applied to all non- revolving funds and other types of investment experimental interventions. in low-income community development. 5. Provide Flexible Funding 2. financial Product Development for Mechanisms Strong Financial Institutions 33. Offering diverse funding options (e.g., grants, 30. Experimentation with various forms of loans, credit enhancements/guarantees or a financing structures and flexible funding mix of the three), which provide medium- arrangements that go beyond low-interest term capital, and lending to financial loans or working capital loans can allow an institutions with a track record of providing innovative finance programme to develop housing microfinance increases the likelihood a variety of products, and will increase the of successful project implementation. This effectiveness of a programme through a lesson may be applied to other interventions more diverse loan portfolio. This lesson can on a case-by-case basis, depending on the normally be applied to other interventions in specific circumstances. this field. 6. Proper Administration to Lessen the 3. Support Research, Innovation and Burden Dissemination of Experiences 34. To lessen the administrative burden when 31. If widely disseminated, lessons learned both operating loan programme activities, the UN- from UN-Habitat global research and from Habitat Secretariat should have conducted various pilot affordable housing programmes a feasibility study on how to fit a lending can support the replication and scaling-up of programme into a grantgiving institution. housing and neighbourhood upgrading for This lesson can usually be applied to other the urban poor. Disseminated information interventions in this field. should also support new efforts to marry low-cost building technologies and financial services. VI. kEY Recommendation 35. The evidence from various sources suggests 4. Explicit Targets for Programme that the ERSO programme was successful, Beneficiaries acted in a financially innovative, catalytic and bankable way, and introduced replicable and 32. The ERSO programme was experimental, scalable, enhanced lending structures for and thus developed various models of the purpose of affordable housing for low- interventions according to country and income households. The recommendations housing needs. These included targeting below suggest how the programme might be underserved beneficiaries in politically improved: challenged areas, and informally employed urban poor families, and peri-urban (a) UN-Habitat could consider supporting development designed to cross-subsidize scaling up ERSO internally, either in an low-income populations by selling 25 per cent expanded lending programme at scale of units to middle-class buyers. In considering (USD 20 million, for 20–50 projects), how to scale up these types of programmes or in another round of experimental in future, operations aiming to support pilot lending for a period of four years. affordable housing should clearly define their If either option is selected, it would 8 Evaluation of the Experimental Reimbursable Seeding Operations
require a stronger level of commitment (b) Alternatively, UN-Habitat could consider and adequate resources from UN- exploring partnership alternatives with Habitat. In particular, UN-Habitat development finance institutions to should: continue to build on the work done and • Make a substantial opening capital the results achieved under the ERSO contribution; programme, and to expand the work according to the wishes of the project • Staff the programme with between partners of the ERSO programme. This seven and ten8 professionals and alternative would allow UN-Habitat to allocate a yearly budget of USD 2–2.5 continue to be involved in innovative million;9 lending for the urban poor, while • Invest in a robust administrative lending providing a stronger platform to meet and support system; the demand for such lending from • Conduct a thorough survey and reach host countries, and to work at scale consensus with donors on financial with international financial institutions support; interested in accessing these sectors • Consult stakeholders and consider the in low-income countries, including Habitat Agenda in determining the the possibilities of public-private objectives of such a new programme, partnerships with development finance and where intervention is needed to fill banks. This alternative could allow in gaps in the financing of affordable for greater sharing of programme housing for low-income households; operating costs. It could also allow for • Establish a simpler governance combined donor support with other structure in a new programme. It is initiatives, thus using donor funding suggested that the Executive Director effectively. This type of new initiative of UN-Habitat chair the board, of might be achieved through a number which the director of a future ERSO of potential partnership alternatives, programme would be a member. including: Outside UN-Habitat but The other board members could be within the United Nations system, for persons with financial expertise and example UNCDF, or the World Bank, development experience. The board or participating as a sponsor in a should set up, from its membership, at multi-donor scaled facility partnership least four committees: financial policy structure10 or a combination of two or and risk planning committee; credit more of these alternatives. review committee; audit committee; and compensation committee. It is suggested that the chair of the board also chair the financial policy and risk planning committee and the credit review committee.
8 Estimate by Urban Finance Branch Chief to cover professional and geographically balanced staffing. 9 An approximate but reasonably common figure in the industry to calculate experienced financial staffing. 10 Option outlined in the proposed ERSO programme sixth loan project presented to the Steering and Monitoring Committee in October 2010 (Annex V). Evaluation of the Experimental Reimbursable Seeding Operations 9
1. Introduction and context of ERSO
A shelter project in a village in the Hebron Area, Occupied Palestinian Territory © IRIN/Tamar Dressler
1.1 Introduction 1.2 Mandate 36. The UN-Habitat Governing Council and 38. This evaluation was mandated by the Secretariat have repeatedly recognized that Governing Council of UN-Habitat in its housing and local infrastructure conditions in resolution 21/10 of 20 April 2007. Its main many countries, regions and neighbourhoods purpose is to provide guidance for any are of poor quality and overcrowded, resulting decision on the steps forward of the ERSO in unsafe housing, lack of access to clean programme by the Governing Council of UN- drinking water, poor sanitation, unsustainable Habitat at its twenty-third session, in April cooking fuel and other basic services. These 2011. conditions increase the vulnerability of the poor to the impact of urban poverty and environmental degradation. The lack of 1.3 Context of ERSO adequate shelter and basic services underpins 39. At its twenty-first session, in April 2007, the Millennium Development Goal 7, target Governing Council of UN-Habitat recognized 7.D: By 2020, to have achieved significant that increasing the flow of investment–– improvement in the lives of at least 100 whether from donors, Governments or the million slum dwellers. private sector––to housing and infrastructure in underserved communities would help to 37. The present evaluation assesses the progress alleviate poor housing conditions, and be a made in the implementation of the ERSO further tool with which to enhance the social programme during its experimental phase, mission of the normative and regional techni- from 2008 to 2011. The evaluation was cal cooperation activities of UN-Habitat. This conducted from October 2010 to February understanding was reflected in resolution 2011 by an independent consultant hired by 21/10, which emphasized the urgent need UN-Habitat. for the provision of increased resources for affordable housing and housing-related in- frastructure, prioritizing slum prevention and 10 Evaluation of the Experimental Reimbursable Seeding Operations
slum upgrading, and accordingly established 1.4 purpose and objective of ERSO the ERSO programme and the ERSO Trust 42. According to paragraph 7 of resolution 21/10, Fund to develop experimental reimbursable the overall goal of ERSO is to improve the living seeding operations and other innovative fi- conditions of the poor in developing countries nancial mechanisms to increase the flow of and contribute to the Habitat Agenda goals investment in shelter and infrastructure to of adequate shelter for all and sustainable underserved families and communities. human settlements in an urbanizing world. In 40. In accordance with that resolution, UN- addition, working towards the achievement Habitat is responding to the challenge of of the Millennium Development Goals was to finding innovative solutions for increasing be at the core of ERSO activities. funding for affordable housing in order 43. The purpose of the ERSO programme is to: to address the problem of growing slum populations and to contribute to poverty • Field-test experimental and reimburs- alleviation and better health. The strategic able seeding operations and other in- goal of the ERSO programme is to increase novative operations for financing the sustainable financing for affordable and social urban poor for housing, infrastructure housing and infrastructure during a four-year and upgrading through community experimental period from 2008 to 2011, groups, including where there is an through the introduction of experimental expectation of repayments mobilizing reimbursable seeding operations, loans and capital at the local level; and other innovative financial mechanisms. The • Strengthen the capacity of local rationale behind the ERSO programme was financial and development actors to to explore innovative financial and credit carry out those operations and to enhancement structures to generate leverage support the capacity of UN-Habitat to and donor support for prudent lending enhance those operations. programmes for affordable housing for low-income households and those who are 44. The objectives of ERSO activities are to: excluded from a country’s financial sector. • Increase the effective demand for 41. The impetus for such a financial programme financing of low-income housing, dates back to the formation of the UN-Habitat related infrastructure and upgrading Foundation itself, when in decision 32/451 by facilitating access of low-income of December 1977 the General Assembly of community groups and households the United Nations adopted United Nations to financing for adequate shelter Financial Regulations 5.10 and 9.4, giving the solutions; and Foundation the authority to incur borrowing • Demonstrate to the Governing Council for reimbursable seeding operations and the technical, financial and institutional extending loans from borrowed and capacity of UN-Habitat to identify, earmarked voluntary resources. With the prepare and influence innovative, promulgation by the UN Secretary-General reimbursable seeding operations that in July 2006 of the new special annex for mobilize domestic investment capital the UN-Habitat Foundation to the Financial and savings on a financially sustainable Regulations and Rules of the United Nations basis. (ST/SGB/2006/8), the Governing Council and Executive Director were empowered to strengthen the Foundation and to develop it into a mechanism to assist developing countries with investments in housing. Evaluation of the Experimental Reimbursable Seeding Operations 11
1.5 sCope and objectives of the Objective evaluation 47. The objective of this evaluation is to enable UN-Habitat, partner agencies and other Scope stakeholders to assess the progress made 45. In accordance with the Terms of Reference, towards delivery of the programme outcomes the present evaluation covered the period and, on that basis, to make decisions on the from January 2008 to 31 January 2011, future orientation and emphasis of ERSO. and focused on ERSO fund design and implementation processes in the Nairobi office, in addition to selected field projects 1.6 Report structure (Annex I). The evaluation also covered all 48. Chapter 1 outlines the background to the the ERSO programme lending transactions, establishment of the ERSO programme and advisory and capacity-building activities and discusses the objectives and purpose conducted to date. A risk appraisal was carried of the evaluation. Chapter 2 describes the out, including the resource implications of evaluation methodology, while the evaluation the proposed mechanisms in ERSO and other findings are summarized in Chapter 3, and activities tested during the experimental the conclusions and recommendations are period. presented in Chapter 4.
46. The assessment thus takes into account ERSO programme design, processes, implementation and outputs. The evaluation questions in the Terms of Reference have been developed into a questionnaire for the purposes of the evaluation (Annex III).
12 Evaluation of the Experimental Reimbursable Seeding Operations
2. evaluation methodology
Children playing in the street in Uganda © UN-Habitat
2.1 Design of the evaluation mechanisms in ERSO and other activities methodology tested during the experimental period. Various methods were used to collect 49. The evaluation examined ERSO programme information, including document reviews, design, processes and implementation, stakeholder interviews, a questionnaire and and conducted a risk analysis, including field visits, as outlined in Table 2.1 and based the resource implications of the proposed on the Terms of Reference (Annex I).
Table 2.1: Methods used and type of information collected
Methods Purpose Evaluation objectives Source of information Observations Challenges Document To gather 1) Comprehensive 1) Focused on Documents provided as review background and historical documents provided stated in the Terms of information and gain information Reference (Annex I). In an impression of how 2) Information may addition, the decision the ERSO programme 2) Information be incomplete documents, credit reviews, operates already exists applications, finances, 3) Need to be clear memos, minutes, papers 3) Few biases about about what one is and articles collected information looking for during the evaluation and 4) Inflexible data- listed in Annex VIII were gathering: data is used. restricted to what already exists Evaluation of the Experimental Reimbursable Seeding Operations 13
Stakeholder To obtain stakeholder 1) To obtain a 1) Focused on Held more than 50 face- interviews opinions and/or range and depth of stakeholders in UN- to-face interviews and experiences, and information Habitat in Nairobi several complementary learn more about and selected field interviews by phone or their answers to 2) Flexible with visits e-mail. The stakeholders questionnaires stakeholders were grouped according 2) Difficult to analyse to their involvement in the and compare ERSO programme. Most stakeholders responded 3) Interviewer to the full set of questions may have biased while others were only stakeholder asked to respond according responses to their involvement.11 Questionnaire To organize a quick 1) Easy to compare 1) Might not get Questionnaires presented and easy way to and analyse careful feedback only to former and obtain large amounts current staff and the SMC of information from 2) Gathered a great 2) Wording may have members; however it was the stakeholders deal of data on the biased stakeholder also a tool for guiding most involved in the ERSO programme responses interviews. ERSO programme 3) Evaluation focus 3) Does not always Questionnaires based on questions were get the full story and the questions provided already provided was validated with in the terms of reference by the terms of interviews in this with some amendments, reference evaluation including additional questions.
Field visits To gather accurate View the operations 1) Difficult to Field visits to ERSO information about of the ERSO interpret observed programme projects, one how the ERSO programme as they behaviour to the Occupied Palestinian programme actually are actually occurring Territory and one to operates on the 2) Complex Uganda ground to categorize observations The project in the Occupied Palestinian Territory was continuing, while the Uganda project was in the planning phase. Review To conduct 1) Information Represents only Reviewed IFAD and UNCDF assessment of to compare the information those lending organization as and comparison ERSO programme institutions chose to compared to the ERSO with other lending with other similar provide programme, and assessed institutions in the programmes in the operation of the ERSO United Nations United Nations programme according to system and best system the market-leading firm, practice FinMark, terms of best 2) Best practice practice
11 Groups were organized according their involvement with the ERSO programme: former and current staff and SMC members; CPR and directors of UN-Habitat; Programme Support Division and United Nations Office at Nairobi; partners and loan project managers. 14 Evaluation of the Experimental Reimbursable Seeding Operations
50. Before the actual evaluation mission began, and monitoring role? the consultant participated in the ERSO (c) Does the ERSO programme lending programme Steering and Monitoring approach have leverage potential? Committee (SMC) meeting in Madrid from 13 (d) Is it possible to state any innovative to 15 October 2010, which gave him insights financial impact of the ERSO into the operation and challenges of the programme to date? ERSO programme. Review of a wide range of documents provided by the UN-Habitat 53. Modification of questions was motivated Urban Finance Branch provided information by the evaluation commitment to paying on the background to the ERSO programme due attention to stakeholder views of how and the management decisions concerning the ERSO projects have interacted with the it.12 In addition, the consultant prepared a overall UN-Habitat mandate, the role of the questionnaire13 based on an extensive set of ERSO programme governance, the leverage questions in the Terms of Reference. potential of the programme, and to find out whether the stakeholders had already Evaluation Criteria observed financial impacts. The modification was also intended to narrow down the 51. The evaluation criteria of efficiency, suggested extensive set of questions to effectiveness, relevance, sustainability and match the categories of ERSO programme preliminary impacts of ERSO activities were stakeholders, based on their involvement used. and knowledge of the operation of the ERSO programme, as outlined in Table 2.2. Sources of Information 54. The questionnaire was sent to UN-Habitat 52. The data sources included relevant staff and SMC members. Completed copies documents, the questionnaire and interviews were used to produce tangible data sources, with stakeholders during field trips (Table 2.1). because these groups had detailed knowledge The Terms of Reference suggested questions of programme operations. All questions that guided the focus of the evaluation. The in the questionnaire were answered. The questions, which represent various angles questionnaire was also used as a guide to from which to bring out the potential value face-to-face and phone interviews with other of the ERSO programme, were slightly ERSO programme stakeholders. Questions rephrased into a manageable format (Annex asked during the interviews were modified III). The evaluation had the discretion to add depending on the roles and responsibilities of or modify the evaluation questions in the the interviewees. Terms of Reference. The following questions were added; Stakeholder Involvement, (a) Can the ERSO programme approach Participation and Contribution contribute to the overall UN-Habitat 55. The participation of stakeholders was vital to mandate and its Medium-Term the evaluation process, as their contribution Strategic and Institutional Plan? in the form of information and opinions (b) Has the ERSO programme governance influenced the evaluation of the ERSO (SMC/CPR) been supportive, directive programme. The following stakeholders and effective in terms of its steering proposed in the Terms of Reference were
12 See the list of documents in Annex VIII. 13 See the questionnaire in Annex III. Evaluation of the Experimental Reimbursable Seeding Operations 15
Table 2.2: Stakeholder consultations in the evaluation of the ERSO Programme
Stakeholder/ Key Mandate Manuals Project Support Collabora- Best Response areas and and loans on adminis- tion practice to ques- overall operations site tration partners tionnaire back- ground Committee X X X of Permanent Representatives United Nations X Office at Nairobi UN-Habitat Deputy X X X Executive Director and Heads of Divisions UN-Habitat, X X Programme Support Division UN-Habitat, Legal X X X Officers UN-Habitat, X X X X X X X current and former staff Steering and X X X X X X X Monitoring Committee Partners and X project site manager Donors X X IFAD and UNCDF X Others X X
contacted for interviews and later consulted throughout the process, while the on specific issues: evaluation approach and main ERSO programme findings were presented to (a) The MTSIP Steering Committee was it for comments. informed of the process and invited to provide feedback on draft findings and 56. In addition, more than 50 stakeholders were recommendations; interviewed, most of them at face-to-face (b) The donors were invited to comment meetings. Most of the interviewees were on draft reports; from Nairobi and included high-ranking and middle-level management officials (c) The Steering and Monitoring Commit- of UN-Habitat and the United Nations tee (SMC) of ERSO was also invited to Office at Nairobi, CPR members, donor review the draft reports; representatives, directors and staff of the (d) The CPR Working Group on the ERSO Urban Finance Branch and branches of the programme was informed of the Human Settlements Financing Division. progress and results of the evaluation Others interviewed included local government 16 Evaluation of the Experimental Reimbursable Seeding Operations
officials and project site representatives in to which the project had had the Ramallah, Occupied Palestinian Territory, and intended impact, and what could have Kampala. been done differently or better, so that lessons could be learned; Evaluation Process (c) Face-to-face and e-mail interviews conducted with stakeholders, who 57. The evaluation process began with an showed a great deal of interest in the inception report submitted during a briefing evaluation and were generous with session with the UN-Habitat Monitoring their time. Besides delivering well- and Evaluation Unit and the Urban Finance organized views, stakeholders narrated Branch team. The participants agreed on the history of the ERSO programme the overall evaluation methodology outlined and gave opinions on its future in the inception report, but called on the outlook and on the implementation evaluation to address all the issues in the of the programme on the basis of the Terms of Reference. To minimize the logistical evaluation criteria and objectives; difficulties, the Urban Finance Branch team was responsible for coordinating site visits (d) Presentation of a preliminary overview and interviews with key stakeholders. The of the findings both orally and as evaluation environment was structured as preliminary drafts to the Urban Finance outlined below. Branch team and selected stakeholders; feedback received from them before 58. The evaluation process included: preparing the draft evaluation report; (a) Desk review of project information, (e) To minimize any inaccuracies and including the key documents listed in maximize ownership of the findings, the the Terms of Reference; evaluator submitted the draft report to the Monitoring and Evaluation Unit for (b) Interviews with: Project managers and comments from stakeholders, which national partners to collect information were consolidated and considered in on achievements and impact of and the final report.14 challenges faced by the project, including the management aspects of work; and key project stakeholders, focusing on the degree of programme implementation and the extent
FIGURE 2.1: Evaluation process
Document reviews and analyses
Formal and informal interaction with Defining/refining the assessment stakeholders and field visits
14 The feedback came from the entire Secretariat. The Monitoring and Evaluation Unit coordinated and consolidated the responses, which were sent to the evaluator. The Unit also managed the evaluation and was the focal point. Evaluation of the Experimental Reimbursable Seeding Operations 17
2.2 Methodological limitations low-income housing and infrastructure. and constraints As the evaluator is unaware of any published definition of best practice in 59. The limitations and constraints anticipated this field and was not directed to any in the inception report proved justified. They by UN-Habitat, this was an enormous included: challenge. The task clearly required (a) It was not realistic to expect the resources and research well above evaluation to show what the what could be accomplished with the development impact might be, on time and funds available. The evaluator future beneficiaries since none of the circumvented this through web-based ERSO programme lending projects had research and electronic interviews with advanced to completion. To overcome experts15 at FinMark Trust, a South this limitation, the evaluation discusses African firm specializing in the field. development impacts in terms of how The findings were limited to that firm’s important finance is for affordable views, however; housing for low-income households, (d) The Terms of Reference expected the and what financial investments evaluator to review other lending have been concluded during the programmes and operations within the experimental period. The evaluation United Nations system, such as UNCDF also touches on how the financial and IFAD, with comparative analysis leverage mechanism works and the of the aims, organizational structures, possibility of replicating and scaling up staffing and operations of the other the current ERSO programme lending two programmes within UN-Habitat mechanisms, using existing financial with a lending mandate. Although infrastructure arrangements in an the evaluator contacted officials from innovative way; UNCDF and IFAD to participate in a (b) It was not possible for the evaluator to questionnaire survey to produce a meet all key stakeholders in the ERSO comparative analysis between the programme for face-to-face interviews organizations, he has not yet received because of the huge geographical sufficient responses from those distances and time constraints. The institutions. Instead, the organizations’ evaluation meetings were limited to latest annual reports have been used, key stakeholders in Nairobi and at the but the validity and relevance of project sites in the Occupied Palestinian the data in the reports could not be Territory and Uganda. To overcome confirmed. any consequent limitations, key stakeholders were contacted by phone and/or e-mail; (c) The Terms of Reference also required a comparative analysis to be made of UN-Habitat ERSO operations in relation to international best practice with regard to the delivery of finance for
15 Kecia Rust, see list of interviewees (Annex VII). 18 Evaluation of the Experimental Reimbursable Seeding Operations
60. During the evaluation process other why promoting gender equality and women’s limitations and constraints arose related to rights is important in achieving the goals of gender equality and human settlements sustainable development that have been development. identified for UN-Habitat. The evaluator has not, however, assessed this linkage in the 61. In terms of the Habitat Agenda this means ERSO programme or at the project loans level paying attention to linkages between gender because the issue was not straightforward in roles and responsibilities within the area the review documents or in the questions of of human settlements. Outlining gender the Terms of Reference. linkages in the areas of the UN-Habitat mandate will strengthen understanding of Evaluation of the Experimental Reimbursable Seeding Operations 19
3. analysis and findings
Community members engage in the planning of housing projects in Nepal © UN-Habitat
of managerial staffing, even with technical 3.1 findings on ERSO design and support, turned out to be inadequate for implementation the very substantial administrative task of 62. The implementation of the ERSO programme setting up an experimental programme. From was not preceded by a documented feasibility very early on, the CPR members explicitly study of how to streamline the programme stressed the need for a lean staffing level into the UN-Habitat administration; rather, to avoid opportunity costs to UN-Habitat 18 the approach (arising from the mandate caused by ERSO activities, and rejected and strong requests from Member States)16 the notion of funding the establishment of was to proceed directly to implementation permanent structures exclusively for ERSO using existing resources. Table 3.1 provides within UN-Habitat through core resources. an overview of ERSO Programme staff and Although an internal UN-Habitat ERSO 19 their key qualifications. In the early stage, programme document of April 2008 called the ERSO programme was coordinated by a for the recruitment of professionals with small in-house management team supported finance expertise to serve in the ERSO team, by senior part-time banking consultants the actual recruitment process experienced from Swedbank,17 guided by the Steering internal challenges and delays. and Monitoring Committee. This approach 63. When the programme was halfway through covered a wide external geographical, its experimental period, UN-Habitat expanded institutional and thematic range of technical the technical team by hiring four finance expertise. Especially with regard to the professionals to support the implementation establishment of the necessary in-house loan of programme activities. Some 20 months administration systems, however, the level
16 Statement from former ERSO management. 17 One of the largest Swedish banks. 18 Memo from the CPR working group, 21 September 2007. 19 United Nations Human Settlements Programme, ERSO Programme, document dated 10 April 2008, p. 10. 20 Evaluation of the Experimental Reimbursable Seeding Operations Main experience Over 20 years’ experience in operational management and the provision of Over 20 years’ experience in operational management and the provision in the area technical assistance and policy advice in Africa, Asia Europe of water and sanitation. Before joining the UN-Habitat Human Settlements Financing Division in Before for advising senior management Schlosser was responsible 2006, Mr. Housing and Urban Development of the German Ministry Transport, rent and housing finance, on federal housing assistance programmes, of the he contributed to the reform In particular, home ownership policy. the €5 billion housing 11 billion federal home ownership programme; system; of the national welfare component within the overall redesign for improved of developing proposals process and to the inter-ministerial scheme integration of home ownership saving schemes into the tax-break accounts, which concerns about 30 million citizens for personal retirement assistant at the served as a research He had previously in Germany. United States, and as a transit planner for Land University of Delaware, government in southern Germany. Over 30 years’ banking and financial experience. Before joining UN- Over 30 years’ banking and financial experience. Before at NewLine Capital, a Habitat, Ms. Hewson was Managing Director financial advisory firm focused on private sector investment and public- markets. NewLine advised on private partnerships in emerging and frontier housing and consumer finance microfinance mortgage, micromortgage, frameworks for affordable investments and legislative regulatory founding NewLine, Ms. Hewson was a Senior Vice- housing. Before at JP Morgan Chase and predecessor and Managing Director President she served as banks Chase Manhattan Bank and Chemical Bank, where USD head of Global Securitization Services, a division she built up from 2 billion to over USD 300 in assets under administration, serving international offices in and domestic banking investment clients from and Hong kong. She was the United States, Kingdom, Ireland Company and Chase Manhattan Trust member of Chase Ireland a board Prior to this assignment, Ms. Hewson headed Chemical of the West. Company of California. Ms. Hewson joined Chemical Bank from Trust banking practice, Farley & Williams, she led the New York where Watson, investments and asset-based finance, including specializing in cross-border structuring, workout and bankruptcy practice. Education M.Sc. in Human Geography of the Developing Countries from B.Sc. the University of Utrecht; the in Human Geography from University of Groningen. PhD in Urban Affairs and Public PhD in Urban Affairs Policy Masters in Public Administration A.B., Princeton University, 1973, A.B., Princeton University, summa cum laude. Phi History, Beta Kappa. University School of J.D., New York 1979 Law, in Business Strategy Programme (1998) and Executive MBA Corporate Finance Programme (1992-1994) of the Graduate School of Business, Columbia University T ime with ER SO September 2007– present September 2007– July 2009 June 2009–present P osition Acting Head of Human Settlements Financing Division. Former Coordinator of the ERSO programme Chief of UFB and head of ERSO programme programme staff key qualifications staff able 3.1: ER SO programme N ame Bert Diphoorn Christian Schlosser Barbara Hewson T Evaluation of the Experimental Reimbursable Seeding Operations 21 Main experience Over 10 years’ banking and financial experience. 2002-2009 SPIANATA & Co, London, UK, Cofounder and Head of Finance Operations. scratch and acted as head of finance Cofounded start-up concept from revenues within 12 months, grew and operations. Achieved break-even to GB£ 2 million. Responsible for opening five new outlets whilst zero from than 30 employees Managed a team of more maintaining profitability. London, UK. Mergers & nationalities. Morgan Stanley, of 15 different Acquisitions, Investment Banking Division Received extensive training and and hands-on experience in complex financial modelling, interpretation various industry sectors analysis of company financial statements across and countries. Company valuations using various methodologies, including discounted cash flow (DCF) modelling, comparable company analysis Formed part of transaction analysis (Prepaids). (Comps) and precedent transactions, such as the €2.4 billion IPO execution team of high profile of Inditex on the Madrid Stock Exchange in 2001. Debt Capital Market Services, Investment Banking Division Extensive training and hands- on experience in bond pricing, market analysis, corporate debt preparing analysis to determine possible funding requirements, structure debt issuance and for corporate clients considering future presentations executing client bond issues. Before joining UN-Habitat, Laura Cordero worked for a range of joining UN-Habitat, Laura Cordero Before World Bank as Private development finance institutions, including the Sector Development Consultant for the Competitiveness and Private in Mozambique, and the Asian Development Sector Development Project Bank, as Capacity Development and Private Sector Analyst. Bank in institutions such as ProCredit She also worked with microfinance Mozambique and FINCA International. 2002–2008: Morgan Stanley & Co. International, London, UK, Vice- generation within / divisions of existing revenue Analysing areas President. could be additional revenues Morgan Stanley and determining where client gained. Acting as point of contact at Morgan Stanley for entire with their serviced in accordance and ensuring clients were relationship and maintaining client management importance to the firm. Creating with Morgan ensuring clients remained cross-selling, system IPB Europe: mailings and frequent client meetings, presentations, Stanley through contact. Education Scotland, University of St. Andrews, United Kingdom BA and MA Honours in Economics & Management B.Sc. Economics. Concentration: International and Development Service, Economics; M.Sc. Foreign Concentration in International Development T ime with ER SO 2009–present March March 2009– March 2011 March November 2008– May 2009 P osition Senior Credit Officer of the ERSO programme Junior Credit Junior Credit Officer of the ERSO programme Programme Programme Officer of the ERSO programme N ame Saturnino Machancoses Carceller Laura Cordero Portia Machancoses 22 Evaluation of the Experimental Reimbursable Seeding Operations Senior Executive experience at large and small companies in different Senior Executive experience at large and small companies in different skills in HR, business planning and financial (15 years), with core areas management. Main experience Thirty–five years’ banking experiences in different positions, from practical positions, from Thirty–five years’ banking experiences in different issues at account level up to decision-making executive in a number experience in the whole Jonsson has very broad of financial institutions. Mr. financial field. Previous work experience in F. van Lanschot Bankiers N.V. in Den Bosch van Lanschot Bankiers N.V. work experience in F. Previous October 2003 to November 2007. (Netherlands) from Member Management Information Solutions. Defining Project management (accounting) information based on business needs and all Wrote customer value, one of the strategic goals company. for documents on the design of management (accounting) reports the new information system to go live in June 2008. Communication with business sponsors, management accounting department, other project Account Manager at a service provider. teams and the data warehouse customer branch in Zeist. Senior banker with over 25 years’ experience advising financial institutions, with considerable expertise in the arrangement and management of credit and a detailed finance programmes, intensive transactions and structured competencies for banks as originators and understanding of required transaction sponsors debt issuers or structured sellers of assets, secured Twenty-five years of diverse experience developing and managing financial Twenty-five services businesses in emerging markets, including several years as an executive with the Moscow-based subsidiary of a United States asset law firm practice includes New York Background management company. focused on public finance. Education T ime with ER SO P osition October 2007–October 2010 (not on a full-time basis) October 2007–October 2010 (not on a full-time basis) July 2008–June 2009 July 2009–April 2011 (not on a full-time basis) September 2009–December 2010 (not on a full-time basis) N ame Consultants Göran Henriksson Stig Jonsson Corinne Buck Iain Heggie Ann Marshall Source: Derived from respective résumés, Annex X. Evaluation of the Experimental Reimbursable Seeding Operations 23
before the end of the project, a senior banker transactions, taking a catalytic role as first-loss with financial programme management interests, it would leverage funds. Moreover, experience20 was also hired. the programme has come a long way, and important lessons can be learned. 64. Analysis of the questionnaire, indicates that the respondents were not convinced of the 66. This evaluation recognizes that UN-Habitat efficiency of the ERSO programme; some has a political mandate backed by the argued that UN-Habitat was not prepared General Assembly, the UN Secretary- to make the necessary administrative General and the Comptroller, to borrow adjustment to enable the ERSO lending model and lend at its own risk. This mandate was to work optimally (Annex IV , Figure 3). This reaffirmed in 2002, when UN-Habitat was observation may be questioned in view of elevated to a programme, and in 2007, the changes made by the organization during when the ERSO programme was established. the learning phase of the programme, and Creating efficient, sustainable and prudent also the fact that some respondents agreed operational systems for long-term lending that the ERSO programme had been able is a 20-year exercise that is part of a much to provide products and services relatively larger trend in the international community, well. With limited staff, resources and from development assistance to development processes, however, it may be unfeasible to finance, to which many multilateral and continue to offer much-needed services if bilateral agencies are moving. Although the programme is not expanded. The ERSO UN-Habitat has had political, financial and programme is merely a small test that should institutional capacity constraints, it has show how efficiently it could be run with made enormous improvements since 2002. the support of the international community. It may achieve its mandate in the coming 12 Furthermore, the ERSO programme has had years, provided that it works in a graduated, insufficient financial resources, and some systematic manner to gain the confidence of its procedures do not enable it to be an of member States, secure the required effective financial mechanism offering the funding and overcome quite understandable required support to project beneficiaries. UN- institutional constraints associated with the Habitat needs to provide more funding for change from development assistance projects staff and other resources if the programme to a combination of TA and transaction is to meet its global mandate for affordable lending. Development finance remains a fairly housing. Unless increased funding and new activity globally and within UN-Habitat staff are made available, the evaluator is of and greater awareness-raising is crucial. the opinion that the programme should be 67. There were mixed views on the sustainability discontinued. of the ERSO programme (Annex IV, Figure 4). 65. Although the ERSO programme has an array Some respondents were of the view that donor of instruments and flexibility (e.g., local countries were likely to object to UN-Habitat currency, various types of loans) in principle, as the preferred institution to host ERSO, and restrictions in systems and implementation preferred an international development bank. hamper flexibility. In fact, UN-Habitat has On the other hand, recipient countries would proved to be an obstacle in many areas, probably be positive if new sources of funding creating delays and providing limited support were to result. The key challenge will be for to partners. Staff and SMC interviewees were UN-Habitat to demonstrate added value. of the opinion that, if the ERSO programme positioned itself in larger, multi-institutional
20 See Annex X for résumés of former and current staff of the ERSO programme. 24 Evaluation of the Experimental Reimbursable Seeding Operations
68. Other respondents voiced support for the Territory project, because of its scale and the idea of ERSO becoming part of the UN- ERSO loan catalytic arrangement. Habitat infrastructure albeit with its own 72. There was consensus among the respondents administrative policy and carrying out a that the ERSO programme was very relevant22 permanent mandate with appropriate staffing (Annex IV, Figure 1). That position was also and financial support. Given its centrality in supported by the in-depth interviews with the United Nations system, UN-Habitat has UN-Habitat officials, donor representatives the ability to marshal the necessary financial and partners. Most respondents found the resources. As an experimental programme, concept of ERSO sound, although the current ERSO has been adequate but, in the longer implementation arrangement was perceived term, its management team should be to pose significant challenges. strengthened. 73. Many respondents and several UN-Habitat 3.2 findings on the ERSO officers interviewed suggested that a blend programme Trust Fund and of credit enhancement (guarantees) and loans would be appropriate and essential loan portfolio for ERSO support to move further down the 69. The evaluation was asked to report on the income pyramid. In addition to ERSO funding, key performance indicators (Table 3.2), which community project finance would require were developed with targets in eight areas21 greater government input and subsidy. when the original programme was prepared and adopted by UN-Habitat in April 2008. 74. Diversifying the funding portfolio is an area in which UN-Habitat, with its strong convening 70. The indicators were calculated from primary power and influence on Governments, may sources using the loan disbursement be very relevant, effective and valuable until documents and calculating the total costs and the private sector can fully understand and target households from the loan agreements. address information asymmetry and market They were reached, with the exception of failure. However, incentives will be needed to the fundraising target of the programme’s attract private sector involvement. projected four-year budget. The evaluator considers that the indicators may have been 75. The beneficiaries agreed that the ERSO too narrowly set to efficiently measure the projects actually leveraged the in-put intrinsic value of an innovative financial resources, which resulted in additional lending programme. beneficiaries among urban low-income households. AMAL, Azania and the Kasol- 71. Table 3.3 shows that ERSO has a diverse Tororo Municipality programme are models lending portfolio. All the five loans were where ERSO incentives attracted transactions closed within six months in the third year of by private-sector banks. The incentives the four-year trial period. The loan maturity included: ranges from 3 to 20 years and the interest rate from 1 to 6 per cent. The estimated leverage (a) Long-term, local currency lending. This ratio was high, ranging from three to nine, was actually also used as a subsidy, but with the exception of the Occupied Palestinian even if market rates were used, it would
21 Projected budget 2008–2011: i) Number of ERSO operations in the process of implementation. ii) Average ERSO contribution per operation. iii) Domestic investments / savings mobilized per operation. iv) Number of low-income households served. v) Households served under ERSO within the range of income deciles defined per country operation. vi) Strengthened capacity of domestic financial institutions in affordable housing finance. vii) Strengthened capacity of domestic institutions and development actors in affordable housing delivery. viii) Infrastructure provision and upgrading. 22 Financing has become a key issue for UN-Habitat: It is one of the pillars of the Medium-Term Strategic and Institutional Plan. Evaluation of the Experimental Reimbursable Seeding Operations 25
Table 3.2: ERSO programme key performance indicators
Original specific Target Achieved Remarks on results measurable performance indicators, January 2008 Projected budget 15,000,000 No 3,670,000 was raised. 2008–2011 (USD) Number of ERSO 8–12 in total Almost 5–6 operations will be in operation at the end of operations in the process the trial period. of implementation Number of ERSO In four regions Yes Two in Africa, one in Asia, one in Central America, operations in the process and one in the Middle East. of implementation per region Average ERSO contribution Min. 500,000 Yes One operation was as low as 250,000. per operation (USD) Domestic investments/ Average Yes Analytic evidence suggests that a minimum savings mobilized per leverage factor mobilization of 4:1 may be achieved as early as operation min 1:1 2015. Number of low-income Min. 1,600 Yes Estimate of a minimum of 6,000 low-income households served total of households when projects are completed. households Number of low-income Min. 200 Yes Estimate of 500 low-income households per households served households per operation when projects are completed. operation Households served under No specific Yes A total of 6,000 low-income households obtaining ERSO within the range of indicator was or in the process of obtaining improved shelter income deciles defined per set solutions as a result of improved access to finance country operation for low-income housing through an ERSO project. Strengthened capacity No specific Yes The capacity of local financial and development of domestic financial indicator was actors strengthened to ensure their ability to carry institutions in affordable set out the ERSO projects effectively, efficiently and housing finance in a sustainable manner, was measured: directly through a comparative institutional capacity evaluation, carried out before implementation and in April 2011; and indirectly, by achieving a non-performing debt rate not more than five per cent greater than the national non-performing debt rate for the housing sector loan portfolio in the respective country on both local trust funds established with ERSO resources and on the ERSO Trust Fund itself.
be a significant incentive because some capitalization. In other instances (e.g., markets have important local currency Uganda), United Nations involvement lending liquidity issues; in the project gave some lender (b) Key investment (as in the case of shares reassurance and was an incentive in AMAL bought with a loan to SAKAN); for financial institutions to become in this particular case, the name and involved in the project, including from reputation of the United Nations as the corporate image perspective. an institution with neutral interest 76. The AMAL project also demonstrates UN- was essential to succeed in AMAL Habitat ability to leverage large funds from 26 Evaluation of the Experimental Reimbursable Seeding Operations
diverse public and private models to finance if a small programme such as ERSO is to be urban settlements. A permanent ERSO more catalytic. programme may be appropriate in delivering 77. Stakeholders also indicated that efficient a much more solid platform for cooperation, incentives were needed to stimulate private- especially with new partners. A partnership sector investment in low-income housing and approach is therefore extremely important
Table 3.3: ERSO programme loan projects as at 31 January 2011
Name Loan Amount Estimated Estimated Cur- Tenor, Rate Repayment approval (USD) total leverage rency years per project ratio cent costs23 per (USD) annum Azania Bank 21October 500,000 4,550,000 1:9 TSh 3 1.5 6 periods of 6 Limited 2009 months. Habitat for 8 March 250,000 750,000 1:3 Nr 5 1 Quarterly Humanity 2010 repayments International and full, Nepal straight-line amortization schedule of principal and interest (over 18 quarters). Palestinian 8 March 1,000,000 673,500,000 1:673 USD 20 Max 12, Single bullet Affordable 2010 average repayment Housing 5–6 of principal Foundation expected in (SAKAN) 2030. DFCU Bank 12 March 500,000 2,360,000 1:5 USh 15 2 Fully Limited 2010 amortizing on quarterly basis, commencing 2 years after disbursement date. Fundación 12 March 500,000 N/A - The USD 10 6, close Fully para la 2010 loan is to amortizing Promoción included market on quarterly de Desarrollo in PRODEL repayments, Local ordinary straight-line (PRODEL) lending. basis.
23 Urban Finance Branch presentation to CPR, ERSO programme working group 21 April 2010. Evaluation of the Experimental Reimbursable Seeding Operations 27
underserved markets. The private sector has ties, among others. Accordingly, guarantees, not yet demonstrated that it is willing and liquidity facilities, first-loss position, and oth- able to meet the demand from this market er risk-reducing mechanisms are important sector––although that varies according to incentives, as is the partnership approach context. The ERSO programme projects whereby the ERSO programme carries much have begun to demonstrate this, but, for of the transaction costs that would otherwise some projects, using incentives in addition be borne by the financial service industry. to interest rate subsidy would have been 80. ERSO tested five models24 of attracting more appropriate. The PRODEL project, private-sector finance into affordable housing for example, shows how strong demand and infrastructure projects. In all cases, that emerged once community project finance a mix of lending sources had been brought models were successfully applied. together to overcome any previous funding 78. The evaluator learned of the need for gap was an achievement in itself. Table organized community groups to augment 3.4 and the descriptions of the individual savings with commercial finance to acquire loan projects that follow show that all the land, extend infrastructure or construct simple ERSO projects are relevant, with somewhat housing with a view to repaying part or all efficient implementation and reasonable of that finance. Significant experimentation performance. The Nepal and PRODEL projects is required in relation to such financing have already shown development impact and arrangements. Respondents demonstrated are considered sustainable by site managers. high demand for ERSO programme products and services, partly because other institutions 3.2.1 MHONZE project, United Republic were either uninterested or unable to offer of Tanzania similar services. (a) The credit enhancement provided by 79. Stakeholders argued that, if private-sector fi- ERSO to Azania Bank gave it sufficient nance worked hand-in-hand with the ERSO institutional and financial support to programme, there could have been learning enable it to grant a loan to Mwanza City and partial buy-in from the beginning. The Council for a low-cost housing project. ERSO programme would then have been a The council had already undertaken unique opportunity for private-sector finance similar projects, but on a much smaller to experiment with systems that they could scale; not use on their own. Through the ERSO pro- (b) The involvement of UN-Habitat incre- gramme the private sector would have had ased not only the visibility but also the effective and sustainable access to Shack/ council’s stakes in committing itself to Slum Dwellers International (SDI), local au- sound implementation of the project; thorities, community development financial (c) This project has also demonstrated intermediaries and bilateral guarantee facili-
24 In April 2009, UN-Habitat, signed a loan agreement with ARBAN, a Bangladeshi non-governmental organization, to fund the finalization of construction of a 40-unit building and the subsequent take-out finance for the members of a cooperative of slum- dwellers. A subsequent amendment to the loan agreement was made in October 2009, including a series of pre-disbursement conditions, which were key documents and information needed by the new ERSO management to comply with prudent lending practice (information that was not incorporated into the loan agreement before the loan was signed). The information included: affordability data from end users, approved building construction plans, proof of compliance with construction regulations, and appropriate permits for the non-governmental organization to receive a loan. In the process of gathering this information from the partner, the new ERSO management became increasingly uncomfortable with the ARBAN administration, and developed serious concerns as to the reliability of the affordability and other data. After a long negotiation process, it was decided to terminate the loan agreement. At that point, no disbursement had occurred. Unfortunately, no best practice due diligence had been conducted before signing the loan agreement. If a proper due diligence process had been followed before signature, red flags would have been raised much earlier in the process, and the lengthy post-signature process that finally led to termination could have been avoided. 28 Evaluation of the Experimental Reimbursable Seeding Operations
Table 3.4: ERSO programme loan projects: design and challenges
ERSO loan Design Implementation Performance Innovation Challenges Projects Azania Bank Low-interest loan, Well- Phase 1 To prove mixed Risks of Limited to be on-lent to implemented, according to development with construction Mwanza City phase 1. plan, phase 2 high and best use delays. Council, for phase to be started. of land, a model for 1 . similar projects. Habitat for Low-interest loan, Well- Performs Credit and technical Low operating Humanity to be on-lent to 15 implemented in according to assistance to end on-lent margin. International credit cooperatives the institution’s plan. users. Nepal to apply save and ordinary lending. Needs to build methodology. improve portfolio monitoring processes.
Limited capacity to manage growth of portfolio. Palestinian The loan was Some delay in Performs Catalytic investment Planned number Affordable design for SAKAN implementation according to and leveraged when of units does Housing to buy shares in the but revised plan revised plan. it unlocked senior not materialize. Foundation controlling company on track. finance from other (SAKAN) AMAL. partners. Innovative Rise of unit in construction, costs, may miss tenor and interest target groups. rates. DFCU Bank Low-interest Delay in Seems to be Encouraging a local Rise of unit Limited loan to DFCU for implementation, performing to financial institution costs, may miss construction finance clearing plan. to provide housing target groups. and then lending difficulties. loans to low-income to end-users as households with mortgage finance. land contribution by the Government.
Long tenor. Fundación General corporate Well- Performs The neighbourhood High lending para la loan, which implemented in according to improvement concentration Promoción includes continuing the institution’s plan. programme is a in four main de Desarrollo infrastructure ordinary lending. municipal finance institutional Local (PRODEL) development, mechanism. clients. secondary lending to local microfinance Near market rates institutions and long tenor. and secondary lending to support microfinance housing. Designed as a precursor to bond issuance. Pending Not yet implemented. Innovative thinking. Working through banks capital base with first loss experimental arrangement, which may award high leverage, using existing financial infrastructure. loan programme in partnership with IFC and KfW. Evaluation of the Experimental Reimbursable Seeding Operations 29
the viability of private-sector finance groups); for the council for a mixed-use urban (b) A key impact of this project has been planning project. The funding allowed the capacity-building of HFHI, especial- the council to compensate Mhonze ly during the loan negotiation process. informal dwellers in compliance with The due diligence process, exposure to Tanzanian law. The funding will be new financial and legal analysis and recovered by the sale of the serviced particularly the need to focus on pro- plots; fessional management of the housing (d) The project enables informal dwellers portfolio (including implementing part- who have received the compensation ners’ loan documentation and portfo- money to gain access to a serviced lio reporting) has provided HFHI with a plot by guaranteeing the right of first first toolkit for private funding in the refusal to purchase the new serviced future; plots; (c) HFHI Nepal is the first HFHI branch (e) The formalization of land use in the or affiliate to gain access to a loan, Mhonze area is expected to increase meaning that the project has been the council’s tax base, enabling it to closely watched by HFHI Headquarters provide better public services to the in Atlanta, United States of America, population. which has provided key technical and legal advice to its branch in Nepal, 3.2.2 Habitat for Humanity particularly since HFHI is ultimately International project, Nepal responsible for loan repayment. HFHI views the experience of HFHI Nepal as 81. The funding facilitated by ERSO to Habitat a potential programme for financial for Humanity International (HFHI) Nepal has capacity-building and access to soft allowed the provision of housing finance finance for any of the 18 housing to 900 families in 15 urban and peri-urban microfinance programmes that HFHI locations around Nepal. The funding is also currently has around the world. noticeably strengthening the existing network of non-governmental organizations and credit cooperatives, which are the second-largest25 3.2.3 AMAL project, Occupied Palestinian Territory providers of financial services in Nepal. More specifically: 82. The ERSO contribution to this project is very small in percentage terms but, given the (a) The ERSO loan has greatly strengthened political neutrality of the United Nations the role of HFHI as an apex institution financing and the ability to take the risk, for credit cooperatives and village the investment of ERSO funds was key. The banks. As a result of this loan, HFHI has establishment of AMAL represents a systemic effectively doubled its lending capacity change in the financial sector in the Occupied and is able to extend credit at a very Palestinian Territory for the following reasons: low interest rate to give both credit cooperatives/village banks and “Save & Build” groups’ access to finance at affordable rates (three per cent per annum for cooperatives/village banks and seven per cent for “Save & Build”
25 World Bank, Access to Financial Services in Nepal. 30 Evaluation of the Experimental Reimbursable Seeding Operations
(a) AMAL laid the financial basis for the (e) AMAL funding negotiations included development of a mortgage market, a commitment by the World Bank with more than USD 500 million of and other entities to supporting funding committed through the facility. the improvement of the legal and Taking into account the fact that regulatory environment for mortgage current mortgage lending in the West lending. Bank is negligible, this programme will in effect kick-start mortgage lending in 3.2.4 KASOLI Affordable Housing the region; Programme, Tororo, Uganda (b) The main source of funds for (a) The Kasoli Affordable Housing the programme is the Overseas Programme in Tororo, Uganda, is Private Investment Corporation the result of a collaborative effort (OPIC) a United States Government between UN-Habitat, DFCU Bank, development finance institution, which Tororo municipality, Kasoli Housing reassures developers and investors of Association and the Ministry of Lands, the stability of the funds and provides Housing and Urban Development; some insulation against political risk (b) That each party committed to a specific by having what have been termed portion of the project (the Ministry–– “prominent victims” at stake in the land and architectural support, the mu- programme. The project has brought nicipality––infrastructure, DFCU––hou- on board two of the main banks sing finance) is in itself an achievement operating in the Occupied Palestinian for ERSO and the Ugandan housing and Territory. Before this, those banks infrastructure industry; had no source of long-term financing (c) This is the first project of its kind in which and were therefore unable to offer DFCU has been involved. The bank mortgages to much of the population; carried out an affordability analysis of (c) The programme is designed to offer the target population, which belongs advantageous lending conditions to to lower income segments than their customers to make the debt affordable: average clients, and concluded that the interest rate on mortgage loans is housing loans were feasible. The bank expected to be around 7.5 per cent per played the leading role in the project’s annum, compared to current lending design and implementation, and rates of over 15 per cent, only available expressed interest in replicating it in to high-end borrowers; other locations; (d) Access to finance for families was (d) The project has also aroused the one of the main constraints for real interest of the Ministry, which has made estate development in the Occupied a commitment to developing a further Palestinian Territory. This facility’s 40–50 similar projects nationwide. establishment has directly stimulated seven developments in the West Bank, which are expected to sell the properties. Overall, it is estimated that the construction will create up to 100,000 new jobs in the region; Evaluation of the Experimental Reimbursable Seeding Operations 31
3.2.5 PRODEL Housing Microfinance projects in various municipalities in and Neighbourhood Nicaragua. More funding applications Improvement programme, for similar projects have recently been Nicaragua submitted to PRODEL and are awaiting 83. The loan to PRODEL, the main apex further funding availability. microfinance institution in Nicaragua, was used to support the current PRODEL housing 3.3 findings on the performance microfinance lending portfolio, and to provide of the ERSO Trust Fund funding for a new loan product for PRODEL’s neighbourhood improvement programme. 84. As shown in Table 3.5, the ERSO Trust Fund received donor contributions of (a) The funding for housing portfolio USD 3,629,597 in total funding, with the activities in PRODEL came at a critical Government of Spain being the main moment for an institution that had only contributor (79 per cent). To date, ERSO has recently become totally independent of disbursed five loans, totalling USD 2.75 million donor funding. The loan was made at (76 per cent of donated funds). An amount a time when PRODEL efforts to attract equal to USD 550,000 (15 per cent of total international capital through a bond funding or 20 per cent of disbursed funds)27 issuance were being curtailed by the will be set aside as loan reserves to cover unstable situation of the microfinance credit and foreign exchange risks. The ERSO industry in Nicaragua, PRODEL’s good loan portfolio is performing according to performance notwithstanding (98.6 schedule. Loan repayment has already begun per cent repayment rate in the housing on four of the five loans and the repayment portfolio in 2010)26. This loan provided rate is currently 100 per cent. bridge financing to an institution that has a key role in the microfinance 85. The evaluation found that the trust fund industry in Nicaragua, and sent a had been run according to the operational positive signal to potential bond manuals, which were verified by the in-house investors; programme management officers according to the UN-Habitat rules. In-depth interviews (b) The housing microfinance model of staff and SMC members indicated promoted by PRODEL (and developed improved effectiveness coinciding with the with the longterm support of SIDA) time when the ERSO project loans began to includes an innovative technical be disbursed28 (Annex IV, Figure 2). assistance service. This model has the potential for replication, particularly in 86. Most respondents were positive as to the other Central American countries. relevance of the ERSO programme loans, which have reached the urban poor. The (c) The neighbourhood improvement evaluator learned, however, of difficulties programme was launched recently by in defining the target group more precisely. PRODEL as an innovative municipal/ Target populations have been interpreted community finance mechanism for in many ways by the stakeholders. They small-scale infrastructure building are mainly the urban poor, who include the and improvement. The ERSO loan has middle class with no access to affordable facilitated funding for the first three housing (e.g., in the case of AMAL in the
26 PRODEL. 27 The balance is due to UN-Habitat overhead costs. 28 See table 3.2. 32 Evaluation of the Experimental Reimbursable Seeding Operations
Table 3.5: ERSO Trust Fund summary as at 31 January 201129
Project Number: FS-ERS-08-SPA Project Title: ERSO (Experimental Reimbursable Seeding Operations) Starting Date: 1 January 2008 Completion Date: 30 April 2011 Executing Agency: UN-Habitat Total Budget: Projected Budget 2008-2011: USD 15,000,000.00
Contributions received: Government of Spain: USD 2,879,596.99 Government of Bahrain: USD 500,000.00 Rockefeller Foundation: USD 250,000.00 Total contributions: USD 3,629,597.00
Resources applied: USD 3,300,000.00 Resources loaned: USD 2,750,000.00 Resources reserves: USD 550,000.00
Programme support cost: 10 per cent
Occupied Palestinian Territory); at the bottom subsidize; government inputs may also fill in of the pyramid were households gaining the gap. access to small loans for house improvement, 88. Many respondents were of the opinion as in Nepal (Table 3.6). that scale could be reached if the ERSO 87. The evaluator considers it crucial for ERSO programme could demonstrate why and to match the design of each project to the where it worked, and how it could operate respective target community to be served as a catalytic investment. The UN-Habitat and the financing capacity available. As convening power and influence could help projects vary in terms of type of intervention, to fill in policy gaps and create effective, depending on all relevant circumstances, high-level partnerships. Going to scale would including available funding, in order for require a business approach, which was one some projects to be viable, they would factor behind the effectiveness of the AMAL need to target low-income to middle- project in the Occupied Palestinian Territory. income populations (higher on the income In general, transactions that sought to create pyramid than the poorest) who exhibit a market-funding mechanisms (e.g., credit need for better housing and infrastructure. enhancement facilities) that allowed several Others may focus on incremental in-situ local financial institutions to participate upgrading, which is more affordable to the were likely to achieve scale. The PRODEL lowest income populations. Some projects neighbourhood infrastructure project had can create a revenue stream that can cross- significant potential as a scalable mixed municipal and community infrastructure
29 The figures in the table have been verified by the UN-Habitat Programme Management Officer. Evaluation of the Experimental Reimbursable Seeding Operations 33
finance model. The same was true of the group and an ERSO Unit in the Urban DFCU-funded Kasoli project in Uganda, Finance Branch is responsible for the which was partnering with the Ministry of day-to-day operations of the ERSO National Housing. programme.
89. The evaluator asked UN-Habitat staff and 91. The Executive Director of UN-Habitat was SMC members about ERSO programme successful in appointing highly qualified governance. The SMC is diverse in terms of professionals in the field of finance to SMC. expertise and background, a clear advantage As per the negotiated Terms of Reference, for an advisory body. The in-depth internal however, the SMC is large, and also comprises interviews revealed that the SMC had been multiple representatives of CPR and the very supportive, providing great strategic donor community, thus limiting regular guidance to the ERSO programme. Moreover, consultations. Formal SMC meetings are it fully understood the technical aspects of expensive and time-consuming to organize, ERSO and was attuned to the political issues. meaning that the full SMC as documented That said, however, the Urban Finance Branch met only in September 2008, March 2009 and the SMC respondents, questioned the and October 2010. Although there were efficiency of ERSO programme governance, consultations between the head of the Urban partly because of confusion resulting Finance Branch and the SMC chair, periodic from lack of clarity as to the role of SMC, communications on transactions between and lack of support for SMC to function the ERSO Unit and SMC expert members, as an independent board. Some drastic and consultations from time to time between improvement was, however, reported during SMC and the ERSO Unit by phone and/or the last year of ERSO. Furthermore, SMC e-mail, communication was generally poor. sometimes served as the credit committee, 92. The low frequency of meetings may have losing its focus on guidance30 and industry been caused by the high cost associated best-practice technology transfer. If SMC is with convening SMC meetings, pointing to retained, it should be transformed into the questions regarding adequacy of resources equivalent of the board of directors of a and optimal governance structures. One multilateral development bank. possible solution would be for SMC to split 90. The governance of the ERSO programme was into thematic groups, such as a credit review set up as follows: committee, a financial and risk committee, an audit committee, and a reputational- and (a) The Governing Council of UN-Habitat target population committee. It might have is the governing body of the ERSO Trust been easier for small groups to meet more Fund; frequently between the main meetings to (b) Under the authority and guidance of provide advice and guidance on content the Governing Council, the Executive and industry best practice to the ERSO Director is responsible for the team, and even more importantly, to senior management and administration of management. ERSO programme operations; 93. Furthermore, the extent to which SMC had (c) SMC was established by the Executive access to the Executive Director to explain Director to provide advice and guidance and, in turn, receive advice and guidance on on ERSO programme operations; the ERSO team, or whether the ERSO team (d) A UN-Habitat CPR/Internal working was exposed to twin directives, is unclear.
30 Interview with SMC Chair. 34 Evaluation of the Experimental Reimbursable Seeding Operations
Table 3.6: Comparison between lending programmes in the United Nations system
Issues UN-Habitat UNCDF 31 IFAD 32 Name of ERSO, Experimental United Nations Capital The International Fund for programme Reimbursable Seeding Development Fund Agricultural Development Operation Lending General Assembly In its resolutions 2186 (XXI) of IFAD is a specialized agency mandate resolution 32/451 13 December 1966, 2321 (XXII) of the United Nations, which of December 1977; of 15 December 1967 and 3122 formally came into existence on 30 United Nations (XXVIII) of 13 December 1973, November 1977. financial regulations the General Assembly established 5.10 and 9.4. the UNCDF with a mandate resolution 21/10 to assist developing countries, of the Governing “first and foremost the least Council of UN- developed” amongst them, “in the Habitat. development of their economies by supplementing existing sources of capital assistance by means of grants and loans”. UNCDF now concentrates its investments in two areas: local development and microfinance. Aim The strategic goal of “The purpose of the Capital The objective of the Fund is to the ERSO programme Development Fund shall be to mobilize additional resources to is to increase assist developing countries in the be made available on concessional sustainable financing development of their economies terms primarily for financing for affordable and by supplementing existing sources projects specifically designed social housing of capital assistance by means to improve food production and infrastructure of grants and loans, particularly systems, the nutritional level of the through field- long-term loans made free of poorest populations in developing testing innovative interest or at low interest rates. countries and the conditions financial mechanisms Such assistance shall be directed of their lives. IFAD mobilizes during a four-year towards the achievements of the resources and knowledge through experimental period. accelerated and self-sustained a dynamic coalition of the rural growth of the economies of those poor, governments, financial countries and shall be oriented and development institutions, towards the diversification of their non-governmental organizations economies, with due regard to the and the private sector, including need for industrial development co-financing. Financing from as a basis for economic and non-replenishment sources in the social progress.” UNCDF offers a form of supplementary funds and unique combination of investment human resources forms an integral capital, capacity-building and part of IFAD operational activities. technical advisory services to promote microfinance and local development in the least developed countries. Yearly (Total for four years) 36,500,000 369,644,506 contributions 3,669,569 (USD)
31 UNCDF(2009). Annual report. 32 IFAD(2009). Annual Report, and Carla Dellanave, IFAD. Evaluation of the Experimental Reimbursable Seeding Operations 35
Investment or 100% lending Grants and lending; 60 % Grants and Lending; 93,5 % lending/grants investment or lending. lending to countries with low debt (per cent) sustainability: 100 per cent grant to countries with medium debt sustainability: 50 per cent grant and 50 per cent loan to countries with high debt sustainability: 100 per cent loan Outstanding 2,750,000 125,000,000,000 717,500,000,000 portfolio (USD) Outstanding 5 68 221 number of loans/projects Average loan 250,000/1,000,000 150,000/6,000,000 19,700,000 size, min/max (USD) Type of loan: Working capital loan Bond investment and development Bond investments and development loans development loans loan/working capital loan Type of Financial intermediary Investments are made in capacity- Developing member States or borrower: (MFI) building, capitalization of MFIs and intergovernmental organizations in Financial other FSPs, financial infrastructure which such members participate. intermediary/ and improvements in the policy, end user legal and regulatory environments. Current Urban Finance The UNDP Administrator serves The IFAD Executive Director reports Organizational Branch (Team), Chief simultaneously as the Managing to the Governing Council of IFAD. Structures is the head of the Director of UNCDF. UNCDF reports Team, reporting to through the Managing Director to the Director, of the the UNDP Executive Board. Head of Division, who report to the Executive Director, UN-Habitat Current staffing 5 127 235 on board Annual 1,500,000 Unknown 147,089,000 management budget (USD) Calculated risk High UNCDF investment capital is Middle to high. profile––(high/ flexible, high-risk and innovative. equity like investment: low/ lending against collateral) Institutional Best practice–– Best practice as per other IFIs Best practice as per other IFIs arrangement prudent banking and basis of preparation of and basis of preparation of ––peer review operations. annual financial statements is in annual financial statements is in other IFI accordance with IFRS. accordance with IFRS, previously IAS since inception. 36 Evaluation of the Experimental Reimbursable Seeding Operations
It is also unclear from the interviews how future ERSO programme with three distinct the supposed teaming of the ERSO Unit governance functions: broad policy advice with the Internal/CPR Working Group on (CPR), programme policy advice (SMC), and a the daily business performed. From the credit review committee (a third, independent documentation, it is noticeable that the two body to be created). groups discussed institutional arrangements 96. Lastly, many stakeholders were convinced that from widely differing perspectives in time- it was important for the ERSO programme to consuming e-mails. This probably delayed have a track record. A successful pipeline of implementation of the ERSO programme. projects would serve as a reference point for 94. In addition, the respondents33 point to national Governments. They would then be misunderstandings between UN-Habitat better placed to establish policies and incen- ERSO management and CPR attributed to a tives designed to encourage private lending lack of frank and fluid communication.34 SMC for affordable housing and local self-govern- and CPR had some misunderstandings, but ment with autonomy to issue debt instru- the situation improved during the last year ments. The deeper problem was that national of the experimental period, when SMC and Governments were not interested in leverag- CPR began working in tandem to ensure ing public investments. The political pres- support of the ERSO programme, with SMC sure for Governments to continue building providing advice on the strategic direction public housing through private partnership of the programme and CPR providing remained lucrative. The principal department more operational support to ensure the of central governments was the ministry of compatibility of ERSO with overall UN-Habitat finance, not the ministry of housing. Its role objectives. Together the two committees in second generation financial sector reforms contributed to improved effectiveness of the was key and UN-Habitat needed to engage programme in the experimental period. CPR, with ministries of finance to share lessons as a political organization, was very useful learned from the ERSO programme. in providing the political context of ERSO programme activities. 3.4 findings on comparison 95. Respondents and some interviewees argued between lending programmes that the ERSO programme needed to be seen in the United Nations system as part of a long-term exercise of building 97. Programmes and operations in the United within UN-Habitat a catalytic lending facility, Nations system with a lending mandate, with a very precise set of services and loan such as UNCDF and IFAD, were reviewed on products, and with administrative systems in the basis of a comparative analysis of their place to offer support. The programme had objectives and organizational structures as provided a vital step forward in that larger summarized in Table 3.6. exercise, offering examples of services and product systems. An important but often 98. The evaluation found that the ERSO poorly recognized by-product of the ERSO programme had a similar strategy and programme was that the lending had created structure to those of UNCDF and IFAD. IFAD the need for UN-Habitat to strengthen its operates exclusively in the agricultural sector, internal financial and accounting systems. while UNCDF has operations in microlending, There was therefore a need to support a which include a percentage of microlending
33 ERSO staff and members of SMC. 34 According to various internal documents circulated at the beginning of the implementation period. Evaluation of the Experimental Reimbursable Seeding Operations 37
for affordable housing, with a comparable and countries with economies in transition in strategy to that of the ERSO programme. mobilizing resources. There have also been UNCDF is also launching an initiative on local new approaches, including the introduction municipal finance and infrastructure finance. of new forms of financial mechanisms, to improve the quality of financial resource 99. Both UNCDF and IFAD have portfolios much mobilization. Depending on the stage of larger than the ERSO programme and have housing activities management, a financial been in the market since the late 1970s. mechanism may be considered well- According to statements in their annual established in one geographical context while reports, they also have upto-date lending being regarded as innovative in another. programme platforms and systems. It appears worthwhile to explore future partnership with 102. The rationale for the ERSO programme UNCDF, which has strategies similar to those intervention was embodied in the words of the ERSO programme. Both organizations “experimental”, “innovative”, “leverage” and may be suitable technical partners for the “catalytic”. The idea behind the programme ERSO lending programme and for discussions was to encourage lending and investment in about sharing lending platforms and systems. affordable housing in developing countries and emerging markets by mitigating key risks. The programme applies both to physical 3.5 findings on the innovative housing projects and more generally to the mechanism promotion of local capital markets as suppliers 100. An innovative financial mechanism should of finance. The latter operates through the involve a creative idea that involves conceiving credit enhancement of local borrowers and and implementing a new way of mobilizing bond issuers, and the development of new and channelling financial resources. This could types of local financial institution. be, for example, through the incorporation of 103. The ERSO programme was not preceded new elements, a new combination of existing by a feasibility study in which those central elements or a significant change or departure key words could have been defined before from the traditional practice. It should offer the programme was made operational, effective, creative and unique answers nor was there any attempt to define them to new problems or new answers to old in any operational guidance, as far as can problems, and may be further transformed by be judged by a review of the documents those who adopt it. An innovative financial provided for the evaluation. Open-ended mechanism may take the form of new interviews with stakeholders revealed what products, new policies and programmes, might characterize experimental, leverage new approaches and new processes. New and catalytic methods, but there were products and new marketable funding widely divergent opinions on what the term instruments can be used to attract public and “innovative financial mechanism” might private investments in housing activities and mean. In the first phase, the consensus among projects. Given the broad range of future parties involved in the negotiations during environmental, economic and social gains 2007–2008 was that “innovative financial arising from housing activities, there are ample mechanisms” were defined as extending opportunities for UN-Habitat to support new loan finance to low-income groups, which products nationally and internationally. explains why the first ERSO project loans 101. The new strategy for housing activities came (among other elements) with interest under development in the ERSO programme subsidies as the feature of innovative financial has offered opportunities to develop new mechanism. This approach and definition programmes for use by developing countries of “innovation” reflected clear requests 38 Evaluation of the Experimental Reimbursable Seeding Operations
from UN-Habitat oversight bodies, voiced with IFC, KfW and Standard Chartered.37 in a series of meetings between September The long-term nature of this arrangement 2007 and April 2008.35 In fact, the explicit is designed to attract longer tenor and goal of experimenting with extending loan affordable funding sources to facilitate finance to the urban poor was defined as expansion of microhousing credits to low- the ultimate goal of the experimental period, income recipients in various countries in rather than “leveraging” resources. The last sub-Saharan Africa and Asia. This would be two ERSO loans were financially innovative a new experiment with excellent potential in the sense of leveraging the initial capital catalytic effect. The ability to leverage other input and high-quality structuring. No substantial financial resources and in kind criticism is implied here, although, to make support from public and private sources, and a programme operational on those terms, it to initiate government support, has added might have been easier to have some sort of value to the overall experimental phase of the acceptable definition contextualizing those ERSO programme. terms within the organization. 106. It is not easy to define the term “innovative 104. With regard to relevance, the evaluator found financial mechanism” as it is a moving target that the innovative mechanisms of long-term depending on the local circumstances. It capital should be considered before the more is, however, easier to tell whether a loan developmental financial mechanisms, such is traditional or innovative, based on, for as subsidized interest rates.36 Respondents example, subsidized interest rates. In Table suggested that it would be better to find 3.4, only the disbursed loans to SAKAN and appropriate cost recovery models that did not PRODEL can be said to have some component distort local markets and could, therefore, be of innovative financial mechanisms, such as the replicated to stimulate growth in lowincome first-loss loan (SAKAN) and near-to-market lending. In fact, given that the ERSO interest rates for microfinance institution programme is designed to explore the need (PRODEL). The pending experimental for incentives, all exploratory incentives are loan to be developed in partnership with appropriate, even equity participation, and international financing institutions may be the projects funded in the experimental period characterized as innovative thinking in that it underscores the need. The ERSO programme is proposed to work through an international approach was useful in encouraging banks bank capital base and use its extensive to enter new markets, but it requires strong financial infrastructural network in numerous due diligence and risk mitigation measures developing countries to reach target groups. to ensure that projects poses as few risks as 107. This is not to say that the loans to Azania possible. Bank, DFCU and HFHI did not have merit 105. With regard to innovativeness, respondents in development terms and also in terms pointed to the proposed forthcoming final of ERSO programme requisites, especially pilot that the ERSO programme was currently capacity-building. The evaluation found that considering, the Global Microhousing Facility, the site management of HFHI Nepal learned
35 Remarks made by the former coordinator of the ERSO programme. 36 Not necessarily, however; normally interventions take place where there is hardly any lending from the local financial sector, so there is no one to crowd out. Even with a subsidized lending programme, the exposure to lending for a type of project or type of organization can be the trigger for a more sustainable lending base. A subsidized lending programme is not sustainable, however, and does not necessarily achieve the proposed objectives of the ERSO lending programme for longer-term, sustainable sources of lending; where the subsidy needs to be separated from the loan, it should take a different form. Lowering the cost of capital (interest rates) can prime a nascent market, even if it is not sustainable in the long term; similarly, lowering the risk domestic financial institutions face as an incentive to lend downmarket is not sustainable. 37 See Annex V. Evaluation of the Experimental Reimbursable Seeding Operations 39
how to write business plans from the ERSO housing investments that might not programme exercise when applying for an otherwise receive financing. ERSO loan. The same methodology is being used to target prudent borrowers with their own business. In the case of DFCU, the field 3.6 findings on collaboration visit interviews revealed that the bank learned within the United Nations and that the target group was willing to open a with partners bank account to save its part of the project 109. Documents and loan agreements showed agreement. Based on the acquired capacity, that ERSO programme loans were developed the bank has taken action to work for the in partnership with international and local first time with similar projects in Uganda. partners, including local government and Furthermore, local authority officials in domestic banks. In the Occupied Palestinian Kampala are increasing their capacity by Territory, Uganda and the United Republic of seeking to apply the ERSO programme loans Tanzania, ERSO partnered local banks, while approach to 20 other slum sites within the in Nepal and Nicaragua the financial partner city limits on the land owned by the Buganda institutions were mainly village banks or sav- Kingdom. ings cooperatives and microfinance institu- tions. Each project has its own type of collab- 108. In short, the characteristics of an “innovative oration with financial institutions, depending financial mechanism” include: on the local situation (Table 3.7). (a) Maximizing the ability of project 110. Interviewees wondered whether UN-Habitat sponsors effectively to leverage donor was serious in becoming a major player in capital for needed investment in the lowincome housing microfinance and finance affordable housing system; for slum upgrading. Some recommended (b) Using existing funds more effectively that UN-Habitat should be part of a larger and sustainably; partnership arrangement if it wished to gain (c) Moving projects into construction access to the amount of resources needed more efficiently and swiftly than under in the long term, as doing so would mean traditional financing mechanisms; and making use of the capacity and systems of (d) Making possible major affordable institutions already in the financial sector.
Table 3.7: ERSO programme collaboration with financial institutions to connect with target groups
ERSO programme project Partners Type of collaboration with financial institutions to engage with target groups Azania Bank Limited, United Azania Bank; Mwanza Municipal Enabling a private financial institution, Republic of Tanzania Council Azania Bank, to extend finance to a municipal council for the purposes of a voluntary resettlement scheme for slum dwellers. Habitat for Humanity Habitat for Humanity International Encouraging cooperative members to International, Nepal Nepal, local non-governmental save together for housing, in combination organizations with financing through village banks or saving cooperatives individual end-users with assistance and supervision of non- governmental organizations. 40 Evaluation of the Experimental Reimbursable Seeding Operations
Palestinian Affordable Palestine Investment Fund, OPIC, It is intended that AMAL will enter into Housing Foundation IFC, Bank of Palestine, Cairo Amman arrangements with local domestic banks, (SAKAN), Occupied Bank, DFID, Aspen Institute’s MEII, initially Bank of Palestine and Cairo Amman Palestinian Territory CHF International, and World Bank Bank, which will in turn provide finance technical assistance to potential purchasers of the affordable housing units under construction, initially in the form of fixed or adjustable rate loans, and, in the future, Sharia-compliant financing. AMAL will then purchase these loans from the originating banks so as to provide additional liquidity for additional affordable housing finance activity by the banks. DFCU Bank Limited, Uganda DFCU Bank, Ministry of Housing, Establishing a partnership between a Tororo municipality, Kasoli Housing private housing finance organization, Association DFCU, national and local government and community groups to finance and implement low-income housing through a private sector-based delivery model. Fundación para la Promoción PRODEL, local non-governmental PRODEL provides funds to microfinance de Desarrollo Local organizations/microfinance institutions, cooperatives and municipalities. (PRODEL), Nicaragua institutions It accompanies its funding with credit technology, including designed products and technical assistance programmes to MFIs and end-users. All PRODEL funds are used for low-income families, typically those earning between USD 1 and USD 4 a day.
Generally, UN-Habitat does not yet have a a service that meets a demand that cannot lender image in the market and its proposed adequately be met by other institutions. credit and funding processes have longer-term 112. The ERSO team was active in searching for implications than those of other institutions. partnerships with relevant business associates 111. Through ERSO, UN-Habitat has therefore and local government stakeholders. Because gained experience and established working the programme was designed as a pilot relationships with local authorities, urban project, information about the approach and poor organizations and domestic financial documentation of experiences was inherent institutions. It has a mandate to empower to the approach from the outset. Elements people living in poverty to realize their included presentation of the operations in productive capacity and does not represent consultation with potential partners and the interests of one country. As such, its countries; presentation of the programme catalytic role in lending can provide services design during expert and regional workshops; and meet needs in ways that international and publications on the experiences at financial institutions cannot, and can serve as the technical and popular levels. Key UN- a bridge for some international and domestic Habitat forums, such as the fourth session financial institutions to reach underserved of the World Urban Forum and the twenty- markets with much-needed financial services second and twenty-third sessions of the for the purpose of affordable housing and Governing Council, were significant events basic services. Once UN-Habitat acquires the for dissemination of ERSO information. requisite funding and capacity, it could provide The pending sixth loan was developed in Evaluation of the Experimental Reimbursable Seeding Operations 41
collaboration with international partners KfW community organizations, banks and other and IFC,38 as presented during a seminar financial intermediaries such as the project held in Stockholm in 2010. Besides sharing loans to SAKAN, PRODEL, DFCU and HFHI, knowledge about the ERSO programme their early accomplishment is reported by operations, UN-Habitat has also been project managers to follow this best practice. engaged in research efforts to compile and 115. With regard to the delivery of finance for document innovative mechanisms and best low-income housing, the ERSO programme practices in human settlements financing for is close to best practice. From the evidence low-income households undertaken by other available, the evaluation found no serious organizations. damaging external factors that interrupted the implementation of the programme 3.7 findings on international or its project loans. On the contrary, best practice with regard to collaboration with international and local the delivery of finance for finance institutions helped the programme low-income housing to deliver its services at or close to the best practice level. Although it was difficult for 113. “Best practice” is a relative term because best the evaluation to make comparisons with practices are constantly changing and being other best practices, materials obtained from updated. Experimentation constantly informs FinMark Trust following web-based research the understanding of what best practices are. helped considerably. Table 3.8 lists some international best prac- tices with regard to the delivery of finance for 116. The ERSO programme has demonstrated low-income housing. Keywords and concepts that its loan projects have developmental include targeting the poor, expandability/ merits for end beneficiaries and perform replicability, evaluation of competitive ad- close to best practice. Because none of the vantage and impact, sustainability, multisec- projects have yet been completed, however, tor partnerships, community engagement, it is difficult to form a meaningful opinion on gender sensitivity, cultural/social sensitivity, how great the impact may be for the target innovative combination of financing low- population in the future. On the other hand, it income housing, community intermediaries is possible to anticipate that the future result and human capacity-building. Best practices of the ERSO programme will be positive, are derived from various sources, including affordable, replicable and sustainable, if it is reflections on the nature of poverty, com- well-managed. munity development principles and practices, theories of communication and learning, and observations from financing low-income 3.8 findings on the ERSO housing case studies. programme target groups 117. Although most respondents (Annex IV, Figure 114. Table 3.8 also gives a brief overview of 5) alluded to the innovativeness of the ERSO some successful low-cost financing delivery programme, most were unable to confirm systems. Generally, making best use of the its development impacts, apart from some available knowledge, leveraging resources, facts that represent an impact in themselves partnering and providing support services use, for example, the establishment of AMAL are among the best practices. In all the ERSO in the Occupied Palestinian Territory; the programme projects loans this has been disbursement of loans to 766 families in the case. As an example, partnering with
38 There is a note on the structure of the project in Annex V. 42 Evaluation of the Experimental Reimbursable Seeding Operations
Nepal; and the establishment of a lending not continue, it may have contributed to programme for neighbourhood infrastructure creating awareness of the need to support in Nicaragua. The Nepal, Nicaragua and affordable housing finance. Occupied Palestinian Territory projects, in 118. This observation may be understandable particular are likely to show immediate impact, in view of the fact that none of the ERSO both in terms of strengthened institutions projects is yet fully completed, but the fact and actual project results, which are already that ERSO is delivering projects with a new apparent: Even if the ERSO programme does operating model is an innovation in itself.
Table 3.8: International best practices with regard to the delivery of finance for low- income housing
Issue International best practice What best practices made this delivery system work? Partnering with community Increasingly, financial institutions The community has frequent meetings with organizations, banks are entering into documented the bank staff members, maintaining open and other financial agreements with either financial lines of communication and a platform to intermediaries institutions or intermediary discuss any controversy. The programme uses organizations. These agreements community groups to deliver workshops and tend to be quite specific and set training sessions. This is crucial since local specific targets for numbers of loans residents have more trust in local community and dollar amounts and usually groups than in banks. The community cover a period of several years. The establishes an advisory committee to financial institution then proceeds to oversee the development of the agreement. make the agreed funds available to This allows the best thinking and a vast the community organizations, which knowledge-base to benefit the negotiations. implement, the plan or, in the case Habitat for Humanity’s work in Uganda is an of an intermediary group, distributes example. They worked with UGAFODE to the funds to other community develop a housing microloan product that organizations. extended Ugafode’s microloans business, while also promoting quality housing investment. The ERSO project in Uganda is close to this best practice. Developing formal As financial institutions have The programme has a clearly defined and community development become more knowledgeable about measurable strategy. The bank makes use of financial institution (CDFI) investing their funds, some have its knowledge about community investing to investment programmes begun to develop their own staffed select effective partners. The bank looks for investment programmes. In general, additional opportunities to work with its CDFI the programmes have at least partners that will benefit both organizations. one dedicated staff member who The bank staffs the programme and provides implements the corporate plan. administrative support to its partners. Standard Bank’s Community Banking initiative in South Africa may fit this description. Investing in Community In addition to developing formal The intermediary uses its position to leverage Development Financial CDFI investment programmes, funds from a wide variety of sources, Institutions banks also invest in individual CDFIs. including both public and private. The Commonly they invest in CDFI affiliated CDFIs are able to share knowledge venture capital funds, credit unions, and resources among themselves, but operate intermediaries, and loan funds. along specialized lines, thereby optimizing efficiency. Evaluation of the Experimental Reimbursable Seeding Operations 43
Creating community In addition to agreements, The banks make lasting use of their money development corporations partnerships and CDFI programmes, by creating a community resource. The CDC (CDC) another investment option that the will support the needs of the community more community investment-savvy as determined by the CDC rather than the financial institutions have chosen banks. The banks pool their resources to is the creation of CDCs. Either create a more significant programme. independently or in association with other financial institutions, they incorporate independent CDCs that are mission-driven and effective. The financial institutions then funnel their CRA dollars into the CDCs. Investing in mutual funds Another common and increasingly By reducing the burden on individual financial popular way for financial institutions institutions through the effectual outsourcing to meet requirements is investing of CRA compliance, more dollars reach in mutual-like funds. Organizations low-income communities. The mutual fund offer these investment funds and company uses its position to leverage funds market them as qualified investment from a wide variety of sources, including funds. In this manner, the financial public and private. institution is guaranteed to meet its CRA requirements without having to invest time and effort in researching appropriate investment opportunities. Bank enterprise award The CDFI Fund offers support to The BEA programme provides an effective programme banks through the Bank Enterprise incentive for reinvestment in communities. Award Programme (BEA). The programme is designed to provide The CDC creates a community resource that monetary awards to banks that will also be valuable to its own staff. increase their investments in CDFIs The CD bank leverages funds from other and/or lending, investment, and sources to increase the size and scope of the service activities in distressed programme. communities. The programme serves to put more capital to work in communities where it is needed. Making use of the best The best programmes utilize community groups that are knowledgeable about the available knowledge target groups, actively solicit input from advisors and partners, and apply lessons learned. The ERSO programme is close to this practice. Leveraging resources The best programmes make the best use of funds by using their funds to leverage other dollars and resources to increase the impact of their work. The ERSO programme is close to this practice. Partnering The best programmes partner with other groups to bring together the most effective resources and broaden the effects of their work. The ERSO programme is close to this practice. Support Services The best programmes offer useful support services that complement their product offerings. The ERSO programme is close to this practice.
119. During the ERSO programme consultation class. This evaluation gathered primary data phase with CPR in late 2007 and early and investigated the income levels of the 2008, the concept of targeting low-income households served, relating them to the populations received much attention. Against relevant country’s income percentiles. As it the background of the CPR stipulations made was not known who the future beneficiaries in 2007–2008, one important question for of three of the loan projects will be, however, the evaluation was whether ERSO operations the evaluator used the estimated target in the supported low-income families or the middle 44 Evaluation of the Experimental Reimbursable Seeding Operations
credit review, the continued validity of which they will be ready to receive the first was checked with the project managers. households by summer 2011; (b) In Nepal and Nicaragua, the target 120. Furthermore, the evaluator found the ERSO was the lowest income household programme to be short of explicit population percentile. That target was met. The targets for its business. The expected projects are in place and running to indicators for the programme did not set an schedule; explicit and well defined indicator for the low-income household target. According to (c) In Uganda and the United Republic the project managers, however, it appears of Tanzania, the target was and that the ERSO projects targeted low-income remains the lower income household households in the countries and territories, percentiles. The projects are in with the exception of the Occupied the planning phase, however; the Palestinian Territory, where the project was beginning of the construction stage is designed to target low-income to middle- planned for 2011. income households. 124. Various organizations, including non- 121. ERSO activities need to be explicit about the governmental organizations, are considering beneficiary populations based on baselines housing finance programmes that may and agreed targets. Contrary to down- draw lessons from the ERSO programme market aims, establishing a sound reputation experience on target groups. The ERSO in financial markets and sustaining a high programme could therefore help to change quality and expanding portfolio can lead to the discussion around low-income housing a new affordable housing financier upmarket finance as lessons learned are made available. by targeting higher income borrowers with The ERSO programme is both new and small. larger loans. Markets perceive such loans as Although it is difficult to judge its impact, the less risky and less costly to manage, while programme is projected to reach a significant contributing to business growth. However, number of households, even with its small the explicit targets have to be set realistically amount of funds. The ERSO programme may in a financial lending context in order not be a leader in demonstrating that housing to nullify the innovative approach. This is finance loans to the underserved can be highlighted as a lesson learned from the effectively repaid. evaluation. 125. The programme has provided evidence of 122. The ERSO programme projects were all in what catalytic lending is and how it works, countries or territories defined39 as low- and how UN-Habitat plays a necessary, income or lower middle-income economies complementary role in the sector. It has also (Table 3.9). demonstrated that community savings, public investment and private capital are the three 123. The intended target groups in ERSO key ingredients for sustainable financing programme countries have been reached or of human settlements development, with almost reached (Table 3.10): focus on affordable housing for low-income groups. Moreover, it has demonstrated to (a) In the case of the Occupied Palestinian Governments an alternative to straight public Territory, the plan is to reach low- service delivery, and shown UN-Habitat income to middle-income target staff that it is possible to diversify sources of groups. Construction of houses is finance. under way and it is estimated that
39 The World Bank. Evaluation of the Experimental Reimbursable Seeding Operations 45
Table 3.9: Gross domestic product per capita in ERSO programme countries or territories
Rank1 Country or territory Gross domestic Household income Year product (nominal) by percentage share per capita (USD) (%) 133 Occupied Palestinian Territory 1,700 lowest 10%: less than 2008/ Ramallah NIS 1,500/$366 district 2007
highest 20%: more than NIS 5,000/ $1221 149 Nicaragua 1,100 lowest 10%: 1.4% 2010 est./ 2005
highest 10%: 41.8% 172 United Republic of Tanzania 500 lowest 10%: 2.6% 2010 est./2005
highest 10%: 34.1% 175 Uganda 500 lowest 10%: 2.6% 2010 est/2005
highest 10%: 34.1% 182 Nepal 400 lowest 10%: 6% 2010 est./ 2008
highest 10%: 40.6% Global average low-income economies 512 2009 Global average lower middle-income economies 2316 2009
Source: World Development Indicators database, The World Bank, 15 December 2010, CIA World Factbook 2010, and Palestinian Central Bureau of Statistics 1 Ranking based on 191 countries
126. Respondents felt that UN-Habitat should be houses in order to obtain money for basic a leader in housing finance for specific low- needs such as paying school fees. income target groups, laying out a range of 127. As can be seen from Table 3.10, the five models (with varying degrees of targeted ERSO lending projects reviewed will reach subsidy) for each population segment. The over 110,000 low-and lower-middle income ERSO programme would fit in as one of beneficiaries in bottom income deciles two to those models. UN-Habitat should present the five. programme as one model and then present others for other population segments. It does 128. Some respondents were of the opinion not have to provide technical assistance on all that UN-Habitat should continue the ERSO models for all segments, but it should be in a programme, preferably under another name position to map the range of models and refer and with clearly defined functions. Other institutions or individuals to other models and institutions could pick up the programme, those who are promoting them. The ERSO but they lacked the legitimacy of UN- programme and other similar initiatives offer Habitat, with its mandate and track record of alternative models for tackling the housing working with urban low-income households, crisis at scale. If UN-Habitat confines itself to local authorities and domestic financial one-off housing projects in cities with large institutions. Other respondents considered housing stock deficits, there is a risk that ERSO best placed to focus on the thematic they would be taken by the middle class and aspects, targeting the urban poor through that low-income households would sell their housing and infrastructure finance, rather 46 Evaluation of the Experimental Reimbursable Seeding Operations
Table 3.10: ERSO programme project beneficiaries
Lending Number Income Av. monthly Intended target groups when signing loan programme level income per agreement40 beneficiaries/ household indicators (USD) Nepal 4,810 Bottom 30% 75 900 families (approximately 3,600 individuals). These families belong to the bottom income deciles: extremely poor. Uganda 1,250 Bottom 30% 230 The loan is to resettle low-income households in phases in serviced, well-planned, titled plots and the development and sale of property by the municipality for low-income, middle- income and high-income residential users, in addition to commercial facilities. United Republic of 2,800 Bottom 50% 136–1200 To provide partial portfolio finance for long- Tanzania term lending to purchasers of 125 affordable houses in phase 1 and another 125 houses in phase 2. Borrowers are members of Kasoli Housing Association. The houses will be mortgaged to low-income earners. Nicaragua 14,420 Bottom 10% 128–194 Enabling lower-income and lowest-income deciles target populations to improve their livelihoods, add to the safety and quality of their neighbourhoods, improve their places of work and improve the quality of their homes and their access to services. Occupied Palestinian 95,000 Bottom 50% 684–1,164 Low-income to middle-income public sector Territory workers, including teachers and nurses, in the Occupied Palestinian Territory. Total 118,280 10–50% 370 (midpoint of range) Source: UFB staff and project site managers
than technical loan administration. The ERSO established many new partnerships with Programme Unit should also provide internal financial institutions, other private-sector support and outreach within UN-Habitat, e.g., partners and community groups in the pilot in utility, infrastructure or local government countries. Some respondents felt, however, finance (strengthening financial management that ERSO would be discredited as a result of local actors and assistance in the path of institutional challenges and closed down towards institutional creditworthiness). before it had had a chance to show its full development impact potential. They argued 129. ERSO is relevant and should be continued that it was pointless to force the programme since it has created strong interest in several to continue with inadequate resources and/ countries and conveyed normative messages or within an inappropriate institutional and (with attention to housing finance for governance setting. urban low-income households) through effective operational engagements and catalytic financing. The programme also
40 ERSO programme project credit memorandum. Evaluation of the Experimental Reimbursable Seeding Operations 47
3.9 findings on technical and 132. During interviews, both Programme Support financial risks Division and United Nations Office at Nairobi staff acknowledged that the above 130. The absence of a feasibility study on how administrative issues were real and a serious the ERSO programme might run led the weakness for the operation of a lending in-house managers to devote time to programme. These issues were documented drafting operational manuals. The manuals in April 2008 and the following risks are went through a number of development highlighted: phases. The first, undocumented, internally developed manual was not regarded as (a) The key assumption of the ERSO Project feasible by the Swedbank expert banking Document is that the Agency will consultants.41 A second set of manuals was provide the leadership and manage the discussed early in 2008 by SMC and CPR, overall process, recruit professionals but CPR raised concerns about the scope with finance expertise to serve in the of the operation manual. This manual was ERSO Team, harness the expertise revised in early 2009, but was found not to of international financial institutions be based on lending experience in the United through partnerships, and contract Nations system. A more streamlined manual the services of external, private entities was developed quite late on, based on loan- at domestic level to prepare select closing experience, and was passed by SMC outputs. Another internal risk relates to in October 2010. the capacity of administrative units of UN-Habitat and UNON to provide the 131. UN-Habitat staff and SMC were of the necessary support for implementing opinion that the ERSO management had ERSO operations. been forced to spend a disproportionate amount of time and effort on creating the (b) Internally, the Professional Staff of UN- appropriate internal systems and buy-in for Habitat may be unable to contribute the programme, resources that could have effectively to the development of ERSO; been used for fund-raising and building a ERSO is addressing these potential robust project pipeline. The Urban Finance risks by strong consultation within the Branch, Programme Support Division and Human Settlements Financing Division United Nations Office at Nairobi staff also and with the units of other Divisions. acknowledged that, during stakeholder To address other internal risks outlined, interviews, several discussions had taken place ERSO will internally emphasize the around those administrative issues. The Urban importance of the experimental Finance Branch staff first explained the need activities to enable strong support from for such systems and had discussions on how administrative units within UN-Habitat/ to acquire them. These include deficiencies PSD and UNON. in postclosing loan administration, due to 133. The evaluator found no internal mailing limited support functions and knowledge of list attached to the document, but it is not loan administration within the Programme implausible to assume that it was circulated Support Division and the United Nations to all heads of UN-Habitat divisions, since Office at Nairobi, and delays in resolving the ERSO programme was greatly debated 42 administrative issues in time . as a new initiative in the organization. It is not clear why, when the ERSO programme
41 From interview. 42 Annex XI for a more detailed list. 48 Evaluation of the Experimental Reimbursable Seeding Operations
management requested administrative 135. To solve the administrative issue, the partners system support from the Programme worked with the United Nations Treasury to Support Division and/or the United Nations outsource the necessary loan administration Office at Nairobi from the beginning of the system support to an external service programme, it was not until two years later provider i.e., a bank recommended by the that the new management wrote in a report Treasury or a provider such as a Mauritius- document to CPR about the next steps of the based service agency, but concerns about programme, “Set-up of loan administration issues such as security of data transportation for portfolio (cash management, IAS led to time-consuming reviews of potential accounting, loan performance tracking, providers until it was too close to the end of payment processing)”.43 There was concern the experimental period for a decision to be among the respondents that the ERSO made. programme had not yet managed to build 136. Table 3.11 shows that the ERSO programme a robust lending platform within the United has achieved most of its objectives. The Nations system. only significant exception is the internal 134. The ERSO programme operational manuals,44 implementation: without any impending which were produced as negotiated external factors, it was a substantial period documents with CPR45 under Governing managed by trial and error, without a Council resolution 21/10, make few references documented road map. to how to operate the loan administration of 137. With regard to efficiency, the evaluation rec- the programme until the latest manual of ognized that the ERSO projects faced chal- September 2010, which includes a chapter lenges resulting from UN-Habitat bureau- offering guidance on post-closing transaction cracy (Annex IV, Figure 3). It is reasonably monitoring. With reference to the working certain that the organization knew that the lending operation in UNCDF and IFAD, ERSO programme required support from the however, there is no evidence that it is not Programme Support Division and the United feasible to build a best practice support system Nations Office at Nairobi. The ERSO manage- for loan administration within the United ment made efforts to overcome these prob- Nations system. In interviews, the Programme lems by resorting to outside bona fide assis- Support Division and United Nations Office tance46 on cash management systems and a at Nairobi management acknowledged temporary loan portfolio system made by an difficulties in and/or opposition to investing in-house information technology manager. in an expensive administrative loan system This may be adequate for a small loan portfo- when the ERSO programme loan portfolio lio, but an extended ERSO programme would was still so small and so close to the end of its have to install quality loan administrative so- experimental period. lutions, both to manage the existing portfo- lio and to stay alive in forthcoming external evaluations and audits.
43 UN-Habitat, ERSO and SUF Programme Progress 8 April 2010: 2010 Steps for ERSO Revolving Loan Programme. 44 United Nations Habitat and Human Settlements Foundation: Policy Framework and Draft Operational procedures and guidelines, HSP/GC/21/5Add.3, 8 March 2007; Operations Manual, For Operational Activities of the United Nations, Habitat and Human Settlements Foundation, Experimental Reimbursable Seeding Operations, Trust Fund (ERSO) 19 February 2009; UN-Habitat, Urban Finance Branch, ERSO Programme – Operation Manual, September 2010. 45 In-depth interview with Key CPR Representative. 46 Interview with Chief of Urban Finance Branch. Evaluation of the Experimental Reimbursable Seeding Operations 49
138. A review of documents and stakeholder inter- manner, as do international financial institu- views revealed that administrative challenges tions. Cooperation in this regard with other might have impaired and slowed down the like-minded United Nations agencies or inter- efficiency of the operation of the ERSO pro- national financial institutions could respond gramme. If it was to play an efficient incuba- to both objectives. tor role, it should have been afforded the op- 139. Assessment of ERSO risks also focused portunity to establish its own organizational on the programme’s effectiveness, thus infrastructure, even if that meant outsourcing establishing how well UN-Habitat and partner some programming and financial (including organizations carried out actions necessary to back-office) activities and responsibilities. Af- achieve programme objectives and produce ter all, the capacity to self-administer could the expected results. The requirements for provide an acid test of institutional viability. a quantitative assessment of management Another acid test would be evidence that effectiveness are: the ERSO programme itself could operate in a budgetary and financially self-sustaining
Table 3.11: ERSO programme objectives collated with evaluation criteria and main findings
Criteria47 / ERSO Increase the effective demand for low- Demonstrate to GC the technical, financial objectives income housing, related infrastructures and and institutional capacity of UN-Habitat to upgrading by facilitating the access of low- identify, prepare and influence innovative, income community groups and households to reimbursable seeding operations that mobilize financing for adequate shelter solutions domestic investment capital and savings on a financially sustainable basis Relevance Yes (Tables 3.2/3.10), interviews, field trips Yes (Table 3.4/ Annex IV, Figure 1), questionnaire, interviews Effectiveness Yes (Table 3.1/3.10/ Annex IV, Figure 2) Yes (Table 3.1/ 3.5/ Annex IV, Figure 2) Efficiency Yes (Table 3.7) No (Annex IV, Figure 3), document reviews, interviews & questionnaire on governance, loan administrative system, implementation & resources Sustainability Too early to say, but yes, in three cases: Nepal, Yes, project loans Nicaragua and the Occupied Palestinian No, own funding, (Table 3.2/Annex IV, Figure Territory (Annex IV, Figure 4) 4) Impact Too early to say, but yes, in two cases: Nepal & Too early to say, (Annex IV, Figure 5) Nicaragua (Table 3.10/ Annex IV, Figure 5)
47 Relevance: The extent to which the objectives of a development intervention are consistent with beneficiaries’ requirements, country needs, global priorities and partners’ and donors’ policies. Note: Retrospectively, the question of relevance often becomes a question as to whether the objectives of an intervention or its design are still appropriate given changed circumstances. Effectiveness: The extent to which the development intervention’s objectives were achieved, or are expected to be achieved, taking into account their relative importance. Note: Also used as an aggregate measure of (or judgment about) the merit or worth of an activity, i.e. the extent to which an intervention has attained, or is expected to attain, its major relevant objectives efficiently in a sustainable fashion and with a positive institutional development impact. Efficiency: A measure of how economically resources/inputs (funds, expertise, time, etc.) are converted to results. Sustainability: The continuation of benefits from a development intervention after major development assistance has been completed. The probability of continued long-term benefits. The resilience to risk of the net benefit flows over time. Impact: Positive and negative, primary and secondary long-term effects produced by a development intervention, directly or indirectly, intended or unintended. 50 Evaluation of the Experimental Reimbursable Seeding Operations
(a) Data48 that can be processed into of actual performance with planned information that is relevant and useful performance. In this case, implementation for managers; was preceded by extensive UN-Habitat (b) Information that can be used to plan, meetings. An expert consultation process make informed decisions and guide took place from 19 October to 5 November evaluation of the extent to which 2007. This was followed up with a formal 49 planned results have been achieved; workshop in early 2008. An ERSO business plan was produced in October 2008. Because (c) Plans that set quantitative targets and of the extensive consultation process and the define indicators; project development and external partnership (d) A tool to provide information for plan- work, however, the approach during this ning, decision-making (implementa- phase did not focus on the establishment tion) and evaluation. of technical systems for loan administrative 140. An evaluation such as this would normally back-office systems for ERSO programme place far more emphasis on analysing primary operations, including post-closing loan data and immediate evidence based on administration, portfolio accounting and cash documentation on model operations, rather and treasury management. than relying too heavily on data represented 141. Corresponding technical experts were by assessments from stakeholder interviews, introduced only one year before the end of a questionnaire and document reviews. The the programme. It is essential for any future implementation of the ERSO programme extended ERSO programme to install quality was not, however, carried out following a loan administrative solutions both to manage documented feasibility study, which could the existing portfolio and to stay alive in then be used as a standard for comparison forthcoming external evaluations and audits.
48 The terms “data” and “information” are often used interchangeably. In the context of information management, however, they have clearly distinct meanings: data are facts that have been recorded and information is processed data. 49 Annex XIII. Evaluation of the Experimental Reimbursable Seeding Operations 51
4. Conclusions, lessons learned and recommendations
A construction site in Ramallah,Occupied Palestinian Territory © UN-Habitat
4.1 Design and implementation ensure successful implementation (Lesson mechanism learned 1).
Conclusion Recommendations 142. Most stakeholders are in favour of the 144. UN-Habitat should continue to support the concept of the ERSO programme and would ERSO programme because of its relevance. like to see some form of a catalytic lending Given the observed challenges and inefficiency programme for affordable housing and within its administration and therefore the basic services to be linked to the UN-Habitat high risk for the programme to contribute work programme in the future. UN-Habitat effectively to the UN-Habitat mandate, it is underestimated the resources required to recommended that there be a finance-related implement a lending operation programme permanent initiative at UN-Habitat which, within its administration, however, making with a serious commitment from UN-Habitat, the conclusion on the sustainability of the could effectively and efficiently continue to ERSO programme less precise. Limited enhance achievement of the goals of the financial resources, staffing capacity and ERSO programme. This would take the form administrative back-office support led most either of (Recommendation 1): respondents to reject UN-Habitat as the preferred institution to operate the ERSO (a) A permanent scaled lending program- lending programme. me within UN-Habitat. This option would only work effectively if backed up by strong commitment and ade- Lessons Learned quate resources from UN-Habitat. As- 143. Urban development and housing projects suming that a permanent financial len- with a financial component require a ding programme is established, if it is to sufficient number of financial services experts be justifiable in terms of administrative on board to provide support in order to costing, would operate a larger loan 52 Evaluation of the Experimental Reimbursable Seeding Operations
portfolio of 20–50 projects amounting committees: financial policy and risk planning to some USD 20 million, the evaluation committee; credit review committee; audit recommends the following comple- committee; and compensation committee. It mentary options: is suggested that the chair of the board also • An initial contribution of capital chair the financial policy and risk planning (optional USD 4 million) by UN-Habitat; committee, and the credit review committee (Recommendation 3). • Staff of seven to ten50 professionals and an annual budget of USD 2 million–2.5 million,51 4.2 pERformance of the ERSO • UN-Habitat to invest in an efficient Trust Fund administrative lending and support system. Conclusion Or in the form of: 147. ERSO was effectively run as a trust fund in accordance with the operational manuals (b) A permanent laboratory pilot-by-pilot verified by the in-house programme concept lending programme within management officers, according to the rules UN-Habitat. The application of this of UN-Habitat. The ERSO loan portfolio is option however would require strong performing according to schedule and is commitment and adequate resources considered successful in view of the funds on the part of UN-Habitat. Running and human resources available to it. The a pilot lending programme requires programme has reached the most deserving many of the same functions as a scaled population, who range from middle class lending programme, although on a with no access to affordable housing (e.g., in smaller scale. the AMAL project in the Occupied Palestinian 145. Based on the experience gained from ERSO, Territory) to households at the bottom of the a review study is recommended to assess pyramid that have no access to small loans for whether a future operational UN-Habitat housing improvement (e.g., HFHI in Nepal). ERSO programme could best be implemented 148. As none of the ERSO programme lending as an in-house or outsourced initiative; by projects has reached completion, it is not UN-Habitat alone or in partnership with other possible to reach a conclusion as to the impact United Nations agencies (Recommendation of the programme on future beneficiaries. 2).
146. Furthermore, based on the experience gained Lessons Learned from ERSO governance, UN-Habitat should 149. Having enough flexible funding agreements, facilitate the establishment of an international beyond low––interest loans or working financial institution board, to be chaired by the capital loans, to allow an innovative finance Executive Director of UN-Habitat and of which programme to develop a variety of products the director of the future ERSO programme increases the effectiveness of the programme would be a member. The other board through a more diverse loan portfolio (Lesson members should have financial expertise and learned 2). development experience. The board should, from its membership, set up at least four
50 Estimate by Urban Finance Branch Chief to cover professional and geographically balanced staffing. 51 An approximate but reasonably common figure in the industry to calculate experienced financial staffing. Evaluation of the Experimental Reimbursable Seeding Operations 53
150. Distilling lessons learned from UN-Habitat 1970s. ERSO could therefore learn from global research from various pilot affordable them, including about up-to-date lending housing programmes and disseminating programme platforms and systems. them to feed them into its innovative finance programme in order to make the first move Recommendations to replicate and scale up for new efforts by UN-Habitat to marry low cost building 156. technologies and financial services (Lesson learned 3).
151. To make it possible to measure the impacts of the programme operations aimed at supporting affordable housing, ERSO has to be explicit about the target beneficiary populations (Lesson learned 4). UN-Habitat should explore future strategic partnership with UNCDF, which has strategies Recommendations similar to those of the ERSO programme (Recommendation 7). 152. For a future ERSO programme, UN-Habitat should thoroughly review innovative 157. UN-Habitat should also engage UNCDF funding mechanisms and seek support from and IFAD in discussions about technical interested donors to ensure sustainable partnerships on lending programme issues resources for ERSO to attain its long-term and sharing lending platforms and systems goals (Recommendation 4). (Recommendation 8).
153. UN-Habitat should find or coin a definition of target groups for its lending operation 4.4 innovative financial in relation to what is achievable in the mechanism innovative financial mechanism context (Recommendation 5). Conclusion
154. For a future ERSO programme, UN- 158. An innovative financial mechanism may take Habitat should conduct a closer analysis the form of new products, new policies and and consultations using an external/ programmes, new approaches and new independent expert to assess leveraging the processes. New products are new marketable impact of individual loans under the ERSO funding instruments that can be used to attract programme and other alternative parameters public and private investments in housing (Recommendation 6). activities and projects. Given the broad range of future environmental, economic and social gains arising from housing activities, there is 4.3 Comparison with lending ample opportunity for UN-Habitat to support programmes within the new products nationally and internationally. United Nations system Lesson Learned Conclusion 159. Offering diverse funding options (i.e., grants, 155. UNCDF and IFAD have portfolios much larger loans, credit enhancements/guarantees/ than the ERSO programme, partly because they have been in the market since the late 54 Evaluation of the Experimental Reimbursable Seeding Operations
shares, or a mix of all three) that provide to operate a lending programme. medium-term capital to financial institutions with a track record of providing housing 163. The ERSO programme operational manuals microfinance directly or indirectly increase were developed during the experimental the likelihood of developing projects where period with the intention of effectively and specific site challenges exist (Lesson learned sustainably covering the technical and financial 5). risks for the borrower in loan contracts. There are, however, several administrative back- Recommendation office support system issues that may have increased the technical and financial risks in 160. Invite and share with other United Nations the operation of the ERSO programme. These agencies what in operational terms they include deficiencies in post-closing loan consider an innovative financial mechanism, administration, portfolio accounting, and taking into account acceptable financial cash and treasury management capabilities risks and instruments. The definition should incompatible with international financial also consider the Habitat Agenda mandate norms for portfolio reporting. on finding, a niche in financial lending programmes where UN-Habitat could fill the 164. The evaluator recognizes that the ERSO gap in the financing of affordable housing projects faced challenges resulting from for low income households in partnership UN-Habitat bureaucracy. If the programme with other international financial institutions was to play an incubator role, it should have (Recommendation 9). been afforded the opportunity to establish its own organizational infrastructure, even if 4.5 Collaboration within the this meant outsourcing some programming United Nations and with and financial (including back-office) activities partners and responsibilities. Cooperation with other like-minded United Nations agencies or Conclusion international financial institutions could have contributed to achieving ERSO objectives. 161. Funding through collaboration between Lesson Learned ERSO and domestic banks and multilateral and international financial institutions has 165. To lessen the administrative burden when cushioned ERSO project loans. operating loan programme activities, it may be useful for the UN-Habitat Secretariat 4.6 tEChnical and financial risks to conduct a feasibility study on how to fit a lending programme into a grant-giving Conclusions institution (Lesson learned 6).
162. Most stakeholders consider the ERSO Recommendations programme not to have operated efficiently enough within the UN-Habitat administration 166. If it is impossible for UN-Habitat to enhance because of a lack of financial resources and its commitment, it should at least continue staffing capacity, and administrative back- to make progress towards attaining the office support issues. They do not therefore goals of the ERSO programme by exploring consider UN-Habitat the preferred institution and initiating negotiations to liaise with Evaluation of the Experimental Reimbursable Seeding Operations 55
like-minded partners in order to share 4.7 international best practice programme operating costs, and seek donor with regard to the delivery support through partners outside UN-Habitat of finance for low-income but within the United Nations system, such housinG as UNCDF, or by participating as a sponsor in a multi-donor scaled facility partnership Conclusion structure to further pilot and scale up investment in affordable housing, as was 169. The evaluation has demonstrated that ERSO outlined in the proposed ERSO programme projects have performed close to best sixth loan project 52 (Recommendation 10). practice according to a comparison with the FinMark ranking list. FinMark is a leading firm 167. If ERSO is to function according to the monitoring best practice in this field. international independent auditors’ best practice, consultations are needed between Recommendation the United Nations Office at Nairobi, UN- Habitat and the ERSO programme on the 170. According to FinMark, ERSO best practise is present and future of the programme in evolving and developing. UN-Habitat should terms of administrative support systems keep the programme on track, comparing (Recommendation 11). ERSO programme methods on best practice with FinMark once a year and make any 168. The United Nations Office at Nairobi and necessary adjustments (Recommendation UN-Habitat should agree on an appropriate 13). timetable for the installation of the required administrative support system. If this is not feasible, negotiations should be started with partners within the United Nations system to outsource the ERSO programme administrative back office systems (Recommendation 12).
52 Annex V. 56 Evaluation of the Experimental Reimbursable Seeding Operations
Annexes Evaluation of the Experimental Reimbursable Seeding Operations 57
I. Terms of Reference
1. Introduction under the Human Settlements Financing Division of UN-Habitat. In the context of the MTSIP, it is a In accordance with the Secretary-General’s core programme of Focus Area 5: “Strengthened bulletin of 19 April 2000 entitled “Regulations human settlements finance systems” and is and Rules Governing Programme Planning, complementary to the Slum Upgrading Facility the Programme Aspects of the Budget, the Programme, also within the Urban Finance Monitoring of Implementation and the Branch. ERSO is also linked to Sub-Programme 4 Methods of Evaluation” (ST/SGB/2000/8), the for improved investment in human settlements overall objective of evaluation is to determine, development leveraged by the Foundation from as systematically and objectively as possible, the domestic private and public sources through relevance, efficiency, effectiveness and impact innovative mechanisms for financing housing and of the UN-Habitat activities in relation to their related infrastructure. objectives and to enable the Secretariat and Member States to engage in systematic reflection, with a view to increasing the effectiveness of The purpose of ERSO is to: the main programmes of UN-Habitat by altering i) Field-test experimental and reimbursa- their content and, if necessary, reviewing their ble seeding operations and other inno- objectives53. The Governing Council of UN- vative operations for financing for the Habitat, through resolution 21/10, has requested urban poor for housing, infrastructure an evaluation of the Experimental Reimbursable and upgrading through community Seeding Operations programme (ERSO) and a groups, including where there is an report is to be submitted at the 23rd session in expectation of repayments mobilizing early 2011. This strategic evaluation was therefore capital at the local level; and included in the evaluation plan for the 2010-2011 ii) Strengthen the capacity of local financial biennium work programme of UN-Habitat. and development actors to carry out those operations and to support the 2. Background and Context capacity of the United Nations Human of the Experimental Settlements Programme to enhance Reimbursable Seeding those operations. Operations Goal The Experimental Reimbursable Seeding Operations programme (ERSO) was designed to operationalize The strategic goal of the ERSO programme is Governing Council Resolution 21/10 through the increased sustainable financing for affordable establishment of a trust fund within the UN-Habitat and social housing and infrastructure ERSO Foundation for a four-year experimental period contributes to progress of MDG Goal 7, Target 11 from 2007 to 2011 to support the introduction of significantly improving the lives of at least 100 of experimental reimbursable seeding operations million slum dwellers by the year 2020. The ERSO and other innovative financial mechanisms. ERSO target group is low to middle income populations is a programme in the Urban Finance Branch in Africa, Asia, Latin America and the Middle East.
53 The terms of reference and other Annexes to this report have been reproduced without formal editing. 58 Evaluation of the Experimental Reimbursable Seeding Operations
Expected Accomplishments and Approach Performance Indicators With respect to field testing of financing, Expected accomplishments include financing ERSO initially adopted a field testing approach raised for and increases recorded in affordable of a standalone lending operation offering and social housing stock and related infrastructure standardized, short term, small-sized loans of up and increase in activities in municipal finance and to USD 500,000 in local currency at concessionary, affordable housing finance. below-market interest rates of between 1-2 per cent to local banks and microfinance institutions, Specific performance indicators for the ERSO with the concept that the interest rate subsidy programme were developed at the time that the would encourage these institutions to make loans original Program Document was prepared and to low-income borrowers and projects. Subsequent adopted within UN-Habitat in April 2008. to July 2009, ERSO developed and field tested These indicators were: other types of pilot structures, including providing long term international market-rate working a) Number of ERSO operations in the capital lines to local microfinance institutions, process of being implemented (target: and providing first loss loan funding to a major 8 – 12 totals in 4 regions) project partnership with World Bank, International b) Average ERSO contribution per Finance Corporation, Overseas Private Investment operation (target: min USD 0.5 million) Corporation, Department for International c) Domestic investments / savings Development and local banking institutions. mobilized per operation (target: Av. With respect to capacity strengthening, the ERSO Leverage factor min 1:1) team has taken a collaborative approach, working d) Number of low income Households with local banks and microfinance institutions served (target: min. 1,600 households and nongovernmental organization partners to total /200 per operation) present the results of lending operations and e) Households served under ERSO within lessons learned at international and regional the range of income deciles defined urban development, microfinance and micro per country operation housing lending conferences. The ERSO team has f) Strengthened capacity of domestic shared insights on financial structuring and loan financial institutions in affordable guarantee risk analysis and risk mitigation with housing finance, Slum Upgrading Facility Programme Local Finance Facilities, and with slum upgrading real estate g) Strengthened capacity of domestic development projects sponsored by other areas of institutions and development actors UN-Habitat. in affordable housing delivery, infrastructure provision and upgrading The ERSO team has further participated in discussions with Water, Sanitation and These indicators were developed before the ERSO Infrastructure Branch on formation of funds programme was fine tuned and additional lending for water plant upgrade project finance and on pilot ideas and capacity building activities were development with Inter-American Development incorporated into the programme consistent Bank, KfW and ProCredit Bank of innovative with the overall programme, goals. Therefore the water hookup micro lending in Central America. suggested questions for evaluation reflect the In addition, the ERSO team has participated assessment of the broader programme goals in in the planning of innovative municipal addition to the specific performance indicators upgrade approached with Agence Françoise de originally developed in the program document. Développement and Millennium Cities Initiative Evaluation of the Experimental Reimbursable Seeding Operations 59
in Kisumu, Kenya; and worked on sector analyses UN Habitat. This includes: with the Regional and Technical Cooperation • Review of a proposed Water Operators Division and with the Urban Economics Branch Partnership fund for upgrading of of the Monitoring and Research Division in UN- Global South WOPS partner water Habitat. facilities to highest environmental standards; Funding basis and loan portfolio activities • Review of financial planning for the Mavoko Community Group and Kewlat The ERSO Trust Fund for field testing lending community housing development (Reimbursable Seeding Operations) was funded project involving Water, Sanitation and by the Government of Spain, the Government Infrastructure Branch and the Gender of Bahrain and the Rockefeller Foundation for Unit; USD 3.6 million. UN-Habitat has reviewed over • Review of Slum Upgrading Facility 50 potential loans to date under the field testing partner internal credit and loan portion of the ERSO Programme. Five ERSO loan guarantee underwriting, project transactions were completed between January management and recovery standards and May 2010 (with Azania Bank in Tanzania in Ghana, Sri Lanka, Indonesia and for USD 500,000; with DFCU Bank in Uganda Tanzania; and for USD 500,000; with Habitat for Humanity International in Nepal for USD 250,000; with • Review of past or future community PRODEL in Nicaragua for USD 500,000; and with fund or microfinance institution seed SAKAN Palestine for USD 1,000,000), bringing funding proposed or given by the Slum total funds disbursed to USD 2,750,000. This Upgrading Facility or by the Regional initial round of lending will support the creation and Technical Cooperation Division. and upgrading of over 33,000 affordable and ERSO is in the process of developing collaborative social housing units in six countries (with housing arrangements with the Millennium Cities investment to be made with leverage additional Initiative and with the Cities Alliance and to investment and project value of over 175 to 1 on work collaboratively with the Shelter Branch of 54 our initial funding) . Certain loan commitments the Global Division, and the Slum Upgrading were not able to be funded as loans following due Programme of the Regional and Technical diligence; the ERSO team then worked further with Cooperation Division to create a better policy donors and sponsors to find, where appropriate, coordination, market and housing stock baseline grant or similar funding for these projects. Lessons data and coordinated action plans. learned from these projects will be included in the September 20, 2010 presentation to the CPR Working Committee on ERSO, which will serve as 3. Evaluation Purpose and documentation for this evaluation. Objectives
Further loan projects are being explored to make The overall objective of this evaluation is to use of the funds remaining. Potential new lending evaluate progress on the implementation of the projects will be presented to the Steering and experimental reimbursable seeding operations Monitoring Committee at its meetings in Spain in and other innovative mechanisms and to suggest 55 October, 2010 and will be made available to the alternatives for more effective implementation . evaluation team at that meeting. Capacity-building This evaluation is also expected to guide any and Advisory Activities ERSO provides financial decision by the Governing Council at its twenty- advice to other projects and programmes within third session on potential future applications of the
54 The April Presentation to the CPR Working Group on ERSO lists the completed projects, amount funded and leverage for each project 55 GC Resolution 21/10 paragraph 7 (g). 60 Evaluation of the Experimental Reimbursable Seeding Operations
experimental methodologies. (GC 21/10, Part II, 7 term) with clear responsibilities and estimated (i). resources, if necessary.
This evaluation will review progress on the implementation of the experimental reimbursable 5. Evaluation Criteria and Key seeding operations and other innovative Questions mechanisms and assess alternatives for more This evaluation will be guided by four main effective implementation. It will guide UN-Habitat criteria: effectiveness, efficiency, relevance and Senior Management, the Urban Finance Branch sustainability. The various pilot approaches and Team, the Steering and Monitoring Committee and some aspects on progress towards the expected donors and interested partners on the degree of outcomes and impact that could be attributed to success of the reimbursable seed capital operations some of the ERSO projects will be assessed. The and other innovative financial mechanisms. Most table below provides some suggested questions crucially, it will inform future strategy and direction that will guide the focus of the evaluation. The for Focus Area 5 activities on strengthened evaluators have the discretion to add or modify human settlements finance systems. Results and suggested evaluation questions which will be recommendations drawn from this report will discussed in the inception report. be presented to the Governing Council at its 23rd session for consideration and to guide any decision by the on potential future applications of 6. pRoposed Methodology the experimental reimbursable seeding operation The consultants are expected to outline the details methodologies. of their proposed methodology in their Inception Report. It is anticipated that the assessment will be 4. Evaluation Scope and Focus organized as follows:
The evaluation will cover the period from January a) In–depth document review and 2008 to present and will focus on processes and analysis, which may focus on the activities of ERSO in Nairobi offices as well as field following (also see list of background projects. All ERSO lending transactions, advisory documents under 11 below.): and capacity-building activities conducted to- • The current 5 ERSO loan transactions date will also be covered by this evaluation. The and associated documentation; evaluation criteria of efficiency, effectiveness, • Proposed additional partnership relevance, sustainability and preliminary impacts activities in micro housing finance; from ERSO activities will be used. It will consider • ERSO lending process, including loan the ERSO programme design, processes and origination, loan administration and implementation as well as undertake an analysis cash management and portfolio of risk, including resource implications of the accounting proposed mechanisms in ERSO and other activities tested during the experimental period. • Financing structures and arrangements for ERSO transactions including In line with Resolution GC 21/10, the evaluation project design, development and will cover the ERSO programme design itself as well implementation; as the outputs of the programme. Lessons learned • Financial advisory work done on behalf and recommendations based on key findings are of other UN-Habitat projects; required. Recommendations are expected to be • SP456 conference presentations and practical, timed (immediate, mid-term and long- related materials.
56 Human Settlement Financing, Sub-Programme 4. Evaluation of the Experimental Reimbursable Seeding Operations 61
b) Interviews with key stakeholders, both transaction, UN Treasury and UNON. face-to-face and by telephone and c) Field visits to project sites in selected email. countries Key stakeholders could include UN-Habitat staff, d) A comparative analysis of UN-Habitat Steering and Monitoring Committee members, ERSO operations in relation to borrowers / project partners involved in each loan international best practice with regard
Evaluation criteria Preliminary questions
Relevance • How appropriate was the initial standalone lending ERSO model for UN-Habitat to pursue in the first place? • How appropriate is an interest rate subsidy approach from a developmental economics standpoint? Can such an approach crowd out local lending and the development of a local financial sector? • How appropriate is the long term working capital loan approach? • How appropriate is the project partnership approach with major international financial institutions? • Are there other lending and credit enhancement models that may be more relevant and that should be considered? • Is there real demand for micro housing lending? Community project finance? The products and services that ERSO offers? • Is there a market for private sector finance involvement in ERSO activities? • Are incentives needed and/or appropriate to encourage such private sector involvement? • Comment on the possible incentives used to-date other than interest rate subsidy (access to long term capital, first loss non-recourse loan investment, first money investment, other) Effectiveness • Did ERSO meet intended and stated programme objectives? To what extent has ERSO achieved delivery of the expected outputs, targets and outcomes and what remains to be done? • Are the ERSO credit reviews, risk and risk mitigation analyses, and revised operational procedures for lending consistent with good practice in international development lending? • Has ERSO loan type or types reached target populations? • Which ERSO loan type or types were most effective in reaching low income populations? • Which loan type or types were most effective in reaching scale and addressing housing stock gaps? • Which loan type or types were most effective in supporting development of municipal government approaches? • Which loan type or types provided the most effective incorporation of support from National Government Housing Ministries? Efficiency • Is ERSO cost-effective? • Does the ERSO programme have sufficient financial resources and staffing capacity to achieve its objectives or continue effective operations? • Does ERSO have sufficient programme support from UN-Habitat and UNON to effectively administer its portfolio? Is the programme support in payment processing, accounting, loan administration and cash management, as implemented to date, effective? • Is ERSO flexible enough to meet the needs of the different users and deliver the required products and services? 62 Evaluation of the Experimental Reimbursable Seeding Operations
Sustainability • Can UN-Habitat access the resources (funding and financing) needed? • Is the present structure of ERSO a sustainable model over the longer term? • Can private sector finance involvement be made compatible with UN-Habitat internal processes and procedures, or would another type of structure to support private sector involvement be preferable? Does UN-Habitat have the appropriate systems in place for a long- term lending operation? Impact • What are the preliminary direct and indirect impacts of the ERSO programme? • What are the implications for housing finance for the underserved?
to the delivery of finance for low- needed for the review, making appointments income housing and infrastructure, for interviews, and arrangements for field visits. and HSFD will also review all the deliverables of the e) In particular, review of other lending evaluation to ensure factual accuracy. programs and operations within The MTSIP Steering Committee will be informed of the UN system, UNCDF and IFAD, the process and will be invited to provide feedback with comparative analysis of aims, to draft findings and recommendations. The organizational structures, staffing and donors will be invited to comment on inception operations of the other two programs and draft reports. The Steering and Monitoring within UN-Habitat with a lending Committee (SMC) of ERSO will also review the mandate. ToR, the inception report and the draft reports. The f) Participation in the ERSO Steering and CPR Working Group on ERSO will be informed of Monitoring Committee meeting in progress and results of the evaluation throughout Madrid, Spain, 13 – 15 October 2010 the process and the evaluation approach and 7. Roles and Responsibilities the main ERSO findings will be presented to the CPR Working Group on ERSO for comments. The The Monitoring and Evaluation Unit, which is evaluation will be guided by the United Nations responsible for coordinating monitoring and Evaluation Group Norms and Standards. evaluation activities of UN-Habitat, will provide the overall management of this evaluation. The Unit will approve the Terms of Reference for the 8. Main Deliverables of the evaluation and oversee the process of selection Evaluation and recruitment of the consultants. The M&E Unit The consultant(s) should produce the following will also review all the deliverables for quality and deliverables: ensure compliance with the norms and standards for evaluation in the UN System. a) Inception Report (first payment = 20 per cent) – the inception report (about 15 The Director, HSFD, Chief, Urban Finance Branch pages) will include proposed detailed and the team members of UFB will provide the methodology, assessment criteria / administrative and logistical arrangements and questions and work plan, justification support to facilitate the work of the consultants and sampling criteria for field visits, as appropriate. This will include ensuring that the and all other detailed related to work consultants have access to all relevant documents focus and programme leading to final evaluation outputs. Evaluation of the Experimental Reimbursable Seeding Operations 63
b) Draft reports (second payment = 40 per transactions including experience with cent) – the draft report (not exceeding emerging, low income housing markets 40 pages, excluding annexes) which in developing countries; will be circulated for comments. Final • Extensive experience in housing finance reports (third and final payment = for low to middle income markets, 40 per cent) – the final report will ideally in developing countries, and; incorporate all the back and- forth • Demonstrated ability and understanding comments from the draft report. The of international best practice standards final report should have a clear stand for banking and loan transactions for alone executive summary. A proposed low and middle income target markets format for the report is attached. • Team leader should have extensive experience in conducting programme 10. Required Qualifications and evaluations. Competencies The evaluator(s) are required to disclose, in It is anticipated that the evaluation will be done by writing, any past experiences of themselves or two consultants recruited through a competitive their immediate family which may give rise to a process. The following experience is required: potential conflict of interest and to deal honestly in • Extensive experience with international resolving any conflict of interest which may arise. banking, particularly in lending and The evaluator(s) are also required to be familiar mortgage lending, microfinance (ideally with the Code of Conduct for Evaluation in the UN micro housing lending) and financial systems and the United Nations Evaluation Group Norms and Standards.
9. work Plan and Schedule
Output / Activity Timeframe Desk review and preparation of Inception Report September 2010 Presentation of draft Inception report to UN-Habitat for 12 October 2010 review and feedback Attendance at ERSO Steering and Monitoring 13 – 15 October 2010 Committee in Madrid, Spain to present and finalize Inception Report Data Analysis and Drafting of Report; site visits as October and November 2010; submission of first draft determined and agreed in Inception Report; on-going report contact with UN-Habitat and other key stakeholders by 6 December 2010 Drafting of Final Reports (comprehensive version and Submission of Final Reports 31 January 2011 summary version for 23rd GC), incorporating comments and other requirements as appropriate and in discussion with UN-Habitat Senior Managers and other key partners Through December 2010 and January 2011 64 Evaluation of the Experimental Reimbursable Seeding Operations
11. Key Background Documents IFCStandard Chartered Global Micro for the Evaluation Housing Facility (UN-Habitat facilitator role) • Governing Council Resolution 21/10 • First ERSO Operations Manual April • UN-Habitat Medium Term Strategic and 2008 and Current ERSO Operations Institutional Plan 2008 – 2013 Manual 19 February 2009 • ERSO Project Document of April 2008 • Revised (current) ERSO Operations • UFB Presentation to the CPR Working Procedure Manual dated September 7, Committee on ERSO, April 2010 2010 • UFB Status Evaluation presented to • Procurement material relating to loan Deputy Executive Director Inga Klevby administration and portfolio accounting and Director Bert Diphoorn May 2010 for ERSO loan portfolio • ERSO credit memoranda on all 5 closed • Evaluation of Mavoko project financial loan transactions structure in connection with proposed • Briefing Note to Deputy Executive loan to HFCK Director on exploratory talks concerning • Other documents as requested and relevant Evaluation of the Experimental Reimbursable Seeding Operations 65
II. Suggested key questions from the terms of reference
Evaluation criteria Preliminary questions Relevance • How appropriate was the initial standalone lending ERSO model for UN-Habitat to pursue in the first place? • How appropriate is an interest rate subsidy approach from a developmental economics standpoint? Can such an approach crowd out local lending and the development of a local financial sector? • How appropriate is the long term working capital loan approach? • How appropriate is the project partnership approach with major international financial institutions? • Are there other lending and credit enhancement models that may be more relevant and that should be considered? • Is there real demand for micro housing lending? Community project finance? The products and services that ERSO offers? • Is there a market for private sector finance involvement in ERSO activities? • Are incentives needed and/or appropriate to encourage such private sector involvement? Comment on the possible incentives used to-date other than interest rate subsidy (access to long term capital, first loss non-recourse loan investment, first money investment, other) Effectiveness • Did ERSO meets intended and stated programme objectives? To what extent has ERSO achieved delivery of the expected outputs, targets and outcomes and what remains to be done? • Are the ERSO credit reviews, risk and risk mitigation analyses, and revised operational procedures for lending consistent with good practice in international development lending? • Have ERSO loan type or types reached target populations? • Which ERSO loan type or types were most effective in reaching low income populations? • Which loan type or types were most effective in reaching scale and addressing housing stock gaps? • Which loan type or types were most effective in supporting development of municipal government approaches? • Which loan type or types provided the most effective incorporation of support from National Government Housing Ministries? Efficiency • Is ERSO cost-effective? • Does the ERSO programme have sufficient financial resources and staffing capacity to achieve its objectives or continue effective operations? • Does ERSO has sufficient programme support from UN-Habitat and UNON to effectively administer its portfolio? Is the programme support in payment processing, accounting, loan administration and cash management, as implemented to date, effective? • Is ERSO flexible enough to meet the needs of the different users and deliver the required products and services? 66 Evaluation of the Experimental Reimbursable Seeding Operations
Sustainability • Can UN-Habitat access the resources (funding and financing) needed? • Is the present structure of ERSO a sustainable model over the longer term? • Can private sector finance involvement be made compatible with UN-Habitat internal processes and procedures, or would another type of structure to support private sector involvement be preferable? • Does UN-Habitat has the appropriate systems in place for a long-term lending operation? Impact • What are the preliminary direct and indirect impacts of the ERSO programme? • What are the implications for housing finance for the underserved? Evaluation of the Experimental Reimbursable Seeding Operations 67
III. Questionnaire
Dear Participant
You have been selected to participate in a questionnaire of the ERSO programme of UN-Habitat. Your selection came because you are an active participant in the programme. We encourage your well thought out responses to the questions listed below. Your responses are vital to guiding the further development of the ERSO Programme. Please give your considered response.
Answer to the questions is open-ended. Use the space provided next to each questionnaire for your reply. You may provide additional information or your views on other related matters of importance to you at the end of the questionnaire.
This questionnaire request is time sensitive. Please email your response latest by 22 November 2010 to the independent evaluator Johan Hyltenstam, [email protected].
UN-Habitat is grateful for your participation.
Thank you for contributions!
No. Question Comments A. Your name: B. The name of your organization: C. In which category are you active regarding ERSO? • ERSO management and staff • SMC • CPR • Partner/Client • Donor • UNON/UN-Treasury/UNCDF/IFAD • Other D. For how long time have you been in the above position regarding ERSO? • Up to 6 months • 6 month to 1 year • 1 year to 2 years • 2 to 3 years • More than 3 years 1. Relevance • The extent to which the objectives of a development intervention are consistent with beneficiaries’ requirements, country need, global priorities and partners’ and donors’ policies. • Note: Retrospectively, the question of relevance often becomes a question as to whether the objectives of an intervention or its design are still appropriate given changed circumstances. 68 Evaluation of the Experimental Reimbursable Seeding Operations
No. Question Comments Questions on the relevance of ERSO Question Yes/ No / Not Responses, Appropriate appropriate comments a) In your opinion; How appropriate was the initial standalone lending ERSO model for UN-Habitat to pursue in the first place? b) Can the ERSO approach contribute to the overall UN-Habitat mandate and its Medium Term Strategy Plan? c) Does subsidized lending contract have long-term developmental economical impact? d) Does a subsidized lending contract approach crowd out local lending and impair development of a local financial sector? e) How appropriate is the long term working capital loan approach? f) How appropriate is the first loss non-recourse loan approach? g) How appropriate is the project partnership approach with major international financial institutions? h) Are there other lending and credit enhancement models that may be more relevant and that should be considered? i) Is there real demand for micro housing lending? j) Is there real demand for community project finance? k) Is there real demand for the products and services that ERSO offers? l) Is there a market for private sector finance involvement in ERSO activities? m) Are incentives needed and/or appropriate to encourage such private sector involvement? n) Please, comment on the possible incentives used to-date other than interest rate subsidy (access to long term capital, first loss non-recourse, loan investment, first money investment, other)…. 2. Effectiveness • The extent to which the development intervention’s objectives were achieved, or are expected to be achieved, taking into account their relative importance. • Note: Also used as an aggregate measure of (or judgment about) the merit or worth of an activity, i.e. the extent to which an intervention has attained, or is expected to attain, its major relevant objectives efficiently in a sustainable fashion and with a positive institutional development impact.
Questions on the effectiveness of ERSO Question Appropriate/ No / Not Responses, Yes appropriate comments a) In your opinion; Have ERSO programme governance (SMC/ CPR) been supportive, directive and effective in their steering and monitoring role? b) Have ERSO been successful in initiating experimental and innovative lending or what else should have been to be done? c) Have ERSO meet intended indicators and stated programme objectives? Evaluation of the Experimental Reimbursable Seeding Operations 69
No. Question Comments d) Are the ERSO credit reviews, risk and risk mitigation analyses, and revised operational manual procedures for lending consistent with good practice in international development lending? e) Does ERSO loan type reached target populations?
If yes; which ones? f) Is ERSO loan type effective in reaching low income populations?
If yes; which ones? g) Is ERSO loan type effective in reaching scale and thereby addressing housing stock gaps?
If yes; which ones? h) Is ERSO loan type effective in supporting development of municipal government approaches?
If yes; which ones? i) Is ERSO loan type providing effective incorporation of support from National Government Housing Ministries?
If yes; which ones? 3. Efficiency • A measure of how economically resources/inputs (funds, expertise, time, etc.) are converted to results. Questions on the efficiency of ERSO Question Appropriate/ No / Not Responses, Yes appropriate comments a) Do you consider ERSO cost-effective? b) Does ERSO lending approach have a leverage potential of its funds? c) Does the ERSO programme have sufficient financial resources and staffing capacity to achieve its objectives or continue effective operations? d) Does ERSO have sufficient programme support from UN- Habitat and UNON to effectively administer its portfolio? e) Is the programme support in payment processing, accounting, loan administration and cash management, as implemented to date, effective? f) Is ERSO flexible enough to meet the needs of the different users and deliver the required products and services? 4. Sustainability • The continuation of benefits from a development intervention after major development assistance has been completed. The probability of continued long-term benefits. The resilience to risk of the net benefit flows over time. Questions on the sustainability of ERSO Question Appropriate/ No / Not Responses, Yes appropriate comments a) Is UN-Habitat a preferred institution to access the resources (funding and financing) needed long-term? b) Is the present structure of ERSO a sustainable model over the longer term? 70 Evaluation of the Experimental Reimbursable Seeding Operations
c) Can private sector finance involvement be made compatible with UN-Habitat internal processes and procedures, or would another type of structure to support private sector involvement be preferable? d) Does UN-Habitat have the prudent operational systems in place for a long-term lending operation? 5. Impact • Positive and negative, primary and secondary long-term effects produced by a development intervention, directly or indirectly, intended or unintended Questions on the impact of ERSO Question Appropriate/ No / Not Responses, Yes appropriate comments a) In your opinion; Is it possible to state any innovative financial impact of the ERSO programme up to date? b) Is it possible to state any development impact of the ERSO programme up to date? c) Are there any other preliminary direct and indirect impacts of the ERSO programme? If so, what impacts can be seen? d) Does ERSO impairs or bring any implications for housing finance for the underserved? If so, what are the implications? e) Do you have any thoughts or wishes for a possible continuation of the ERSO programme? f) Do you have any suggestions for how the ERSO programme can be improved in the future? Please provide additional information that you feel is important or your views on other related matters of importance to you regarding the ERSO programme.
Thank you for your contribution to this evaluation of the ERSO programme! Evaluation of the Experimental Reimbursable Seeding Operations 71
IV. Results of the questionnaire
Introduction with the questionnaire as a structural background to the open-ended interview questions. All the A questionnaire was constructed from the planned face-to-face interviews were conducted. suggested key questions included in the evaluation The interviews gave details on the ERSO Terms of Reference. The questionnaire was sent implementation process, in addition to diverse to 18 individuals: all SMC members and present views on the vision and impact of the programme, and former staff of the ERSO programme. After and this has probably balanced much of the four reminders, 15 individuals responded: all but questionnaire response shortfall. The questionnaire one SMC member and all but two staff members, was divided into five themes – relevance, for a shortfall of 16 per cent. In addition to the effectiveness, efficiency, sustainability and impact – formal questionnaire, more than 50 individual as shown in the following figures. stakeholders took part in in-depth interviews
Figure I: Questionnaire responses to the relevance of the ERSO programme
Relevance of ERSO
Are incentives needed and/or appropriate to encourage such... Is there a market for private sector finance involvement in ERSO... Is there real demand for the products and services that ERSO offers? Is there real demand for community project Finance? Is there real demand for micro housing lending? Are there other lending and credit enhancement models that may be... How appropriate is the project partnership approach with major... How appropriate is the first loss non- recourse loan approach? How appropriate is the long term No answer Questions working capital loan approach? Does a subsidized lending contract Inapproriate/No approach crowd out local lending... Does subsidized lending contract have Appropriate/Yes long-term developmental... Can the ERSO approach contribute to the overall UN-Habitat mandate...
0246810121416 Number of repondents 72 Evaluation of the Experimental Reimbursable Seeding Operations
Figure 2: Questionnaire responses to the effectiveness of the ERSO programme
Is ERSO loan type providing effective incorporation of Effictiveness of ERSO support from National Government Housing Ministries? Is ERSO loan type effective in supporting development of municipal government approaches? If yes; which ones?
Is ERSO loan type effective in reaching scale and thereby addressing housing stock gaps? If yes; which ones?
Is ERSO loan type effective in reaching low income populations? If yes; which ones? No answer Has ERSO loan type reached target populations? If yes; Questions which ones? Inapproriate/No
Appropriate/Yes
Have ERSO meet intended indicators and stated programme objectives?
Have ERSO been successful in initiating experimental and innovative lending or what else should have been to be done? 02 46810121416
Number of repondents
Figure 3: Questionnaire responses to the efficiency of the ERSO programme
Efficiency of ERSO Is ERSO flexible enough to meet the needs of the different users and deliver the required products and services?
Is the programme support in payment processing, accounting, loan administration and cash manage- ment, as implemented to date, effective?
Does ERSO have sufficient programme support from UN-Habitat and UNON to effectively administer its portfolio?
No answer
Questions Does the ERSO programme have sufficient financial resources andstaffing capacity to Inapproriate/No achieve its objectives or continue effective operations? Appropriate/Yes
Does ERSO lending approach have a leverage potential of its funds?
Do you consider ERSO cost-effective?
02 46810121416 Number of repondents Evaluation of the Experimental Reimbursable Seeding Operations 73
Figure 4: Questionnaire responses to the sustainability of the ERSO programme
Sustainability of ERSO
Does UN-Habitat have the prodent operational systems in place for a long- term lending operation?
Can private sector finance involvement be made compatible with UN-Habitat internal processes and procedures, or would another type of structure to... No answer Inapproriate/No
Is the present structure of ERSO a sustainable Appropriate/Yes Questions model over the longer term?
Is UN-Habitat a preferred institution to access the resources (funding and financing) needed long-term?
024681012
Number of repondents
Figure 5: Questionnaire responses to the impact of the ERSO programme
Do you have any suggestions for how the Impact of ERSO ERSO programme can be improved in the future?
Do you have any thoughts or wishes for a possible continuation of the ERSO programme?
Does ERSO impairs or bring any implications for housing finance for the underserved? No answer
Inapproriate/No Are there any other preliminary direct and indirect impacts of the ERSO Appropriate/Yes programme? Questions
Is it possible to state any development impact of the ERSO programme up to date?
In your opinion; Is it possible to state any innovative financial impact of the ERSO programme up to date?
02468101214
Number of repondents 74 Evaluation of the Experimental Reimbursable Seeding Operations
V. Concept note on a global microhousing facility
Partnership approach to 3. The facility would consist of a local currency addressing an urgent global financing and capacity-building programme challenge on a sustainable basis for microfinance institutions in developing markets that are engaged in or wish to be 1. The challenge of adequate, affordable engaged in financing microhousing and housing for a vast number of low-income community development. Under the facility households in emerging markets across the international banks with local branches, such globe is well recognized as one of the most as Standard Chartered, or apex microfinance pressing developmental challenges facing institutions or other lenders with an interest policymakers, Governments, international in financing microhousing lenders, would institutions, the private sector and civil society. make a series of local currency loans to Millions of people lack access to adequate selected institutions identified jointly by the housing and the need is expected to grow partners to finance home improvement loans with rapidly increasing populations, changes and community development loans on an in family structures, rural to urban migration individual or collective basis, as appropriate. and tighter fiscal capacity in Governments The local institutions would be supported by worldwide. Inadequate housing is not only specific capacity-building assistance in these a matter of home ownership, but also of areas by UN-Habitat in collaboration with IFC the basic human needs of shelter, water and other partners that might wish to join and sanitation, climate change resilience this effort. and adaptation, health and social services, transportation and community development. 4. To enable lenders to make a larger volume It is fundamental to the economic and social of financing available to such institutions, the progress of all developing countries. facility would include a credit enhancement programme that would share the risks of 2. Providing access to adequate housing on any losses that might occur as a result of affordable terms is a daunting challenge, defaults by the borrowing MFIs. To ensure both in terms of the vast resources that it that the programme resulted in effective requires and the complexity of its execution. capital treatment for lenders, they would There is increasing recognition that no one not be required to take any first losses in the single stakeholder can successfully tackle this programme, and the credit enhancement problem in a sustainable manner. The growing would be made available on a pari-passu presence of different stakeholders in a large basis. IFC, KfW, UN-Habitat and other number of emerging markets, the increased agencies would work to develop an effective levels of capacity at local levels and, most structure to make the optimal amount of importantly, the increased self-awareness risk-sharing available to lenders to make and aspirations of the local population, the programme feasible from commercial however, provide an opportunity to take on and economic perspectives, while ensuring this challenge through a global partnership that incentives remained well aligned. It is approach among stakeholders who can bring intended that the successful experience of their unique contributions to a collaborative the recent housing project that involved a solution that meets common goals and is donor first loss component to leverage private consistent with their respective operational sector financing will be used to create an and financial capabilities and priorities. Evaluation of the Experimental Reimbursable Seeding Operations 75
efficient mechanism to deliver an acceptable k) The Facility would be set up as an risk-sharing solution to the lenders. offshore trust or a similar vehicle and would be managed by IFC in 5. The facility would be established as follows: consultation with KfW. Alternative a) A first loss fund would be created by external management arrangements contributions from donors interested in could be considered; supporting this initiative; l) [Discuss structuring fees] - [ ] per cent b) This fund would credit enhance of the facility amount to be paid upon guarantees issued by IFC and KfW to closing of the facility [from the first selected lenders who provide local loss contribution]. The facility amount currency loans to institutions that fund would be computed as the aggregate microhousing loans to borrowers in amount of first loss and the amount of developing countries; guarantees committed by IFC and KfW. c) IFC and KfW guarantees would be m) The target size of the Facility would pari-passu to each other and to the be USD [60] million to guarantee USD lenders with regard to their exposure [75] million of lending by the Bank, to the underlying microhousing finance of which USD [25] million would be entities; committed by IFC and KfW and USD d) Subject to structuring considerations [10] million would be the first loss and operational requirements, IFC component. may guarantee the lending entity Operation of the Facility and be counter-guaranteed by KfW. Alternatively a parallel guarantee a) Once the Facility was established, it structure may be adopted; would seek to negotiate guarantee e) The first loss could either be funded or arrangements with specific lenders unfunded; interested in lending to microhousing f) The guarantees would be structured to institutions; cover multiple microhousing institution b) A detailed set of eligibility criteria and exposures of each lender; separate other guidelines would be agreed guarantees for each exposure would with all these lenders for the types of not be considered; microhousing entities they lent to and g) Each lender would pay a guarantee also the underlying loans; fee to IFC and KfW depending upon c) A technical assistance programme the market conditions, risk profiles and to develop capacity at the level of other factors; the microhousing entities would be h) IFC and KfW would guarantee only the agreed. This programme would be led principal and not the interest; by UN-Habitat in co-operation with i) IFC and KfW would assume the other appropriate agencies. currency risk of their exposure and d) As a next step, IFC, KfW and UN- would make payments in equivalent Habitat teams will put together a more local currency; detailed proposal that will serve as a j) Since the first loss would be capped in basis for internal approvals and further hard currency, the guarantee structure development and execution of the would have a currency appreciation facility. trigger beyond which coverage would cease; 76 Evaluation of the Experimental Reimbursable Seeding Operations
VI. Concept note on first loss arrangements
The ERSO programme objective of credit The key difference between banks and other enhancement was to use its donor funds to financial institutions is thus that banks are allowed mobilize and leverage financing from commercial to create money in the economy by taking deposits or private capital sources with the aim of and issuing credit: banks multiply money issued by supporting the capital sources to offer financial the Government. Non-banking financial institutions products, expand their risk horizons, broaden are not permitted to do that. access to finance to more borrowers, extend the It is very important to bear this process in mind loan tenors so that affordable housing projects when partner banks are invited to scale and could be matched with the finance payments, replicate lending to ERSO programme projects. and to improve the terms and lower the rates. Banking sector regulation and changes in the If successful in establishing a working financial banking sector across the industry internationally mechanism to flow capital to affordable housing, have made it harder for new financial organizations the next step would be to scale and replicate those to be established. The scarcity of financial resources findings. in the banking system may, however, be enlarged To flow capital, it has to be recognized that central by enhancing the bank’s capital and reserve banks are not alone in having the power to inject requirement and subsequently it is, in principle, money into the economy. The dominant share of possible to create new money for those projects. money-creation takes place through the process of Credit enhancement structures can support a range multiplication of demand deposits by commercial of finance models; however, the information here banks. Capital and reserve requirements affect primarily concerns a loan loss reserve57, a financial the potential of the banking system to create mechanism supporting financial institution and transaction deposits. If the requirement is 10 per commercial bank facilities which can also be used cent, for example, a bank that receives a USD 100 for bond issues, project finance, utility on bill- deposit may lend out USD 90 of that deposit. If financing programmes, etc. A range of different the borrower then writes a cheque to someone credit enhancement structures exists, including who deposits the USD 90, the bank receiving subordinated debt and guarantees, all of which that deposit can lend out USD 81. As the process focus on loan loss reserves. continues, the banking system can expand the initial deposit of USD 100 into a maximum of USD 1,000 of money (USD 100+USD 90+81+USD Loan loss reserve funds 72.90+...=USD 1,000). In contrast, with a 20 Loan loss reserve takes the donor money and uses per cent reserve requirement, the banking it to provide partial risk coverage to support the system would be able to expand the initial USD financial institution partner to offer affordable 100 deposit into a maximum of USD 500 (USD housing project finance products. Donor funds 100+USD 80+USD 64+USD 51.20+...=USD 500). can come from a number of sources; the ERSO Thus, higher requirements result in reduced money programme donor funding came from the creation and, in turn, in reduced economic activity. Governments of Bahrain and Spain , and the Rockefeller Foundation.
57 This is to be the main innovative financial mechanism in the forthcoming ERSO programme loan project with the innovative usage of an existing financial infrastructure provided by a global banking corporation, such as Standard Chartered Bank. Evaluation of the Experimental Reimbursable Seeding Operations 77
Loan loss reserves are best applied using a portfolio also have targets for the amount of lending; if approach to credit structuring; where the end-users the partner did not meet those targets, the ERSO are a large number of small projects. It is also programme should have the ability and the right to important that there are donor funds available to reprogramme the funds. provide the seed financing for the loss reserve fund A key objective of the loan loss reserve fund and possible to find additional contributors. The approach is to modify the underwriting criteria as leverage ratios can be increased with experience a credit risk management tool to help the financial gained of collections payment performance institution partner to stretch its risk horizons and and loss and it is possible to include that reset modify its underwriting criteria by, for example, calculation and those portfolio performance targets reducing the required credit score, increasing the in the loss reserve fund agreement. debt income ratio, which are key to lengthen the The contribution block grants are placed on loan tenors up to 10 years to allow unsecured deposit with the financial institution partner loans that are larger in the residential sector, even in a deposit account and then, as the financial to eliminate the loan to value ratio as regards the institution partner originates and executes the property value itself to lower the rates and the loans, the agreed and appropriate proportional customer contribution. amount of funding is placed into the loss reserve There will obviously be trade-offs between the fund and is then available to pay for losses as leverage ratio and the risk-sharing formula. agreed by the definition of loss. The lower the leverage ratio, the more risk A key definition in the loss reserve fund agreement protection is offered. The key principle here will is the definition of event of loss. One trigger for be to achieve alignment of incentives with the the ability of the lending partner to draw funds financial institution for good loan origination and from the loan loss reserve could be using a loan administration. A key point will be that any losses acceleration mapped out cycle that the bank goes after the loss reserve fund is exhausted would through, the bank is fully responsible for collections go fully to the account of the lender so that it and recoveries at the point where the borrower has has strong incentives for good loan origination in failed to cure in a default situation; then the lender compliance with the underwriting guidelines that would accelerate the loan and it is at that point are part of the agreement. of loan acceleration that the financial institution An agreement between the ERSO programme, the partner would have the right to draw from the financial institution partner and the programme loss reserve fund. Following a loss the financial manager should seek sustainable connections, institution will continue their recovery activities and define all the roles to be played during the loan recovered monies would be placed back into the origination and the project development process. loss reserve fund. These should include marketing, loan application, There would be reporting and monitoring loan origination, and loan documentation. One of requirements consistent with the obligations of the goals should also be to reduce transaction costs the financial partner to the ERSO programme for the lender. concerning their use of the ERSO programme It is important to make the loss reserve fund funds. The reporting covers the portfolio, the assignable, which would support the secondary accounts in the loss reserve fund, aging receivables market development where the primary loan on collection performance, the status of recoveries originator would have greater flexibility to sell and so forth. All of the financial institutions are off that portfolio and assign the loss reserve financing data that is collected and is an important fund as part of that sale. Loss reserve funds are value for next generation financial mechanisms relatively easy to set up and administer. The lending that may come out of this programme: the data institution can also be used as the administrator of on collection performance. The programme would the loss reserve fund but it is also possible to use a separate escrow agent. 78 Evaluation of the Experimental Reimbursable Seeding Operations
To some extent there is an inherent conflict of contaminate the trading levels of their triple-A- interest between the lender’s role as manager rated corporate or standalone debt issues. An of the loss reserve fund and its role as lender. It ERSO programme first loss reserve strategy could is therefore important to distinguish those two play an important catalytic role in this context by responsibilities in the loss reserve fund agreement filling the gap in the debt class with the lowest and rely on the clarity of the terms of the loss payment priority in a senior/subordinated debt reserve fund agreement itself to manage that risk. structure where other MLI’s are anxious to advance. There may also be ways of setting up programmes If development banks with one-to-one leverage that would allow the use of multiple financial could increase such leverage to a multiple as high institutions coordinated under a single loss reserve as four times for purposes of guarantees, without fund agreement or escrow agreement. jeopardizing their triple-A ratings, and offer quality Multilateral lending institution (MLI) treasury guarantee products in collaboration with the groups are often concerned about the potentially private sector, they could help expand substantially inferior trading values for issues they guarantee the investments flowing into affordable housing relative to their straight corporate debt; they fear projects in developing countries. that poor trading value of guaranteed issues may Evaluation of the Experimental Reimbursable Seeding Operations 79 F2F, E-mail F2F, F2F F2F Phone, E-mail F2F F2F F2F F2F F2F F2F F2F F2F F2F F2F Contact Urban Transport Section Urban Transport HSFD, Programme Management HSFD, Programme Officer Director of the Human Settlements Director Financing Division Director Legal officer, Legal Unit Legal officer, Methods and Oversight Officer IPSA/ERP Systems Accountant/ Officer Chief, Management Support Section Director Deputy Executive Director Senior Legal Advisor Deputy Director, Division of Deputy Director, Administrative Service Treasury Service Unit, Account Treasury Section Chief, Treasury Service Unit, Chief, Treasury Account Section P osition/ S tatus UN-Habitat UN-Habitat, Human Settlements Financing Division UN-Habitat UN-Habitat Office, New York UN-Habitat Office, New UN-Habitat, Programme Support UN-Habitat, Programme Division UN-Habitat, Programme Support UN-Habitat, Programme Division UN-Habitat, Programme Support UN-Habitat, Programme Division UN-Habitat, Programme Support UN-Habitat, Programme Division UN-Habitat, Programme Support UN-Habitat, Programme Division UN-Habitat United Nations Office at Nairobi United Nations Office at Nairobi United Nations Office at Nairobi United Nations Office at Nairobi O rganization v i ewe d Kenya Settlements Financing Division Kenya Kenya United States Kenya Kenya Kenya Kenya Kenya Kenya Kenya Kenya Kenya Kenya Country Christian Schlosser Rosemary Kiragu Bert Diphoorn Chris Dewsson Saidou Abdoulie Ndow Mohamed Robleh Michele Levesque Felista Ondari Antoine King UN-Habitat Inga Björk-Klevby Miouly Pongnon David Hastie Anuradha Shenoy United Nations Office at Nairobi James Getty N ame II. Li s t of people i n e r V II. 80 Evaluation of the Experimental Reimbursable Seeding Operations Contact F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F, E-mail F2F, F2F F2F F2F E-mail elephone N o. Member SMC Member SMC Member SMC Member SMC Member SMC Chair SMC New Line, Capital Partners New Line, Capital Partners Consultant to the UFB team Member of the UFB team Member of the UFB team Junior Credit Officer, Member of Officer, Junior Credit the UFB team Senior Credit Officer, Member of Officer, Senior Credit the UFB team Chief of the Urban Finance Branch (UFB) Director, Regional Office for Africa Director, and the Arab States Chief, Office of the Executive Director Chief, Urban Economy and Social Development Branch T P osition/ S tatus Managing Director, Spectra Managing Director, Partner, Voras Capital, former Morgan Voras Partner, Stanley Managing Director Director, African Centre for Legal African Centre Director, Excellence, ACLE - ILI-Uganda CEO of Xterna Mortgage Market Services Professor and Vice-Rector, Warsaw Warsaw and Vice-Rector, Professor School of Economics Independent Expert, Retired from IADB, from Independent Expert, Retired ADB Legal consultant to the UFB team Financial strategy UN-Habitat UN-Habitat UN-Habitat UN-Habitat UN-Habitat UN-Habitat UN-Habitat UN-Habitat UN-Habitat O rganization Bahrain United Kingdom Uganda Mexico Poland Canada United States United Kingdom consultant to the UFB team Kenya Kenya Panama Kenya Kenya Kenya Kenya Kenya Kenya Country Saleh Albelushi Ellen Brunsberg Swithin Munyantwali José M. César Marek Bryx Marek UN-Habitat, ERSO Programme, Monitoring and Steering Committee UN-Habitat, ERSO Programme, Alan Gill Ann Marshall Iain Heggie Liz Case, Jean Ives Bonzi Julio Norori Laura Cordero Saturnino Machancoses UN-Habitat, Urban Finance Branch Barbara Hewson Alioune Badiane Paul Taylor N ame Xing Quan Zhang Evaluation of the Experimental Reimbursable Seeding Operations 81 Contact F2F F2F F2F F2F Phone F2F Phone Phone Phone F2F F2F F2F F2F F2F F2F F2F F2F F2F F2F, E-mail, F2F, F2F, E-mail F2F, F2F, E-mail F2F, E-mail elephone N o. Partner Representative Partner Representative Partner Representative Azania Bank Partner Representative Sida Sida Ministry of Foreign Affairs Affairs Ministry of Foreign Ministry of Foreign Affairs Affairs Ministry of Foreign UN-Habitat Donor representative Deputy CPR CPR Deputy CPR CPR and donor representative EEG representative Latin America representative CPR Chair Expert advisor to ERSO Member SMC Member SMC T P osition/ S tatus Kasoli Project Manager Kasoli Project Head of Consumer Banking, DFCU Bank Managing Director, DFCU Bank Managing Director, Senior Loan Officer Chairman of the Board, PRODEL Chairman of the Board, Senior Advisor Handling Officer, Urban Development Handling Officer, Senior Advisor Senior Advisor Liaison with the Spanish Ministry of Housing Governance Advisor, Multilateral Governance Advisor, Cooperation Department, AECID Representative of United States Representative Representative of United States Representative Deputy Permanent Representative of Deputy Permanent Representative Germany Deputy Permanent Representative of Deputy Permanent Representative Spain Deputy Permanent Representative of Deputy Permanent Representative Russia Permanent Representative of Argentina Permanent Representative Permanent Representative of Kenya Permanent Representative Independent expert, Ex World Bank Independent expert, Ex World Associate Director, International Associate Director, Relations, Banco de España Chairman and Managing Director, ITI Chairman and Managing Director, Limited O rganization Uganda Uganda Uganda United Republic of Tanzania Nicaragua Sweden Sweden Norway Norway Spain Spain Kenya United States Germany Spain Russian Federation Argentina Kenya United States Spain India Country Peter Kwiri Wilbrod Owor Juma Kisaame Jackson Lohay UN-Habitat, ERSO Programme Partners/Client UN-Habitat, ERSO Programme Raúl Lacayo Per Fröberg Mikael Atterhög Per Nygård Erik Berg Marta L. Fernández UN-Habitat, Donors Carmen Sánchez Miranda Yvonne Khamati-Kilonzo Yvonne Joseph Murphy Regine Hess Bruno G. Dobarco Sergey V. Trepelkov Sergey V. Daniel Chuburu UN-Habitat, Country Permanent Representatives, CPR UN-Habitat, Country Permanent Representatives, Macharia Kamau Larry Hannah Manuel Martínez N ame Kishori Dhingra 82 Evaluation of the Experimental Reimbursable Seeding Operations Contact E-mail E-mail Phone, E-mail Phone F2F, Phone F2F, F2F F2F F2F F2F F2F F2F F2F F2F F2F E-mail elephone N o. FinMark Trust IFAD UNCDF Swedbank Swedbank Arabtech Jardaneh Al Reehan Solutions for Development Consulting Co. Palestinian Investment Fund, PIF Palestinian Investment Fund, PIF Palestinian Investment Fund, PIF UN-Habitat, Ramallah Partner Representative Partner Representative T P osition/ S tatus Centre for Affordable Housing Finance for Affordable Centre Loans and Grants Officer Chief, Business Development and External Relations Consultant, UN-Habitat Consultant, UN-Habitat Project Manager Project Project Manager Project Managing Director Project Manager Project Director of Palestinian Investments Director Consultant Programme Manager Programme Housing Officer, Ministry of lands, Housing Officer, Housing & Urban Development Director for Housing, Ministry of lands, Director Housing & Urban Development O rganization South Africa Italy United States Sweden Sweden Occupied Palestinian Territory Occupied Palestinian Territory Occupied Palestinian Territory Occupied Palestinian Territory Occupied Palestinian Territory Occupied Palestinian Territory Occupied Palestinian Territory Uganda Uganda Country Kecia Rust Carla Dellanave Magnus Magnusson Stig Jonsson Others Göran Henriksson Sammeer Melhem Nabil Hasan Al-Aref Iyad Joudeh Nura Treish Durgam Maaee Samih Al-Abid Nael Salman Dave Khayangayanga N ame William Walaga Evaluation of the Experimental Reimbursable Seeding Operations 83
VIII. Background documents reviewed
For the purposes of this evaluation, the evaluator on the way forward for Urban Finance reviewed the following key background activities at UN-Habitat, Nairobi, 21 documents: October 2010 • ERSO Steering and Monitoring • Governing Council Resolution 21/10 Committee Meeting 13-15 • UN-Habitat Medium-Term Strategic October 2010, Meeting Report and and Institutional Plan (MTSIP) for 2008 Recommendations of the ERSO SMC to – 2013 the Executive Director on the progress • ERSO Project Document of April 2008 of the ERSO programme from March • UFB Presentation to the CPR Working 2009 to October 2010, including Committee on ERSO, April 2010 revisions to the Operations Manual, • UFB Status Evaluation presented to review of implementation of ERSO Deputy Executive Director Inga Klevby through April 2011, Nairobi 21 October and Director Bert Diphoorn, May 2010 2010 • ERSO credit memoranda on all five • UN-Habitat, Draft work programme closed loan transactions and budget for the biennium 2012 – 2013, HSP/GC/23/10/10U • Briefing Note to Deputy Executive Director on exploratory talks concerning • UN-Habitat, United Nations Habitat IFC Standard Chartered Global Micro and Human Settlements Foundation: Housing Facility (UN-Habitat facilitator policy framework and draft operational role) procedures and guidelines. HSP/ GC/21/5/add.3/ 8 March 2007 • First ERSO Operations Manual, April 2008, and Current ERSO Operations • United Nations Human Settlements Manual, 19 February 2009 Programme, ERSO Programme, Document, 10 April 2008 • Comments on the ERSO documents dated November 7 2007, Version JE • UN-Habitat, Memorandum ERSO, to 2007-11-12 Executive Director, 10/11/10 • Revised (current) ERSO Operations • Financial Regulations and Rules of the Procedure Manual dated September 7, United Nations Habitat and Human 2010 Settlements Foundation (UNHHSF), HSP/GC/21/ INF/8, 10 January 2007 • Procurement material relating to loan administration and portfolio accounting • UNCDF, Annual Report 2009 for ERSO loan portfolio • Report for UNDCF: Financing Local • Evaluation of Mavoko project financial Infrastructure, November 10, 2009 structure in connection with proposed • UN-Habitat, Product Services Bro- loan to HFCK chures • ERSO Steering and Monitoring • Women´s World Banking, Annual Committee Meeting 13-15 March Report 2009 2010, Preliminary Recommendations of the ERSO SMC to the Executive Director 84 Evaluation of the Experimental Reimbursable Seeding Operations
• Credit Suisse, Global Investor 2.10, • Alfredo Stein and Luis Castillo, October 2010; Anna Tibaijuka, Slum Innovative financing for low-income dwellers contribute to the economic housing improvement: Lessons from and social makeup of a city. programmes in Central America, 2005 • The Standard, Nairobi, Kenya, Section • A social economic survey report of B, December 9 2010; Affordable Kasoli village, Tororo district, October housing? Not anytime soon! 2009, James Ndugwa, DFCU bank, Mbale branch. Evaluation of the Experimental Reimbursable Seeding Operations 85
IX. Glossary
Term Explanation First loss piece The debt class with the lowest payment priority in a senior/subordinated debt structure. or loan loss reserve Leverage Utilizing leverage amplifies the potential gain from an investment or project, but also increases the potential loss. This increased risk may be perfectly acceptable or even necessary to reach the goals of the entity making the investment. Evaluation The systematic and objective assessment of an on-going or completed project, programme or policy, its design, implementation and results. The aim is to determine the relevance and fulfilment of objectives, development efficiency, effectiveness, impact and sustainability. An evaluation should provide information that is credible and useful, enabling the incorporation of lessons learned into the decision–making process of both recipients and donors. Evaluation also refers to the process of determining the worth or significance of an activity, policy or programme. An assessment, as systematic and objective as possible, of a planned, on-going, or completed development intervention.
Note: Evaluation in some instances involves the definition of appropriate standards, the examination of performance against those standards, an assessment of actual and expected results and the identification of relevant lessons. Related term: review. Effectiveness The extent to which the development intervention’s objectives were achieved, or are expected to be achieved, taking into account their relative importance.
Note: Also used as an aggregate measure of (or judgment about) the merit or worth of an activity, i.e. the extent to which an intervention has attained, or is expected to attain, its major relevant objectives efficiently in a sustainable fashion and with a positive institutional development impact.
Related term: efficacy. Efficiency A measure of how economically resources/inputs (funds, expertise, time, etc.) are converted to results. Impacts Positive and negative, primary and secondary long-term effects produced by a development intervention, directly or indirectly, intended or unintended. Sustainability The continuation of benefits from a development intervention after major development assistance has been completed. The probability of continued long-term benefits. The resilience to risk of the net benefit flows over time. Relevance The extent to which the objectives of a development intervention are consistent with beneficiaries’ requirements, country need, global priorities and partners’ and donors’ policies.
Note: Retrospectively, the question of relevance often becomes a question as to whether the objectives of an intervention or its design are still appropriate given changed circumstances. Innovative Ahead of the times; favouring or promoting progress; being or producing something like nothing done or experienced or created before; being or productive of something fresh and unusual; or being as first made or thought of. Experimental Learning from attempts to improve access to finance for affordable housing. Catalyst An event that directly or indirectly causes another event, an activator, A metaphor for something influencing financial institutions relationships without intending to be a part of them. Pareto efficient Given a set of alternative allocations of goods or outcomes for a set of individuals, a change from one allocation to another that makes at least one individual better off without making any other individual worse off is called a Pareto improvement. An allocation is defined as “Pareto efficient” when no further Pareto improvements can be made. 86 Evaluation of the Experimental Reimbursable Seeding Operations
X. rEsumEs of the former and current staff of the ERSO programme
Present Head of Housing and Former Coordinator of the ERSO Settlement Financing Division programme: Christian Schlosser (ERSO programme): Albert (September 2007 - July 2009) Johannes Diphoorn Dr. Christian Schlosser currently heads the Urban Albert Johannes Diphoorn has over 20 years’ Transport Section of UN-Habitat, the United experience in operational management and the Nations Human Settlements Programme. Based provision of technical assistance and policy advice in Nairobi, Kenya, the focus of his work is on in Africa, Asia and Europe in the area of water promoting sustainable urban mobility in developing and sanitation. He is currently Acting Head of countries, with an emphasis on the needs of the Housing and Settlement Financing Division. the urban poor. Prior to joining UN-Habitat in He holds an M.Sc. in Human Geography of the 2006, Mr. Schlosser served with the German Developing Countries from the University of Federal Ministry of Transport, Building and Urban Utrecht and a B.Sc. in Human Geography from the Development. University of Groningen. In this capacity, he was responsible for advising Prior to UN-Habitat, Bert Diphoorn was Senior Senior Management on Federal housing assistance Water Adviser, PRVP, of the African Development programmes, housing finance, rent and home Bank, in Tunis, Tunisia. Before that he was Head ownership policy. In particular, he contributed of the Water Support Unit at the Ministry of to the reform of the €11 billion federal home Foreign Affairs in The Hague, Netherlands, where ownership programme; the €5 billion housing he was responsible for overall approaches to component within the overall redesign of the water resources within Netherlands Overseas national welfare system; and to the inter-ministerial Development Assistance. From 1993 to 1997, process of developing proposals for improved Diphoorn was First Secretary at the Land and Water integration of home ownership saving schemes Management, in the Royal Netherlands Embassy in into the tax-break scheme for personal retirement Dhaka, Bangladesh, where he was responsible for accounts, which concerns about 30 million citizens the management of a large portfolio of bilateral in Germany. Further tasks included assessing the assistance projects in the water and sanitation economic implications of housing-related national sector with a total annual value of USD 20 million. legislation and the preparation of policy briefs Before that Albert Johannes was Project Manager for the Minster/State Secretaries and undertaking of Social and Infrastructure Development at ETC policy-oriented research on housing markets, the Consultants of Leusden, Netherlands, in Colombo, impact of demographic changes and housing Sri Lanka. He was also Team Leader of the Dutch versus sustainability. Ministry of Foreign Affairs project “Sensibilisation Previously, he served as research assistant at the et Formation des Paysans autour des Barrages” in University of Delaware/USA and as transit planner Ouagadougou, Burkina Faso. At the start of his for a Land government in southern Germany. professional career he held various posts as Expert, Socio-economist, Associate Expert in promoting cooperatives of the ACOPAM project, Associate Expert in promoting cooperatives of the Project “Promotion des Coopératives”, Junior Expert of the Rada Integrated Rural Development Project. Evaluation of the Experimental Reimbursable Seeding Operations 87
Present Head of the ERSO 2. Review current and proposed ERSO projects. programme: Barbara C. Hewson 3. Together with relevant background data Barbara Hewson is Director of Urban Finance at on the relevant housing markets, banking UN-Habitat, responsible for the ERSO Revolving sectors, institutional frameworks (including Loan Programme, an experimental finance initiative legal and regulatory) and suggested format making catalytic loans supporting domestic bank of ERSO involvement using information investment in affordable and social housing provided by ERSO assess: projects globally; and the Slum Upgrading Facility, a grant-based guarantee programme working to a) The potential outlays and inflows promote public-private partnership investment by ERSO with respect to proposed in community-led neighbourhood improvement experimental reimbursable seeding projects in Asia and sub-Saharan Africa. operations, and b) The staffing and third party costs Prior to joining UN-Habitat, Ms. Hewson was necessary to conclude a financing Managing Director at NewLine Capital, a financial structure for each project and for advisory firm focused on private sector investment ERSO operations as a whole during the and public-private partnerships in emerging and relevant ramp-up time period. frontier markets. NewLine advised on mortgage, micromortgage, microfinance housing and 4. Development of a financial model with low, consumer finance investments and legislative and medium and high case scenarios based on: regulatory frameworks for affordable housing a) Review of timing and projected inflows in Ukraine, Russia, Poland, China, South Korea, from ERSO loans India, Middle East/North Africa and sub-Saharan Africa. Key partners included the International b) Review of staffing plan and functions Finance Corporation (World Bank Group), the to be handled internally and externally Asian Development Bank, USAID, Overseas Private with respect to: Investment Corporation and hedge funds The Rohatyn Group and Greylock Capital. • Origination of ERSO loans; • Administration of ERSO loans; As Consultant on Financial Strategy for the ERSO • Application and selection criteria for Programme (Nov./Dec. 2008): loans to be funded, 1.. Undertaking detailed revenue and cost • Legal Documentation, projections for the ERSO experimental • Funding process, period and the long-term implementation of • Loan administration set-up, initiated projects to provide strategic input on proposed financial arrangements (including • Periodic monitoring of loan position, securitization structure, credit enhancement • Management of problem loans/special structure backed by ERSO loan, and local servicing; bank housing finance guarantee/lending • Accounting and reconciliation to loan commitments) among ERSO, local banks and administration systems; international investment banks as templates • IT coverage; for future ERSO involvement in primary and • Legal coverage. secondary housing finance transactions. 5. Develop a draft ERSO Financial Strategy.
Before founding NewLine, Ms. Hewson was a Senior Vice-President and Managing Director at JP Morgan Chase and predecessor banks Chase 88 Evaluation of the Experimental Reimbursable Seeding Operations
Manhattan Bank and Chemical Bank, where she 2002-2009: Spianata & Co, London, UK served as head of Global Securitization Services, a division which she built from USD 2 billion to over Cofounder and Head of Finance & Operations USD 300 billion in assets under administration, serving international and domestic banking and Cofounded this innovative, up-market, Italian investment clients from offices in the United States, fast food concept from scratch and acted as United Kingdom, Ireland and Hong Kong. She head of finance and operations. He managed a was a board member of Chase Ireland and Chase team of more than 30 employees of 15 different Manhattan Trust Company of the West. Prior to nationalities. Also sourced and managed company’s this assignment, Ms. Hewson headed Chemical lawyers, bankers, accountants, designers, Trust Company of California. Ms. Hewson joined architects, property agents and shopfitters. Chemical Bank from Watson, Farley & Williams, where she led the New York banking practice, 2000-2002: Morgan Stanley, London, UK specializing in cross-border investments and asset- Mergers & Acquisitions, Investment Banking based finance, including structuring, workout and Division bankruptcy practice. • Received extensive training and hands- Ms. Hewson has an A.B. in History from Princeton on experience in complex financial University, summa cum laude, and a J.D. from modelling, interpretation and analysis New York University School of Law, where she of company financial statements, was Editor in Chief of the Journal of International across various industry sectors and Law and Politics. She attended the Programme countries. Company valuations using in Business Strategy and the Executive MBA various methodologies, including Corporate Finance Programme of the Graduate discounted cash flow (DCF) modelling, School of Business at Columbia University. She is a comparable companies analysis board member of the Princeton Club of New York, (Comps), and precedent transaction is married and has two children. analysis (Prepaids).
• Involved in business development, Senior Credit Officer of the ERSO researching a wide variety of industries programme: and companies, conducting thorough Saturnino Machancoses due diligence, preparing and delivering 2009 - present: Senior Credit Officer, Urban numerous client presentations and Finance Branch, UN-Habitat assessing the financial viability of any proposed transaction. Mr. Machancoses is responsible for the day-to- day management of the ERSO programme, an Debt Capital Market Services, Investment experimental lending initiative launched in 2007 by Banking Division UN-Habitat that is aimed at stimulating financing • Extensive training and hands-on for housing and infrastructure projects for low- experience in bond pricing, bond income households in Latin America, Africa, the market analysis, corporate debt Middle East and Asia. structure analysis to determine possible funding requirements, preparing presentations for corporate clients considering future debt issuance and executing client bond issues. Evaluation of the Experimental Reimbursable Seeding Operations 89
1996 -2000: University of St Andrews, Montpellier II University, Business Management St Andrews, Scotland, UK School, Montpellier, France, June 00
BA and MA Honours in Economics & Courses on International Financial Management. Management
1991-1996: Brentwood School, Essex, UK Consultant to the ERSO programme: Iain Heggie A-Levels: Grade A in Economics, French, Business Studies and Spanish Senior banker with over 25 years’ experience advising financial institutions, with considerable expertise in the arrangement and management of Junior Credit Officer of the ERSO credit-intensive transactions and structured finance programme: Laura Cordero programmes, and a detailed understanding of The ERSO Programme for Affordable Housing and required competencies for banks as originators Infrastructure Team, since March 2009, and sellers of assets, secured debt issuers or structured transaction sponsors (underwriting, World Bank Mozambique, Maputo, Mozambique, credit analysis, administrative procedures, servicing, Nov 08- Feb 09. asset liability management, regulatory compliance, MIS and accounting), which combine to offer a Private Sector Development Consultant, Private unique combination of skills to advise banks on Sector Development, Africa Region. strategic and tactical approaches to balance sheet Organized the day-to-day on-site implementation development and/or restructuring through asset of the Competitiveness and Private Sector and liability analysis, new product development, Development project, Prepared and reviewed key transaction origination, and refinancing/sale of project documents, including budgets and the existing portfolios. Senior banking consultant Project’s Implementation Manual, liaised with to the Urban Finance Branch of UN Habitat in Mozambican Government officials, several donors, i) its establishment, negotiation, funding and and other key stakeholders, and participated in the management of a portfolio of five housing Private Sector Working Group meetings. finance loans for its ERSO programme, and ii) the restructuring and finalization of loan guarantee Georgetown University, School of Foreign Service, programmes in Ghana, Sri Lanka and Indonesia for Washington DC, USA, May 08 the Slum Upgrading Facility. MSc. Foreign Service, Concentration in International Development, Dean’s Award for Consultant to the ERSO Academic Excellence programme: Ann Marshall Additional seminars: Project Design & Twenty-five years of diverse experience developing Management, Monitoring and Evaluation, and managing financial services businesses in Participatory Techniques emerging markets, including several years as an executive with the Moscow-based subsidiary of Complutense University, School of Economics and a US asset management company. Background Business, Madrid, Spain, June 03 includes New York law firm practice focused on Graduate courses, International and Development public finance. Consistent record of achievement Economics, BSc. Economics. Concentration: in: International and Development Economics (5-year • Implementing new financial services programme). products and innovative investment and funding structures in emerging markets. 90 Evaluation of the Experimental Reimbursable Seeding Operations
• Resolving legal and operational issues, • Creating and maintaining client including reorganizations, transactions management system IPB Europe: cross- and regulatory development; effective selling, ensuring present clients remain working within developing legal with Morgan Stanley through client frameworks. meetings, presentations, mailings, frequent contact. • Overseeing day-to-day operations, building business and contributing 2002-2006: Institutional Equity Division (IED) / strategic insight in organizations European Firm Management – undergoing rapid growth or change in Vice-President volatile environments. • Corporate Strategy roles in IED reporting • Financial advisory firm specializing in directly to both the Global Head and mortgage and consumer finance in European Head of IED; and in European emerging markets. Firm Management reporting directly to Chairman and COO of Morgan Stanley • Joined to add in-depth emerging International. Responsibilities included: markets expertise to advisory practice providing transaction advice in early • Conducting detailed analysis of stage markets and for new issuers, financial performance of European and debt capital market development business across divisions and products for public and private sector clients, to facilitate strategic decisions and completed assignments in India, long-term planning. Ukraine, Nigeria, sub-Saharan Africa, • Developing strategic business plans for and Palestine. key and new business initiatives (Russia, South Africa and Emerging Markets; Programme Officer of the ERSO and specific product areas). programme: Portia Machancoses • Coordinating inter-divisional, cross- (October 2008-May 2009) divisional and cross-regional teams 2002-2008: Morgan Stanley & Co. International, focusing on integration of client service London, UK, across common product platforms: structured derivatives and middle 2006-2008: International Prime Brokerage (IPB) markets. Vice-President • Researching and writing internal and Management role in IPB with primary responsibility external presentations and speeches: to monetize relationships from top 25 per cent of ranging from quarterly business Firm’s Hedge Fund clients. Responsibilities include: updates to the business unit to key • Analysing areas / divisions of existing note speeches at client conferences. revenue generation within Morgan 2001-2002: Investment Management (MSIM) – Stanley and determining where Senior Associate additional revenues can be gained. Member of European Sales Team distributing • Acting as point of contact at Morgan investment products to institutional and Stanley for entire client relationship intermediary clients in both the UK and offshore and ensuring clients are serviced in markets. Specifically responsible for developing accordance with their importance to pan-European relationships with Merrill Lynch, JP the Firm. Morgan and UBS. Evaluation of the Experimental Reimbursable Seeding Operations 91
1999-2001: Private Wealth Management (PWM) 10/2003-02/2007: F. van Lanschot Bankiers N.V. - Associate in Den Bosch (Netherlands)
Analyst in Client Strategic Group providing Account Manager at a customer branch in Zeist. analytical and technical support to the Head of 1/2002-6/2002: Eindhoven University of PWM Europe and Head of Strategy for Europe: Technology (Netherlands) • Conducted analyses and evaluations Assistant to Financial Management Department. of businesses spanning affluent and high net worth clients in Italy, UK, Switzerland and Spain. Senior Swedbank Advisors to • Undertook strategic planning process the ERSO Programme (October for high net worth, USD 150m revenue 2007-October 2010): Stig Jonsson/ businesses including modelling for 3-5 Göran Henriksson year projections. Stig Jonsson: Vice President/Senior Client Relations Manager, Swedbank, Organizations- and • Evaluated new opportunities for the Institutional Customers. affluent and high net worth businesses, including investigation of mergers and/ • 35 years’ banking experiences in or acquisitions. different positions from practical issues at account level up to decision-making • Advised on hedging/monetization of at executive levels in a number of large equity stakes, structured products, financial institutions. Mr. Jonsson has tax-efficient vehicles and investment wide-ranging experience of all financial management considerations. areas.
• Specialized in financing for individuals Consultant to the ERSO corporate/associations, housing Programme (July 2008 – June 2009): finance, project financing and Corinne Buck infrastructure financing. 02/2007-11/2007: F. van Lanschot Bankiers N.V. in Den Bosch (Netherlands) • Proven record of dealing with transformation issues in form of Project Member Management Information formation, reorganization, as well as Solutions: closing institutions/units.
• Define management (accounting) • Substantial work experience in information based on business needs developing effective operation and and customer value, one of the strategic management systems, staffing and goals of the company. training, as well as appraisal, lending and monitoring procedures. • Write all documents on the design of the management (accounting) reports • In addition, gained considerable work for the new information system to go experience in evaluating, organizing live in June 2008. and monitoring financing schemes and institutions in Sweden, as well as in • Communication with business several developing countries. sponsors, management accounting department, other project teams and Göran Henriksson: Vice President/Senior Adviser, the data warehouse service provider. International Cooperation at Swedbank 92 Evaluation of the Experimental Reimbursable Seeding Operations
Qualifications and Experience restructure departments, is well able to communicate proposed changes. • Senior Executive experience at large and small companies in different areas (15 • Requested speaker in the area of non- years), with core skills in HR, business performance loans and how the bank planning and financial management. crisis in Sweden was solved, excess to finance and microfinance industry. • Comprehensive experience as programme manager/project leader • Experience in financial sector in large restructuring assignments, development projects in South America, including management training and Africa and the Far East. downsizing. • Comprehensive experience in SME, • Good social communication skills, municipal and housing financing, with ability to deal with all levels of staff, relevant assignments in Ukraine, the from senior members to loan officers Baltic States, Nicaragua, Dominican and similar. Republic, Kenya, Uganda, Thailand, South Korea and China. • Responsible for corporate and finance department (2 years) within a bank, • Long experience (7 years) in the performing mergers and acquisition construction and real estate industry. projects in Europe, the Far East and Member of the board of directors of Latin America. Nordic Construction Company AB (publ), one of the largest construction • CEO for Mandamus Holding AB (3 companies in northern Europe. years), a company for restructuring, Experience of infrastructure projects administration and selling properties and project management in that sector. related to non-performance loans.. • Relevant experience in international • Head of business department for the credit and risk assessment. National Network Provider in Sweden with a yearly investment budget of • Comprehensive experience in more than €400 million in infrastructure educational and training activities in investments financial issues, including relevant experience in training and seminars • CEO for an assets management on access to finance for SMEs, credit company during the bank crisis in scoring, monitoring credit application, Sweden. strategic planning etc. • By working for banks as well as • Senior Adviser, Nordic MicroCap Fund business/construction companies, he (NMC) a Swedish fund for investments is well-positioned to evaluate risks in in Microfinance institutions in Africa the financing of large investments. and the Far East. In addition, he has a proven ability to Evaluation of the Experimental Reimbursable Seeding Operations 93
XI. Operational support for lending and project finance portfolios
To achieve international best practice for 2. IAS accounting and report-writing package operational support for the finance programme, • General ledger; we need to put in place three types of support activities (loan and finance support functions • Creation of financial statements; currently not supported by PSD or elsewhere in • Report writing for overall portfolio UNON or otherwise in Nairobi or New York): performance analysis and performance 1. Cash management system forecasting; • Reconciliation with cash position; • Multi-currency, multiple account opening to support loan funding and collections • Expected to actual performance tracking for multiple domestic currency loans; by loan, currency, country, region;.
• Real time payment receipt information; 3. Loan administration system • Roll-up reporting for entire portfolio; • Tickler; • Management of reserves; • Amortization schedule calculation and • Capable of supporting treasury updating; management and currency risk • Loan performance tracking; management strategies; • Linked to accounting and cash • With automated reconciliation to management systems. accounting package. 94 Evaluation of the Experimental Reimbursable Seeding Operations
XII. short reports on the ERSO loan projects
Loan to Azania Bank Ltd., United Republic improved knowledge of efficient management of of Tanzania their lending activities. There is significant potential for broadening this project to many other HFHI The ERSO loan to Azania Bank of USD 500,000 affiliates globally. Over 900 families will eventually equivalent in Tanzania shillings, supports a benefit from the ERSO loan. municipal loan made by Azania Bank to the Mwanza City Council to fund site survey, planning Loan to Sakan for the AMAL project, and infrastructure installation in a peri-urban area Occupied Palestinian Territory currently occupied by families living informally. In its largest catalytic project, ERSO supported Proceeds from the sale of 700 larger plots to the development of a USD 500 million affordable middle-class families and commercial users housing programme in the Occupied Palestinian will repay the municipal loan, and allow the Territory, by investing USD 1 million in the creation municipality to service a total of 2,800 plots, with of a new secondary facility for affordable mortgage the remaining 2,100 plots to be offered as secure lending. This catalytic investment was necessary tenure land to low-income families, including to unlock senior finance from the United States those previously living informally in the area. The Overseas Private Investment Corporation, the Ministry of Housing is working with UN-Habitat International Finance Corporation, the Palestine on the project. Compensation will be offered to Investment Fund, and two local banks in the the families currently living informally on the land Occupied Palestinian Territory (Cairo Amman Bank to reimburse them for the value of their present and Bank of Palestine). The World Bank and the homes and crops, and thus give them sufficient UN-Habitat Technical Unit are providing policy funding to build a new home on a secure plot in assistance to the Palestinian Capital Markets Mwanza, or, if they wish, to move and rebuild Authority and Housing Ministry, respectively, elsewhere. while CHF International is providing borrower Loan to Habitat for Humanity International financial education tools to the local banks. (HFHI) Nepal The programme will offer good quality housing stock to nurses, schoolteachers and families The ERSO loan to Habitat for Humanity who have been overcrowded because of the International Nepal of USD 250,000, equivalent in low stock of affordable housing, as little has Nepalese rupees, shows that it is possible to create been built in the West Bank. It will employ over a fruitful collaboration with a heretofore purely 100,000 construction workers over the life of the donor-funded non-governmental organization project. The project aims to build over 30,000 seeking to expand its activity in poor communities. new homes over the life of the programme. The HFHI Nepal used the loan documentation and evaluator made a field visit to this project site procedures agreed on for the ERSO loan as models and can confirm that building activities are under to create more formal relationships with the village way. Although no one has yet moved in, the site banks that they fund, improving collection rates manager estimates that the first households will and enabling them to make more loans, not only be doing so in spring 2012, after six months of because of ERSO capital, but also as a result of building delays.58 About one third of the planned site was built.
58 Mainly due to the fact that the Israeli authorities did not allow the builders to use dynamite for the groundwork. Evaluation of the Experimental Reimbursable Seeding Operations 95
Loan to DFCU Bank Ltd., Uganda low-income communities. It is estimated that over 4,000 families will benefit from the ERSO-funded The ERSO loan of USD 500,000, equivalent in programmes. Ugandan shillings, encouraged DFCU Bank to commit matching funds to finance construction Final proposed ERSO pilot transaction (see and long-term micromortgage lending to Annex V) members of a low-income community in Tororo The proposed transaction, like other ERSO municipality. The loan programme took into initiatives, is catalytic in nature, with ERSO account contributions to be made by the Ministry providing up to USD 250,000. The project, now at of Lands and Housing (land, income support fund the concept stage, would be to design and create for job retraining, affordable house design), the a USD 75 million Global Micro Housing Facility to municipality (infrastructure) and the community increase the supply of funds offered to low-income (savings). The programme aims to deliver up to populations for incremental home improvement 250 new homes in phases, and provide income and provision of basic services. The proposed generation support. Facility would be designed to attract longer tenor Loan to PRODEL, Nicaragua (up to three years) and lower cost funding sources to promote expansion of microhousing credits to ERSO has provided a working capital loan of USD low-income populations in 15 countries in sub- 500,000 to PRODEL, an apex non-governmental Saharan Africa and Asia. Preliminary details of the organization. PRODEL will use the funds in structure are as follows: two ways to help low-income communities in Nicaragua. Some 40 per cent of the loan will be Funds would be provided to local microhousing used to finance the PRODEL lending programme lenders through Standard Chartered Bank for housing improvement loans. PRODEL lends branches, in local currency. to microfinance institutions, which in turn lend Standard Chartered would be incentivized to to individuals. PRODEL ensures that the primary enter this secondary lending market by guarantee lenders offer architectural and engineering services cover of loss exposure of up to 66 per cent, to be to each borrowing family to help them design provided by IFC and KfW on a 50:50 basis. their improvements in accordance with building codes. PRODEL also ensures that improvements IFC and KfW in turn would be supported by risk- are well-constructed, that they allow (by design) sharing cover from donors to cover 4-5 potential for multiple implementation phases, that no one loan defaults. home improvement loan is beyond the family’s capacity to repay, and that the family can, over time, achieve their full vision of their improved home. The remaining 60 per cent of ERSO funds will be used to finance the new PRODEL municipal finance initiative, in which community group savings and in kind contributions, together with municipal borrowings, are combined to support infrastructure improvement, bringing improved road, sanitation and water services to low-income and peri-urban communities. Improved basic services improve comfort, safety and health in the communities served, while adding to the value of local housing and thus enabling wealth creation for 96 Evaluation of the Experimental Reimbursable Seeding Operations
It is proposed that UN-Habitat’s ERSO programme would take the following roles:
1. Facilitate bringing together the relevant lenders, guarantors, microfinance institutions, and housing policy development programmes supporting incremental home lending to the urban poor;
2. Take the lead in developing, on behalf of all donors, the eligibility criteria for screening microhousing operations of potential MFI and local bank participants, to be sure the lending programmes to be funded are well-designed and will most effectively reach the target populations; and
3. Finally, ERSO would supply a loan from the ERSO Trust Fund of up to USD 250,000 to cover certain start-up costs of the programme. Evaluation of the Experimental Reimbursable Seeding Operations 97
XIII. Expert Consultation Process 19 October – 5 November, 2007
I. Background 2. Submit for the consideration of the Committee of Permanent Representatives (CPR) proposed UN-Habitat is the United Nations agency for human operational procedures for such experimental settlements. It is mandated by the UN General activities; Assembly to promote socially and environmentally sustainable towns and cities with the goal of 3. Prepare a working operations manual to describe providing adequate shelter for all. the processes for different reimbursable seeding operations and other finance mechanisms in The Governing Council (GC) of UN-Habitat is a consultation with the Committee of Permanent high-level forum that meets bi-annually to set Representative; and UN-Habitat’s policy and approve the agency’s work programme and budget. At its most recent 4. Establish a steering and monitoring committee meeting, in April 2007, the GC approved GC of 12 to 14 persons in consultation with the CPR. Resolution 21/10 on “Strengthening the Habitat Representatives of Governments, international and Human Settlements Foundation: experimental financial institutions, United Nations bodies, financial mechanisms for pro-poor housing and the private sector and major non-governmental infrastructure”. organizations may be invited as participants.
GC Resolution 21/10 of 20 April 2007 requests, UN-Habitat is currently preparing the inter alia, the Executive Director of UN-Habitat: implementation of this Resolution. It is planned to present the Draft ERSO Operational Procedures 1. To establish a trust fund within the Foundation and the ERSO Operations Manual to the CPR on 19 for a four-year experimental period from November 2007. 2007 to 2011, to support the introduction of experimental reimbursable seeding operations In order to ensure that these documents reflect as well as other innovative financial mechanisms. best practices and to help strengthen and inform The purpose of the trust fund is: the operational design of ERSO, UN-Habitat seeks to consult with a select group of internationally- • To field-test experimental and reimburs- recognized experts in the area of pro-poor housing able seeding operations and other inno- and infrastructure finance. vative operations for financing for the ur- ban poor for housing, infrastructure and upgrading through community groups, II. purpose and Design of the including where there is an expectation Expert Consultation Process of repayments, mobilizing capital at the The Human Settlements Financing Division of local level; UN-Habitat is organizing a consultation process on • To strengthen the capacity of local ERSO between 19 October and 5 November, 2007. financial and development actors to carry out those operations and to support the Consulted Experts are asked to review the Draft capacity of the United Nations Human ERSO Operational Procedures (16 pages) and the Settlements Programme to enhance ERSO Operations Manual (41 pages) and provide those operations. written recommendations to strengthen them, drawing upon best practices in human settlements financing in particular and upon sound operational procedures in general. 98 Evaluation of the Experimental Reimbursable Seeding Operations
The purpose of the Expert Consultation is to III. Experts consulted strengthen the ERSO Operational Procedures (OP) Below is the list of experts who will review the and the ERSO Operations Manual (OM) by ensuring draft OP and OM between 19 October and 5 that the proposed procedures and guidelines November, 2007. The list covers representatives are technically and financially sound and provide from IFIs and private financial institutions that have workable methodologies based on best practices. agreed on short notice to review the documents. Experts and organizations consulted range from As indicated, further attempts will be made the World Bank, Regional Development Banks and in the coming weeks to broaden the range of Private Financial Institutions. organizations and expertise covered.
List of experts reviewing draft ERSO documents, 19 October to 5 November.
List of experts reviewing draft ERSO documents, 19 October–5 November
Name Organization Experience and expertise Allan Gill Ex-Asian Development Executive Director for Canada, the Netherlands and Bank the Nordic countries; Treasurer; Director of Private Sector Development), Member of the Board of Directors of the Inter-American Development Bank. Anil Kumar Barclays Bank Head of Microfinance; previously with ICICI Bank India Carmen Foglietta Canada Mortgage and CMHC Manager, International Relations & Housing Corporation Operations. Participated in Canadian Delegation to GC21. Can draw on CHMCs expertise in financing through community groups Robert Daughters Ex-Inter-American Principal Urban Development Specialist, Development Bank Institutional Capacity and Finance Sector, Fiscal and Municipal Management Division of the Inter- American Development Bank. Loïc Chiquier World Bank Housing World Bank/IFC Programme Manager, Housing Finance Group Finance Practice, Financial Markets for the Social Safety Net Unit, Financial and Private Sector Development Vice-Presidency. Experience in housing (finance) policy, primary/secondary mortgage markets, housing finance institutions, low-income housing finance, microfinance, rental markets, legal/regulatory environment. Michael Dyson Independent Consultant Economics and Infrastructure Consultant with over 30 years of international and domestic experience.
Ex-partner of PricewaterhouseCoopers LLP, responsible for international development assignments in government reform, transport, renewable energy, housing and public / private sector partnerships. Evaluation of the Experimental Reimbursable Seeding Operations 99
Bernd Riessland Vienna Business Agency, CEO, Vienna Business Agency. Ex-Manager, Bank Austria One Austria Göran Henriksson Swedbank Senior Advisor and head of international cooperation at Swedbank Additional organizations to be consulted Asian Development Bank Regional expertise and networks to country partners African Development Bank Regional expertise and networks to country partners KfW Expertise with setting up national housing and infrastructure funds Equity Bank First microfinance institution to be listed on an African stock exchange
IV. Continuation of the Expert to undertake, functional considerations, the Consultation Process with specific areas of expertise of SCM members and a formal workshop in early recommendations for candidates to the SCM; 2008 (iii) To provide recommendations on strategies To continue the consultation process into the start for developing partnership arrangements of ERSO projects, it is planned to host a workshop with institutional partnerships with IFI’s, in the first quarter of 2008 in Nairobi. governments, local authorities, the private sector and major non-governmental organizations; The purpose of the workshop is: (iv) To review and provide recommendations (i) To inform the design and requirements of the relating to targeting, credit enhancements and ERSO Experimental Financial Operations: Provide risk management, including currency exchange recommendations on innovative financial risk, to assure proper risk management and to mechanisms that could be incorporated into enhance local markets. ERSO projects, with reference to best practices;
(ii) To review the TORs for the ERSO Steering and Monitoring Committee (SCM) and provide recommendations on the specific activities that the SCM should be called upon Evaluation Report 5/2011
Evaluation of the Experimental Reimbursable Seeding Operations
Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee 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Box 30030, 00100 Nairobi GPO KENYA Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Tel: 254-020-7623120 (Central Office) Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO www.unhabitat.org Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian 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Oro NIO ISBN(Series): 978-92-1-132028-2 Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nica- raguan Cordoba OroDECEMBER NIO Ugandan Shilling UGX 2011 Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee ISBN (Volume): 978-92-1-132420-4 NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shil- ling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD Nicaraguan Cordoba Oro NIO Ugandan Shilling UGX Tanzanian Shilling TZS Nepalese Rupee NPR US Dollar USD 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