Plenary: Microfinance for Housing - European Microfinance Award 2017

Keynote speech
  • Sandra PRIETO, Habitat for Humanity's Terwilliger Center for Innovation in Shelter
  • Lucie ASTIER SUCH, Agence Française de Développement (AFD
  • Álvaro AGUILAR AYON, Cooperativa Tosepantomin, Mexico
  • Augusto PAZ-LOPEZ LIZARES-QUIÑONES, Mibanco, Peru
  • Frank VAN DER POLL, The First MicroFinance Bank - Afghanistan


Sandra PRIETO opened her presentation by referring to the challenges that urbanisation places on the housing market. In 2015, four billion people, representing 54% of the world's population, lived in cities. This figure is estimated to increase to six billion by 2030. At least 880 million urban residents lived in slum conditions in 2014. The housing market for this segment of population is faced by several bottlenecks, some of them being: lack of regulatory environment, inadequate supply of affordable housing, and exclusion from traditional mortgage markets due to unstable income and lack of land tenure.

Prieto explained that housing, alongside education and health, is the main reason why low-income households get loans. Moreover, 20 to 30% of traditional microfinance loans are diverted into housing. She pointed out that housing microfinance is growing among MFIs in response to client demand, and due to social impact alignment and portfolio diversification. However, although housing microfinance portfolios are growing and outperforming traditional microfinance portfolios in both returns and lower delinquency, they still represent a small percentage of the overall portfolio of MFIs. The reason for this is lack of technical capacity and capital constraints for the majority of financial institutions (FIs) that prohibits scaling up. She concluded by emphasizing the need for different sources of capital for different implementation stages, and more innovation of financial products. Lastly, donors, investors, FIs and other housing market actors need to work together to support different stages of housing microfinance development.

Lucie ASTIER SUCH addressed the audience by explaining that housing is a multidimensional issue. Housing microfinance is not only providing loans for house purchase or improvements, but also for access to water, sanitation, electricity and other services. She added that the 2017 European Microfinance Award is looking at all those dimensions. She continued by introducing the Award finalists before giving them the floor.

Augusto PAZ-LOPEZ LIZARES-QUIÑONES introduced Mibanco which started operations in early 1980s as an NGO. Currently Mibanco is the largest microfinance bank in Peru serving micro and small enterprises (MSEs) and low-income clients. Peru is facing a large housing deficit estimated at 1.5 million houses. Most low-income people live in houses that are overcrowded and lack access to basic services. Mibanco started offering housing microfinance as a response to the need of its clients. Before offering housing products, Mibanco conducted extensive research on their clients' needs to design suitable products. Mibanco offers three housing loan products, all of which are combined with obligatory credit-life insurance and offered together with educational material. Mibanco offers mortgage loans, loans for house improvements, repairs and expansion, and loans for connections to drinking water and sanitation. The bank cooperates with homeowner's associations and a network of construction material suppliers. Paz-Lopez Lizares-Quiñones explained that providing housing microfinance helps Mibanco attain its social focus, achieve healthy profit, maintain its sustainable focus, and have happy and loyal customers.

Frank van der POLL presented The First MicroFinance Bank - Afghanistan (FMFB-A), a retail bank regulated by the Central Bank of Afghanistan. FMFB-A has been active in Afghanistan since 2003 and has 40 branches across the country, with 63,000 borrowing customers, and 100,000 saving customers. Van der Poll explained that the housing market in Afghanistan is in a dire situation as the housing stock deficit increased from about a million in 2006 to 1.5 million in 2014 and is expected to keep on increasing. This is due to the influx of people moving back to Afghanistan after the war ended and increased urbanisation. Moreover, many homes were destroyed during the war or due to the frequent earthquakes in the region. FMFB-A decided to provide a housing improvement loan to improve the quality of life of its customers. The housing improvement loan currently occupies 13% of its overall portfolio, and aims at 26% in the future. The loan is offered as a single disbursement with a loan tenure that floats between 12 to 36 months. Van der Poll mentioned the flexible repayment terms as the key differentiation from products offered by other financial service providers (FSPs). FMFB-A also offers construction advisory services, which is a key differentiator for the bank. These services are voluntary and free of costs. The Bank spent a lot of time conducting research on customers' needs before providing this product.

Álvaro AGUILAR AYON introduced Tosepantomin, a cooperative that started operations in 1999 offering savings, deposits, insurance and remittances as well as non-financial services to rural commu­nities in the states of Puebla and Veracruz in Mexico. The cooperative has 32,000 members, 64% of which are women, and 78% indigenous people. Tosepantomin has raised about USD 56 million in the last 10 years for the construction of houses, thus helping 16,000 families and creating 1,500 jobs for people in the local communities. It has addressed a major bottleneck in the region, since the majority of new houses are self-built, using low quality material and without technical expertise. Tosepantomin offers technical assistance from design to construction, including architectural planning, creation of housing project budgets, and oversight of the construction process. It also promotes ecological and sustainable housing by using local materials, eco-friendly building techniques, recycling, renewable energy and energy efficiency.


Astier Such asked how the finalists deal with the lack of land titles and collateral in their housing products. Van der Poll explained that all land titles in Afghan­istan are owned by men, and he emphasised that The First MicroFinance Bank - Afghanistan also accepts urfi (customary) title deeds as collateral. Urfi titles are more common among their clients and are issued and recognized by the city elders. However, female clients do not need to provide urfi land titles to access the housing loan. Paz-Lopez Lizares-Quiñones from Mibanco explained that many of their clients do not have land titles, so they are sometimes replaced by certificates of possession. He added that land titles are just a formality. Aguilar Aron from Tosepantomin agreed with the last statement and added that Tosepantomin never had issues with non-repayment.

A question from the audience addressed the role of savings in housing micro­finance. Van der Poll explained how the banking sector in Afghanistan is very unstable and people do not trust depositing their money in banks. Moreover, deposits in rural Afghanistan are of extremely low value in quantitative terms. As such, the Bank's housing program depends on long-term borrowing from external sources as deposits cannot play an asset role. Paz-Lopez Lizares-Quiñones explained that Mibanco is currently educating their clients on the importance of savings. He added that their customers are mainly saving in the form of assets such as material, animals or merchandise. Aguilar Ayon said that all credit for the Tosepantomin housing loans comes from savings, as the cooperative has created a culture of savings many years ago. He added, however, that Tosepantomin may have to find external funding in the coming years, as demand for housing loans is increasing.