Introduction to Housing and Microfinance (a blog)

“Housing microfinance has come into its own. Filling a void
created by the limitations of traditional housing finance and building on the
lessons of the recent microfinance revolution, housing microfinance is now a
discrete area of practice that intersects housing finance and
microfinance” (Daphnis and Ferguson, 2004).

That is how Franck Daphnis introduces housing microfinance in the opening chapter of Housing Microfinance: A Guide to Practice (2004). Although the last decade has shown a tremendous growth in housing microfinance across the globe, I would argue that in Sub-Saharan Africa housing microfinance is still in its infancy. Whereas Daphnis rightly defines housing microfinance through the lens of its financial nature, I would note that housing microfinance, perhaps not quite as obviously as it would seem, is also the intersection of housing and microfinance. And so I begin this blog on housing and microfinance…

For two decades I have worked in Africa in the housing sector with Habitat for Humanity,  a Christian, non-governmental organization (NGO). Having approached  housing in a variety of ways over the years, I have come to the conclusion that housing microfinance is an effective and more realistic way to improve housing conditions than many of the other more traditional governmental and institutional approaches to housing.

True to my housing background, I look at housing microfinance as a housing delivery .mechanism. It is a type of financial intermediation that addresses a significant bottleneck in the housing process of many  households across the globe that live below or near the poverty line. While it is not a panacea, housing microfinance could make a significant positive impact in the housing conditions of Sub-Saharan Africa. Well designed and implemented housing microfinance has the potential to be sustainable for the financial service provider, sustainable at the household level and result in tangible improvements in living conditions. Products and services that can simultaneously achieve all three of those variables will be the key to the success of housing microfinance as a housing delivery mechanism in Africa.

In his book Housing Without Houses: Participation, flexibility, enablement, Nabeel Hamdi (1999) defined provision and support as two paradigms of housing that are at times in conflict. Housing is surprising ideological in nature and the dynamics between “providers” and “supporters” is not far removed from those of liberals and conservatives, Republicans and Democrats or the religious and agnostic. I am an unabashed “supporter” and believe that the degree to which a housing microfinance intervention aligns with the support side of a housing paradigm continuum will have a strong influence on the degree to which the intervention will be sustainable to both the institution and household. I would expect someone from the provider side of the continuum to reject many of the positions I will express in this blog, because the two paradigms have very different ways of interpreting what the housing “problem” is (if there is one at all) and thus what an appropriate resulting intervention would look like.

In the coming months, I shall elaborate on these statements and present some of the things I believe about housing and housing microfinance and why. These are merely my opinions based on a limited degree of experience. They are admittedly experiential and subject to change as more information is gathered and the housing and financial landscapes change over time. I greatly encourage and request feedback and comments, particularly from alternative points of view or personal experience. I hold my positions fairly strongly, but I am also a believer in good debate between two opposing views as an engine of learning when it stays focused on the issues and facts and delves ever more deeply into the underlying theories espoused and theories in use.

I expect to write on topics that include subjects such as:

1. Housing Paradigms and Housing Microfinance: How does our approach to housing influence housing microfinance design? Although often only implicit, even people who do not consider themselves to be housing practitioners have inherent beliefs about housing that influence housing microfinance design from their unspoken assumptions. “What makes a good house?” This is a value-laden question, the answer to which generally points to one’s personal housing paradigm.

2. Incremental Building and the Finance Bottleneck: Using housing paradigms as a foundation, I would like to look at how housing microfinance fits in with what is actually happening on the ground for the vast majority of low income households. It is generally acknowledged that the poor around the world build incrementally. In the absence of any realistic hope for a formal building process or traditional housing finance, incremental building is primarily an informal housing finance strategy for the poor. I will argue that housing microfinance has the best chance of being sustainable at the institutional and household level if it understands incremental building in its local context and is designed to fit into dwellers’ own informal and incremental processes. To microfinance institutions (MFIs) and other financial service providers who base their products and services on understanding a market, this should come naturally. For those of us in the wider housing field, it is strangely more difficult to see at times.

3. Construction Technical Assistance (CTA): The degree to which construction technical assistance should be part of a housing microfinance intervention is a matter of hot debate. It is similar to the debate over whether business development services should be included with small business loans. It often boils down to a “quality vs. quantity” argument of sorts.

4. Technical Aspects: What are some design elements of housing microfinance? I hope to present some ideas and case studies for review.

5. Institutional Aspects: Is there such a thing as a housing microfinance institution and if so, is it viable? What are the keys to reaching scale and achieving broad access to affordable housing finance?

I look forward to discussing these topics and more. New to blogging, I am not sure whether this will even be read, but I just thought I would start putting some thoughts out there for whatever they are worth.