If it is agreed that the poor tend to build incrementally and that housing microfinance can flourish where this type of home construction is actively taking place, then successful housing microfinance products will be designed to interface with incremental building processes. Perhaps the most common housing microfinance product is some kind of home improvement loan. Although often thought of as being for repairs and renovations, home improvement loans can be applied to a variety of uses in the incremental process. I usually group home improvement loans into five loan use general categories, which are by no means exhaustive or definitive.
COMPLETION: I currently define completion as when a home improvement loan (or similar housing microfinance product) is applied to new house construction on a house that has not yet been occupied. The objective of completion is to bring a structure to the point that the dweller can occupy it, (or to work towards occupation if it cannot be achieved with a single loan). I generally consider “completion” of a structure as dweller-defined by occupation: A house is complete when the household decides to occupy it. This is unlikely to ever be accepted as an industry standard, but it comes with the caveat that a house can be complete (good enough for occupation by the dwellers’ standards and/or current needs) without being “finished.” The point at which dwellers decide to enter the home varies from household to household, depending on their individual circumstances and livelihood strategies. Some are quite willing, or find it necessary, to occupy a structure as soon as there is a roof for shelter. Others require more substantial work to be completed prior to occupation.
Completion loans bridge financing bottlenecks to make a house at least minimally habitable (according to the criteria of the dweller) and usually build upon previous in-kind savings in the form of the materials and structure of the walls. In Sub-Saharan Africa, completions commonly translate into roofing a structure and / or shutting the structure with doors and windows. Because the roof is an expensive and challenging investment for many households, loans for completion help a household occupy their new home and continue work on it as they enjoy its shelter.
The foundations and walls of a new house would also fall under the category of completion. In the housing microfinance products which I have developed, however, we have favored working with structures that already have the foundations and walls built. This helps to ensure that the client is actively committed to his or housing process and has some stake and investment in the structure. By the time a client has constructed a house to wall plate level, he or she has much experience in the housing process and has more realistic expectations of what is ahead compared to someone who has yet to start building. I have, however, seen foundations as a housing microfinance loan or component thereof.
COMPLETION: I currently define completion as when a home improvement loan (or similar housing microfinance product) is applied to new house construction on a house that has not yet been occupied. The objective of completion is to bring a structure to the point that the dweller can occupy it, (or to work towards occupation if it cannot be achieved with a single loan). I generally consider “completion” of a structure as dweller-defined by occupation: A house is complete when the household decides to occupy it. This is unlikely to ever be accepted as an industry standard, but it comes with the caveat that a house can be complete (good enough for occupation by the dwellers’ standards and/or current needs) without being “finished.” The point at which dwellers decide to enter the home varies from household to household, depending on their individual circumstances and livelihood strategies. Some are quite willing, or find it necessary, to occupy a structure as soon as there is a roof for shelter. Others require more substantial work to be completed prior to occupation.
Completion loans bridge financing bottlenecks to make a house at least minimally habitable (according to the criteria of the dweller) and usually build upon previous in-kind savings in the form of the materials and structure of the walls. In Sub-Saharan Africa, completions commonly translate into roofing a structure and / or shutting the structure with doors and windows. Because the roof is an expensive and challenging investment for many households, loans for completion help a household occupy their new home and continue work on it as they enjoy its shelter.
The foundations and walls of a new house would also fall under the category of completion. In the housing microfinance products which I have developed, however, we have favored working with structures that already have the foundations and walls built. This helps to ensure that the client is actively committed to his or housing process and has some stake and investment in the structure. By the time a client has constructed a house to wall plate level, he or she has much experience in the housing process and has more realistic expectations of what is ahead compared to someone who has yet to start building. I have, however, seen foundations as a housing microfinance loan or component thereof.
The house above appears to have had the wall raised in several stages and then been left for some time (tall weeds inside). It is typical of a loan used for roofing to work towards occupation.
Construction on this house appears more recent, but would also fall under the "completion" category.
The small house is ready for a completion loan (roofing, doors and windows), but the owner has plans to extend to the right in the future.
FINISHING: I consider finishing as new work undertaken on an occupied house. Housing is a process that is rarely ever truly “finished.” In How Buildings Learn: What happens after they’re built, (which is fascinated reading), Stewart Brand demonstrates that even buildings that have been “completed” and/or “finished” still often undergo significant change over the course of time. Building upon the work of Frank Duffy, Brand identifies “six S’s” that define a building and are subject to change: Site, Structure, Skin, Services, Space Plan and “Stuff.” [1] Brand’s concepts are broadly applicable and visible, even in the informal settlements and rural communities of Africa. Brand focuses on changes to a building that may have otherwise have been considered “finished” at one time, much of which would be considered extension or repair/renovation in my loan categories. Finishing as a housing microfinance loan use tends to add structure, skin and services for the first time as the dwellers occupy the house. This includes key house components such as floors, ceiling, doors and window, plaster, utility connections, etc. The finishing loan use category corresponds to an incremental building strategy of moving into a structure before it is completely finished.
The dweller-influenced loan use classification I have utilized is sometimes initially confusing to loan officers. What is classified as a completion for one household may be finishing for another, even though the actual work done is exactly the same. A common example of this is windows and doors. Some households are willing to occupy a structure before the windows (and sometimes even doors) are installed. They cover the window and door openings with some provisional solution, such as plastic, old sacks, mats, blocks, old iron sheets or just about any other imaginable item. Other households, however, find this totally unacceptable and will not occupy a house that has temporary shutting (e.g. see picture above of roofed house lacking windows). The amount and value of household assets (stuff) at risk from theft, the likelihood that the house may be left unattended for periods of time and the security situation in the neighborhood may be some of the factors influencing thes decisions. In summary, the completion and finishing loan use categories tell whether the work was done on an unoccupied or occupied home.
Floors, plaster, ceilings, utility connections and even windows are often added to houses gradually after occupation. These activities are well suited for housing microfinance loans and can makes a significant improvement in living conditions for the household.
Windows are often details left to be finished after occupation. The houses above are examples of occupied structures with windows made of temporary materials.
EXTENSION: Extension involves adding new rooms to an existing house. Many houses are designed constructed for possible future extension. A growing family is often a cause for extension to a home. Sometimes, homes are also extended to earn income through a home-based business or rental units.
Extensions take many forms and are also often built incrementally. The houses above have begun extending incrementally, with partially completed walls in the areas being extended.
REPAIR / RENOVATION: Replacing old components of a home with newer components. Re-roofing is a common repair undertaken in older informal settlements. I also consider upgrades as being in the repair / renovation category, such as replacing older doors or windows with new ones.
Houses that could benefit from a loan for repairs. Built with sun-dried blocks, the structures are at risk due to the condition of the roofs.
AUXILIARY STRUCTURE: Adding additional structures on one’s plot. In areas where there is no sewage connection and no access to electricity, outdoor cooking, bathing and cooking are the norm. Bathing areas and even toilets are often open and sometimes only made of temporary materials such as plastic, mats or reeds. The construction of such outdoor structures can provide greater privacy and living conditions by improving sanitation on the property.
Examples of outdoor baths and latrines that could be replaced with a loan for an auxiliary structure on the client's property.
Names for loan use categories are not necessarily important. What is most important is that a housing microfinance product is flexible and aligns with the local building realities for low income households. Flexibility allows multiple options to borrowers in their housing process. The housing microfinance program with which I am currently involved in Dar es Salaam is still very new, but the breakdown of loans by loan use category so far is approximately as follows:
Finishing: 54%
Completion: 22%
Repairs: 11%
Auxiliary Structures: 9%
Extensions: 4%
This is likely to change in the future as we gain more clients and enter into new areas. Older settlements are more likely to have finishing and repairs, while new settlements have more completions.
The loan use categories presented here are simply ways of tracking what the loan was used for and do not represent different loan products. In time, however, they may provide information that could identify a need to adjust product features for specific loan uses. Regardless, flexibility that fits into the local practice and keeps the dweller in control is likely to be a key in making a housing microfinance intervention successful in reaching large numbers of households in a sustainable manner.
This is likely to change in the future as we gain more clients and enter into new areas. Older settlements are more likely to have finishing and repairs, while new settlements have more completions.
The loan use categories presented here are simply ways of tracking what the loan was used for and do not represent different loan products. In time, however, they may provide information that could identify a need to adjust product features for specific loan uses. Regardless, flexibility that fits into the local practice and keeps the dweller in control is likely to be a key in making a housing microfinance intervention successful in reaching large numbers of households in a sustainable manner.
[1] Brand. S. (1994) How Buildings Learn: What happens after they’re built. NY: Penguin. 13.
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