Funding Habitat Houses
Habitat for Humanity traditionally relies on the generosity of supporters from individuals and civic groups to churches and business corporations to fund its activities in the Asia-Pacific region.
Increasingly, philanthropic foundations, commercial banks, specialist microfinance organizations, and official national and multilateral funding institutions are supporting Habitat’s work. Such sources are especially important when it comes to creating ambitious community-wide “transformation projects” where housing is one component in larger-scale programs aimed at breaking the cycle of poverty for individuals and their families.
And core sources of funding for Habitat’s activities are home partner families themselves! Their demand for access to capital rather than charity chimes with Habitat’s mission to provide a hand-up not a hand-out.
The number of ways of funding Habitat homes is growing across the Asia-Pacific region.
The original and still a popular Habitat for Humanity approach is a NO-PROFIT HABITAT MORTGAGE. This model targets the near-poor or low-income working families. It offers flexible lending terms and long loan periods to keep payment amounts affordable. Repayments go into a revolving national “Fund for Humanity” for recycling to address housing needs in other communities and groups.
For many poor and disadvantaged families, the challenge is not repayments per se, but access to affordable financing. An estimated 60 per cent of adults in the Asia-Pacific region rely on money lender or informal “banks” or family and friends for loans and cash advances.
Few people borrow from formal banks or cooperatives or other legal institutions or save with reputable organizations or buy even basic insurance to protect themselves and their families.
Informal arrangements may fund the struggles of everyday life. But it is hard to set aside sufficient spare money for a critical house repair or to build a much-needed extension, let alone build a new home. It is harder to get an affordable loan to pay for proper shelter.
Nearly three-quarters of home improvements among the poor happens gradually. Work is done when there is money. When there is no money, rooms stand uncompleted, pipes unconnected, windows and roofs unrepaired. It can take many years for poor families to see significant positive changes in their living conditions.
Habitat response has been to develop three models that provide families with access to affordable financing to improve or build decent homes at a pace that is comfortable and affordable for the beneficiaries.
Habitat for Humanity’s “SAVE & BUILD” MODEL is a housing microfinance program that brings together low-income families in a community to form savings groups. Members earn about one or two US dollars a day.
The groups, usually 10 to 12-families strong, save money and materials together. Habitat national and international offices and partners supplement villagers’ savings with small, manageable loans to enable the group to build basic or “core” houses or repair a few houses at a time. Construction and saving continue until all the families are housed. A cycle normally takes about two years.
Groups elect their own leaders – often women – to manage and monitor members’ savings, decide which families are housed in which order, and provide “sweat equity” for construction.
In some communities, families and groups choose to save for cycles of repairs rather than for building complete houses.
In some countries, like Nepal, Habitat for Humanity partners with existing saving groups that want to offer housing loans as an additional service to their own members. This model is more sustainable for Habitat and reduces Habitat’s administrative burden, costs and risks. Read more about Save & Build in Nepal.
In the MICROFINANCE MODEL, Habitat works with microfinance institutions, local banks or international non-government organizations that have established microfinance initiatives providing market-rate loans to the economically-active poor who earn approximately US$2 per day.
Habitat helps these organizations to develop home-improvement loans to complement the existing range of loan products they offer their client families. In addition Habitat provides support services such as assistance with technical aspects of construction, financial education and support acquiring land titles.
Habitat for Humanity began pilot projects with MFI partners in 2007. Partners included TYM, a major microfinance institution in Vietnam; Sarvodaya Economic Enterprise Development Society (SEEDS), the largest MFI in Sri Lanka; and VisionFund in Mongolia.
A precursor of this model has provided financial and housing support services through community development organizations in India and village banks in Nepal.
In 2011 Habitat for Humanity took a major step to expand its ability to reach more families in need–and the reach of the microfinance model–with the launch of MicroBuild India Fund. The joint venture housing finance company provides funds to MFI partners to offer shelter-related loans.
The goal is to allow partner MFIs to help more than 60,000 low-income families over the next five years to gain access to small loans to improve or repair their homes.
MicroBuild India Fund is starting in the state of Tamil Nadu and will extend to the states of Karnataka and Kerala.
As in other areas, Habitat for Humanity India is providing technical assistance and housing-related support services. The MicroBuild model will be extended to other countries in the region, and later globally.
The PARTNERSHIP MODEL represents a way for Habitat to work through existing non-commercial institutions such as non-governmental organizations or community associations that wish to help the poor living on between US$1-$2 per day to improve their homes.
Habitat works closely with selected partners to build their ability to manage a program.
Habitat offers a very low- or no-interest wholesale loan to the partner organization which uses the funds to build homes and lend to its client families.
As the families make repayments, the partner in turn services and repays the wholesale loan from Habitat.
Habitat for Humanity Vietnam was the first Habitat entity to use the partnership model. It provided interest-free institutional loans to the Women’s Union, a large quasi-government savings and credit organization with many thousands of individual savings groups.
The relationship started in 2005 in four districts of the southern province of Kien Giang. Families who were members of existing microfinance networks saved and accessed credit for cycles of home improvements.
For example, a first loan could be for a concrete floor and once repaid a second loan might be for a new roof. Subsequent loan cycles might pay for repairing walls, or building water and sanitation facilities.
The approach has proven a speedy way to help hundreds of families across Vietnam.