To ease a worsening housing crisis in Asia and the Pacific, ADB has teamed with Habitat for Humanity International to provide housing loans for low-income families in Bangladesh, India, Indonesia, and the Philippines.
The collaboration will expand ADB’s Microfinance Risk Participation and Guarantee Program to include microloans for housing, home improvement, and water and sanitation. Anshukant Taneja, who heads the program at ADB’s private sector operations department, explains how the partnership will deliver decent, affordable shelter for vulnerable communities.
How serious is the housing crisis in Asia and what is causing it?
In 2020, an estimated 2.2 billion people lived in cities across Asia Pacific, with one-third, or around 700 million, living in slums and informal settlements that lack basic services like water and sanitation. These marginalized communities living in poor-quality housing are increasingly vulnerable to climate change.
Many factors contribute to this worsening housing crisis, including limited government resources for planned development; rapid urban migration leading to poorly planned, densely populated urban settlements; rising housing-related costs, and increasing unaffordability.
These communities do not qualify for existing market-based solutions for housing finance, like mortgage financing. This prevents low-income families from gaining access to decent housing or improving the quality of their existing dwellings.
How has the COVID-19 pandemic made housing even more tenuous for the poor?
The pandemic has exacerbated the global housing crisis. Evidence is emerging that overcrowded communities are more exposed to COVID-19 transmission. The related lock-downs and quarantines diminished the income streams of small informal business owners and daily-wage earners. Their modest savings and resources have been allocated to meet more immediate needs, and spending on housing or home improvement has been given an even lower priority.
Why have ADB and Habitat for Humanity decided to work together on affordable housing?
Traditional housing financing solutions focus primarily on the construction of new houses, which is well outside the reach of low-income settlers in informal urban communities. However, financing for home improvement, refurbishment from temporary and semi-permanent to resilient housing, and water and sanitation can substantially improve living conditions for vulnerable communities.
While microfinance institutions (MFIs) have made efforts to reach this segment, their progress has been hampered by two factors. The first being lack of access to longer-term financing, which can be extended to the micro-borrowers to enhance the “affordability” of the loans. Secondly, there is limited capacity and technical skills among MFIs to develop and deliver appropriate loan products.
To fill this financing and technical-capacity gap, ADB and Habitat for Humanity have launched a new initiative.
ADB is helping MFIs access financing through its Micro Finance Program, and Habitat for Humanity will work to improve the MFIs’ technical expertise through capacity-building and training.
The goal is to provide microloans to 20,000 households in the first phase of the program, to improve the construction quality and climate resilience of homes, and to install sanitation and water connections. This initiative will specifically empower women, by targeting them as recipients of 90% of such home improvement loans.
What are ADB’s and Habitat for Humanity’s roles in this collaboration?
ADB will work with its network of partner banks to provide credit enhancement on longer-term loans for selected MFIs. Technical assistance funding will be used for training and to build the MFIs’ technical expertise, to deliver affordable home improvement and micro-housing loans.
Habitat for Humanity will be responsible for working with MFIs, to assess and enhance their ability to offer such housing microfinance products. This product-design work will help develop a micro-housing loan prototype tailored for the MFIs’ clients. It will also help MFIs develop internal policies and procedures to deliver micro-housing finance as a mainstream product.
Where will this be rolled out, and who else is involved?
In its initial phase, the countries being targeted under this partnership are Bangladesh, India, and Indonesia. Work has commenced in India with Annapurna Finance Ltd., one of the largest MFIs in the country. Discussions with prominent MFIs in Indonesia and the Philippines are ongoing, and pilot-testing work is being planned.
What is the likely long-term impact of this partnership?
The partnership will deliver a market-validated financing solution to improve living conditions for urban communities and enhance resilience to extreme weather events in rural areas. It builds on the social network and client linkages developed by MFIs, by delivering a bundled financing and capacity-building solution.
A decent, affordable home, with access to clean water and sanitation, sets a strong foundation for families’ overall health, well-being, and economic opportunities.
This program empowers women to expand their income opportunities, as homes are often the venue for their micro-enterprises. Increased privacy and access to sanitary conditions, including for menstrual health and hygiene, improves the overall quality of life for women and supports children’s education, providing stability and continuity to livelihoods.
The partnership will expand coverage to newer markets in its second phase. ADB will also potentially work with the follow-on Micro Build Fund promoted by Habitat For Humanity to help mobilize private capital and build a transaction pipeline. The partnership aims to make a notable contribution to better living conditions for the region’s underprivileged, one home at a time.