INSUFFICIENT KNOWLEDGE of the urban poor market and low levels of capital allocated by institutions to such borrowers are hampering the growth of the microfinance market for housing, the Asian Development Bank (ADB) said in a report.
Joji Reyes, president of GlobalWorks International Consulting, Inc., prepared a report on inclusive and resilient urban development for the poor at the request of the Department of Human Settlements and Urban Development, with ADB assistance.
Housing is traditionally a big-ticket item financed via mortgages. A microfinance approach to housing would consider market factors such as low ability to pay, smaller loans, and an incremental release strategy.
Ms. Reyes in the report said that rapid urbanization in the Philippines led to the growth of informal settlers with little access to affordable housing, capital, and health and safety.
The poorest, she said, are not able to access traditional housing financing because they cannot afford it.
“While remarkable progress has been achieved to grow housing microfinance in the Philippines and demonstrate the viability of housing microfinance products, policy and market barriers to further scaling-up exist.”
According to the report, many banks in the Philippines do not have enough knowledge to operate housing microfinance businesses.
She said there is also mismatch between the equity capital terms of microfinancing institutions and the financing terms needed by clients to keep housing affordable.
“Average lending per household is still relatively small compared to the lowest house and lot price within the Philippines’ socialized housing ceiling,” she said.
The stock of affordable housing is also limited.
Recommendations from the report include creating a wholesale financing facility for microfinancing institutions and developing public private partnerships (PPP) for microfinance products.
“Develop and implement a PPP program for green and inclusive housing microfinance properly targeted to the informal settlers,” according to the report. — Jenina P. Ibañez
