Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.
Worldwide, half of the adult population does not have an account at a formal financial institution. Far fewer can get financing to purchase a home or an apartment
Bangkok, 7th October 2013 – Habitat for Humanity International today released its ‘Shelter Report 2014 - Step by Step: Supporting Incremental Building Though Housing Microfinance.’ The report highlights housing microfinance as an effective way to meet the urgent housing needs of low-income families across the developing world.
“Up to 90 percent of home construction in developing countries happens incrementally,” said Jonathan Reckford, CEO of Habitat for Humanity International.
“People build their houses and communities as their resources and circumstances allow. Housing microfinance can support what is already happening naturally, allowing individuals to adapt and build as their needs change. Small loans make a big impact.”
The Shelter Report outlines the growing need for affordable shelter across the world, citing the 1.6 billion people currently living in substandard housing and the UN projection that by 2050, 70 percent of the world’s population will be living in urban areas, many of them in substandard conditions.
Compounding the problem, half of the adult population worldwide does not have an account at a formal financial institution. On average, only 3 percent of the population in developing economies has an outstanding mortgage. In many countries, that number drops to 1 percent, according to the World Bank. Yet access to funding that low-income families can afford is a crucial element for the success of incremental building.
As the need for housing swells and urban migration accelerates, the lessons of microfinance are relevant. As the Shelter Report describes, housing microfinance emerged out of the realization that microloans – small loans made available to people who cannot access the formal financial sector - could be a useful tool for helping the millions of people living in the world’s slums to incrementally improve their conditions.
In the report Habitat lays out several recommendations for increasing access to housing microfinance and supporting low-income families in their process of building and improving their homes in stages. These recommendations include recognizing housing microfinance as an effective way to finance housing for low-income populations in the developing world; national and local laws that create a framework for granting sufficient tenure security; government agencies that catalyze, facilitate and regulate housing microfinance; and capital and capacity building from multilateral development institutions to spur innovation and expansion of housing finance products.