From success to significance:From success to significance ... · PDF fileFrom success to...
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From success to significance:From success to significance:The Kuyasa Fund
S h Af iSouth Africa
Agenda
The South African housing context & housingThe South African housing context & housing finance sector
Housing micro finance as a lever to address povertypoverty
Th l f KThe role of Kuyasa
Ch ll d f dChallenges and ways forward
S f /
• 1994: Introduction of capital subsidy system for households earning
The South African housing context 1/3: Basic delivery
• 1994: Introduction of capital subsidy system for households earning less than R3500 per month
• Delivers 2.7 m units (15% of housing stock) - 2.1m as individual title, 100 000 credit-linked
BUT
• Unit sizes range from 23m2 and average 30m2
Apartheid spatial frame ork remains largel intact & other settlement• Apartheid spatial framework remains largely intact & other settlement elements such as jobs, health care & social fabric factors are absent
• Backlog of 2.4m remains
S f / f S
• Assumption underlying government
The South African housing context 2/3: Role of State
ssu p o u de y g go e ehousing strategy – government investment would lead to title, lead to h i fihousing finance
• From 1996 there have been various o 996 e e a e bee a ousgovernment attempts to encourage banks – very limited sucess
• Special governmental institutional arrangements - NHFC, SERVCON, a a ge e ts C, S CO ,NURCHA - fails,
NGO d i l h i t• NGO and social housing sector weak and weakening – funding & capacity
The South African housing context 3/3: Changing
• Financial sector Charter Nov 2003 Altered (and murky) landscape
g g ghousing finance landscape
•
• Voluntary commitment by formal financial sector for housing lending of R42b by 2008
Altered (and murky) landscape• Government programme covers gap
market ( R3501 – R7500)A dlending of R42b by 2008
S
And• Central government and banks take on
joint projects – mixed income projects New housing vision September 2004:
Link housing to poverty alleviation, job creation and wealth creation
But• Poor households still receive same
housing unit as in past – more t b id t lwealth creation
• Leverage the growth in the economy
government subsidy goes to less poor households – no improved access to finance for poor
• Households remains unhappy about• Housing - improve quality of life & create social cohesion
• Housing - sustainable human
• Households remains unhappy about the housing allocation and social processes underpinning housing developments
settlements & support spatial reconstruction
• Affordability remains a problem for mortgage finance
Gap pMarket
MiMicro finance Market
Th S th Af i h i t t & h i fiThe South African housing context & housing finance sector
Housing microfinance as a lever to address poverty
The role of Kuyasa
Challenges and ways forward
Housing Microfinance 1/2: the lever to develop housing assetsHousing Microfinance 1/2: the lever to develop housing assets
U it l d U it l d tUnits valued at R50 000
Units valued atR150 000 to
R250 000
Governmentdelivers:
Banks require:• 60 m2 – finishes
MicrofinanceS ll
• 23 – 36 m2
• Tenure
60 m finishes
• Tenure
C dit
Small successive savings and loans• Tenure • Credit
worthiness of Individual
loans
Incremental improvements Individual
& Community
Example of a RDP (front) house vs a Kuyasa House (back)Example of a RDP (front) house vs a Kuyasa House (back)
23m2 home 84m2 home
The South African housing context & housing finance sectorThe South African housing context & housing finance sector
Housing micro finance as a lever to address povertyHousing micro finance as a lever to address poverty
The role of KuyasaThe role of Kuyasa
Challenges and ways forwardChallenges and ways forward
O Mi iOur Mission
Kuyasa provides microfinance services because improvingKuyasa provides microfinance services because improving the quality of housing adds essential social value, and
because no other appropriate sources of housing financebecause no other appropriate sources of housing finance are available to low-income households.
f ?What is the development formula?
G i i i t th h i• Gearing savings into the housing process
Small nsec red micro loans geared to ards ho sing• Small unsecured micro loans geared towards housing
• Ensuring that the consumption is for housing• Ensuring that the consumption is for housing
• Short and repeated loan cycles• Short and repeated loan cycles
• Household freedom and responsibility of how housing• Household freedom, and responsibility of how housing loan is consumed
• Use of local labour – maximising local value
’ CKuyasa’s Clients
• Women 74%
• 75% between 40 and 60 years old
• 60% Informally employed & Pensioners
• 60% earning below R1 500; 93% under R3 500
• Regular income - formal & informally employed; social security grantssecurity grants
’ fKuyasa’s Institutional Performance
• Successfully expanding the banking frontier
• Directly mobilised R26m of savings into the housing process
• Disbursed: R55.6 million to 9 200 clients over 8 years
• Loan balance outstanding: R16 1 million• Loan balance outstanding: R16.1 million
• Write off between 1 2% and 7%• Write off between 1.2% and 7%
Kuyasa Development Impact
• 9 200 clients; impacting on 46 000 individuals within households
6 808 h d d h h ld• 6 808 women-headed households
Add d l t R200 illi b idi• Added value to R200 million subsidies
• Transforming neighbourhoods• Transforming neighbourhoods
• Significantly improved asset values• Significantly improved asset values –R920 million
V l dd d t t f diValue added to grant funding
Operational grant funding received R13.2 mil Cost per square meter of subsidy house R750Cost per square meter of subsidy house R750
Number of m2 of space for grant funding i d
17 682m2
receivedAvg increase in space - Kuyasa loan 24m2
No. of Kuyasa clients 9 000If di t t i t h h ld 737If direct grants were given to households 737 Multiplier 12
Key lessons
P d t d l t b d i ti i• Product: development based on existing experiences, must evolve
• Collections: Relationship building & fieldwork
• Operations: Information management leverage IT
• Sustainability: – within the next 2 years
A t it l iti l t t th• Access to capital – critical to support growth
• Effective micro finance practice requires strong &• Effective micro finance practice requires strong & integrated social process
VisionVision• 300 000 new loans from 2008 – 2014
Outreach to 6 provinces & 9 cities• Outreach to 6 provinces & 9 cities• Loan book grows to ZAR669million
1 100 t ff• 1 100 staff
Drivers• Expand Board & increase management capacityp g p y• Harness technical assistance• Project manage the expansion• Fund loan book growth with debt• Raise operating grant of at least ZAR22m
Year 1 Year 2 Year 3 Year 4 Year 5
FY08/09 FY09/10 FY10/11 FY11/12 FY12/13
Income 16 61 136 275 449Financial Expense -2 -13 -25 -47 -70Net Financial Income 14 48 112 228 380Net Financial Income 14 48 112 228 380Loan Loss Provision -2 -15 -28 -57 -79Operating Costs -16 -35 -73 -146 -256p gNet Income -4 -2 11 25 45
Y/E Loan book 44 161 315 649 956
Debt Requirement 45 163 264 522 672New clients 7,000 25,000 45,000 95,000 130,000V l f l di b d 46 163 293 618 845Value of loans disbursed 46 163 293 618 845New Equity 40 50 110
Snapshot of Milestones in Kuyasa’s funding strategyp y g gy
+ “Debt and Equity Phase”“Debt Phase”
Stage I
Stage II Stage IIIBreak-even
Increase product range
Stage I
-2012/13
even
2008/09 2009/10 2010/11 2011/12
eg: Insurance,
savings2012/132008/09 2009/10 2010/11 2011/12
April 7, 2008 April 7, 2011 April 7, 2013Legal architecture: NGO NGO
(Financial Institution Formal Financial Institution
NGO
g
or
Deepenbeing set up)
Size of loan portfolio: 12,529,856 246,065,788 830,944,298 Profitability (ROA): -3.0% 3.0% 7.0%Oper. Expense Ratio: 68.5% 55% 40%PAR 31-365: 25.3% 10% 6%
Deepen housing range eg
meta financeWrite-off ratio: 1.2% 2.5% 1.6%FSS: 43% 95% 115%# branches: 3 21 68# of staff: 60 340 1,050Products: 1 (housing loan) 2 (housing, other) 2 (housing, other)
meta-finance & micro
mortgagesDebt (ZAR): 9,695,715 202,819,535 570,860,181 Equity (ZAR cum.): 7,529,828 45,630,754 259,619,412 D/E ratio: 1.29 4.44 2.20GIRAFE rating: * D C B-
* Next GIRAFE rating to be carried out at the end of 2009
The South African housing context & housing finance sector
Housing micro finance as a lever to address poverty
The role of Kuyasa
Challenges and ways forward
CChallenges
A t b ildi l t l t th li t• Asset building cycle not complete -the client develops an asset – that does not necessarily in the short term have financial value – client affordability
Li k b t K ’ k d f l• Links between Kuyasa’s work and formal sector is emerging – but development is slow
• Achieving scale and expanding microfinance services
• Meeting the capacity constraints of growth –financial, people and systems, p p y
fRole of our partners
• Acknowledgement of role and power of housing microfinance as a lever to fight g gpoverty and to build assets
• Technical support and operational grants
• Start up capital and capacity building• Start up capital – and capacity-building support for expansion and growth
• Market enablement support – guarantees; loans etcloans etc
Housing Microfinance: the housing asset cycleHousing Microfinance: the housing asset cycle
The house as anThe house as a social The house as an economic asset is tied
into issues such as location and the
economic opportunities in the community
The house as a social asset and the family’s approach is strongly
influenced by the delivery process
in the community
House as financial asset is linked to the
social processes of the community and the credit
worthiness of a community
&The Real Reconstruction & Development Programme
Families live,
CChildren play and grow,
fMoving from unsecure shelter…
To homes.