CHAPTER 6. Housing Microfinance

MABS-4 housing microfinance initiative was initiated with a market demand study conducted jointly in July 2008 by MABS and the Microfinance Innovation Center for Resources and Alternatives. Leveraging USAID funding with financial support from Mercy Corps, MABS conducted a survey with four pilot banks to determine the demand for housing loans by their existing microfinance clients and non-clients. The survey revealed a strong demand for small loans for minor home repairs and improvements. It also uncovered a demand for loan products that would enable clients to build houses gradually based on their cash flow. Clients often relied on their own funds because no product was available in the market. This limited what they could do because they often had to wait until they had saved enough to purchase materials little by little to build or improve their homes, which cost more and added time for them to work on their homes. Results from the market study became the basis for designing the housing microfinance loan product that was tailored to client cash flows and based on the incremental building method practiced by Filipinos in the countryside. This reduced the risks to the bank and the clients and allowed clients to obtain more funds up front, allowing them to buy materials at a bulk rate and reduce their costs.

With training and technical guidance by MABS, participating banks developed and introduced housing loan products. Product testing in each bank was done in one or a couple of branches and offered initially to existing microfinance borrowers. Green Bank of Caraga initiated the first pilot testing in two branches in September 2008; the other pilot banks followed. By September 2009, 35 branches of the pilot banks were offering housing microfinance products and had reached more than 450 new borrowers with disbursements of more than 14 PHP million ($350,000).

With the results of the pilot test and after several months of policy discussion with RBAP, MABS, and the Bangko Sentral ng Pilipinas, BSP issued a circular allowing qualified rural banks to offer housing microfinance loans using standard procedures and policies developed by MABS during the pilot test.

After a year of working with the four banks, MABS conducted several additional training courses for other banks. As a result of their training, other banks decided to include housing microfinance as one of their product lines. As of June 2012, 83 branches have helped more than 4,000 borrowers improve their homes with more than 180.3 million PHP in housing microfinance loans disbursed, exceeding the targets of at least 50 branches and 4,000 borrowers. Borrowers used their loans mostly to make minor repairs and home improvements. Banks introduced the product as an incentive product to their borrowers with a good record, but were beginning to offer this product to new bank clients as well.

Exhibit 9: Amount of Housing Microfinance Loans Disbursed

Exhibit 10: Cumulative Number of Branches (Reporting) – Housing Microfinance

Exhibit 11: Cumulative Number of New Housing Microfinance Borrowers


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