The Department of Human Settlements and Urban Development (DHSUD) has tapped the Asian Development Bank (ADB) to conduct a study on how to expand green and inclusive housing microfinance in the Philippines.
Housing microfinance has been identified as a reliable alternative in the delivery of adequate, affordable, and climate resilient housing for the country’s informal settler familiess.
The study was initiated to examine the opportunities, constraints, challenges encountered, lessons learned, and institutional and policy reforms needed to accelerate the implementation of housing microfinance nationwide. It will also look into how housing microfinance can help to enable the Philippines’ urban poor to adapt better to climate change by identifying potential products that provide credit that encourages disaster-resilient housing and support for damaged housing reconstruction in a post-disaster context.
Based on preliminary findings of a survey conducted by US-based GlobalWorks International Corp. (GWIC) 75 percent of the respondent-microfinance institutions (MFIs) non-government organizations, cooperatives and rural banks are interested to expand their HMF program to finance climate- resilient and energy-efficient housing.
GWIC was tapped by ADB to conduct the study and rolled out the survey between December 2020 and March 2021.
Sixty-percent of the respondents have attributed the success of their programs to the interest rates and loan values or sizes.
The average rate of 3 percent per month is believed to be substantially lower than those offered by the 5 to 6 percent informal money lenders. Other factors cited are the MFIs collection mechanisms and the less stringent income requirements.
However, there are perceived deterrents to pursuing green and inclusive housing microfinance:
the mismatch between the MFIs shorter-term sources of loanable funds against the need for a longer repayment period of clients for housing-related loans and perceived risks of lending for housing.
The survey also identified as a deterrent to expansion insufficient knowledge of the housing sector as well as the inadequate supply of climate-resilient housing units or materials.
Most of the respondents confirmed the need for affordable financing (grants and concessional loans, if possible) to allow them to innovate and/or expand in green and inclusive HMF. More than 50 percent also cited the need for a financially viable housing rediscounting facility.
There has been a significant growth in the housing microfinance subsector from 2010 to 2019.
The biggest of these microfinance NGOs, the ASA Philippines Foundation, reported that its home financing portfolio has jumped from P200 million in 2015 to over P1.8 billion in mid-2019 million by the end of 2010.
The banking sector’s disbursements for housing microfinance have reached a total of P1.5 billion as of the end of 2019.
