Do successful housing microfinance portfolios spur similar loan products? Lessons from the Republic of Georgia.
In the piece below, Monica Raskin from Habitat for Humanity’s Terwilliger Center for Innovation in Shelter describes the outcomes from an internal assessment of the systemic impact of their financing efforts. The post lays out some interesting outcomes that they identified from the assessment. In reading it, an important systems-thinking concept stood out for me as needing to be raised. Systems change over time is tied to the when/how certain signals or feedback emerge as either more or less influential. As Monica points out, microfinance organization to microfinance organization signaling, at least related to this segment, has had very little influence on the overall financial service system. It would be very interesting to learn more about why this firm-to-firm feedback is not influential, including how the Fund could amplify such internal signaling.
Habitat for Humanity’s Terwilliger Center for Innovation in Shelter launched the MicroBuild Fund in August 2012 to increase access to affordable housing finance products and services for low-income households globally. The fund bundles capital and technical assistance to financial institutions to demonstrate housing microfinance’s value to the broader industry. In doing so, the Terwilliger Center aims to shift the global portfolio allocation for housing finance from 2 percent to 10 percent of the general gross loan portfolio, among microfinance institutions (nationwide) in the countries where MicroBuild has investments.
As of July 2020, the fund had disbursed USD 136.9 million to 55 institutions across 32 countries, and helped nearly 930,000 households improve their shelter. Additionally, MicroBuild has seen success with many investees scaling up their housing portfolios after receiving capital and technical assistance from the fund.
While the fund has accomplished much to date, in 2019 the center decided to assess whether it was creating true market systems change. Specifically, we wanted to understand if MicroBuild’s investments in financial institutions were resulting in non-MicroBuild financial institutions adopting and scaling housing microfinance products. And, we wondered, was such a strategy to encourage broader product adoption the best way to scale housing microfinance offerings in a given country?
A three-week field study last year in the Republic of Georgia provides one answer. Habitat for Humanity’s Terwilliger Center selected Georgia for many reasons: the high country exposure within the MicroBuild Fund portfolio; substantial market share held by investee institutions; growth of local investees’ housing microfinance portfolios; and the high degree of openness to obtaining microfinance data. Further, the fund had been invested in Georgia for many years. It invested in JSC Credo Bank in 2013 and in JSC MFO Crystal in 2016. Finally, both MicroBuild investee institutions were market leaders within Georgia’s microfinance sector and thus potentially influential to other institutions within the country.
The field visit produced several key findings:
These findings, while offering specific insights into the Georgian market, also have informed the Terwilliger Center’s global approach to scaling the MicroBuild Fund and achieving market systems change. Based on the findings, the fund adjusted its scaling strategy to a more nuanced approach in certain markets where a small subset of financial institutions held the majority of the microfinance sector’s market share. In such countries, the fund would aim to either scale exclusively through MicroBuild investee(s), or by also crowding in a limited number of other financial institutions (in markets where approx. three to five institutions held over 70 percent market share). For countries where scale would be expected beyond MicroBuild investees, the center is now looking to develop a sector influence strategy to ensure that program initiatives provide clear, actionable information to target institutions on how to develop, refine and scale housing microfinance products.
In doing so, the Terwilliger Center can pursue a more nimble (and often more efficient) means of scaling housing finance within MicroBuild’s countries of investment to reach 10 percent of the general gross loan portfolio nationwide. Finally, the center will continue to make the case to the broader financial sector to further crowd in capital in countries and institutions where MicroBuild has proven that housing microfinance can be a good investment.
Read the full report from Habitat for Humanity’s Terwilliger Center here, under the title Exploring the adoption of housing microfinance within the Georgian market.
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The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.