Housing microfinance for Roma and Marginalized groups

GoodFINANCIAL
Practice
Example:
SERVICES
HOUSING MICROFINANCE
Microcredit
Foundation Horizonti
Horizonti – Housing microfinance - Former Yugoslav Republic of Macedonia
Objective: Provide affordable housing
Target group: Roma and marginalized groups
Key words: Housing, microfinance, financial services
Horizonti
Email : [email protected]
Website : http://horizonti.org.mk/contact_mk.html
Implementing organisation: Horizonti
Type of organization: NGO
Location: Former Yugoslav Republic of Macedonia
Founded in: 2000
Products offered: Microcredit for enterprises and families
Portfolio: €2,767,000
Average loan size: €1,183
Percentage of portfolio to women: 100%
History
Horizonti was created in January 2000 as a microfinance programme of ‘Catholic Relief
Services’(CRS), a US-based catholic charitable organisation in Macedonia. In July 2005 the
programme was spun off from CRS who registered it as a local NGO. Horizonti’s mission is to provide
sustained and continuous access to financial services for the low-income economically active
population of Macedonia. The beneficiaries are primarily women-entrepreneurs, from socially
excluded and marginalised groups, in order to support and develop small businesses that will create
new jobs and improve the quality of life of the local population.
Structure
Horizonti provides its services through eight branch offices located in the larger cities, with the head
office in Skopje, the capital. The institution has 39 staff members, of whom nine are senior managers
and administrative personnel and the remainder are branch staff, including: branch managers; 20
loan officers and support staff.
Governance Structure
Horizonti is an institution with a strong commitment to achieving its social goals and creating a
positive impact for its clients. The organization is strongly oriented to understanding clients’ needs
and preferences. The Board of Directors is composed of five independent individuals nominated by
the founder CRS.
Products and services
Horizonti financial services are business loans to micro-entrepreneurs for working capital and the
purchase of fixed assets, and small housing loans for reconstruction and repairs. The sums loaned
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Good practices gathered by EMN – Financial services / Housing microfinance – September 2011
range from €250 up to €4,500, with a loan period from 12 to 36 months. Horizonti uses group and
individual loans, depending on the level of the clients’ requested loans and social conditions. Group
lending is common for poorer and disadvantaged clients such as the Roma population and small rural
farmers. In addition, through joint ventures with local partners, Horizonti provides non-financial
services to its clients in the areas of business development and financial literacy.
Target Clients and Operational Area
Horizonti clients are women with limited or no access to financial services. In terms of location,
urban clients are mainly people with small businesses in the retail, services and small production
sectors while rural clients are individual farmers with small farming activities, cattle-breeding and
crop production. In terms of business status, only 50% of Horizonti clients, excluding the farmers,
have registered businesses according to Macedonia law. On the other hand, in the case of Roma
clients, approximately 90% of their businesses are not registered.
Good practice
The initiative presented concerns the programme ‘Housing Microfinance for Roma and Marginalized
groups’, a joint initiative started in July 2007 between Horizonti and Habitat-Macedonia, a nonprofit
Christian organization that seeks to eliminate poverty housing and homelessness, with the aim of
providing affordable housing to the target groups. The project included several components, such as:
target group needs assessment; design of an appropriate and affordable housing loan (amount:
between €850 and€2,500; repayment period of up to 36 months; annual interest rate of 18%
declining); standardised client selection procedures; marketing activities and monitoring.
Relevance
The programme ‘Housing Microfinance for Roma and Marginalized groups’ helps families to improve
their living conditions. Horizonti deals mainly with large families living in small houses. They often do
not have much in the way of financial resources, generally no documentation to prove legal
ownership of land and seldom hold building permits. Horizonti offers the means to improve the
homes of the Roma’s population by granting loans and supporting clients with business-related
services.
Accessibility
The programme is open to Roma Families and marginalized groups living in the Republic of
Macedonia.
Innovation
The main innovative component is the partnership approach, which enables a reduction in the risk of
issuing not-for-profit loans taking into account Habitat’s technical capacities The approach also
encourages mutual learning between the two partners. Moreover, unlike Horizonti’s more
conventional business products, the housing loan applications are analyzed and approved by a joint
Credit Committee consisting of both partners’ representatives. Another innovative component is a
free service that offers construction drawings of based on the clients’ needs and advice on
construction..
Effectiveness
From the start of the programme up to year-end 2010, the project offered loans and advice to 251
households (a total of 1,500 beneficiaries). The beneficiaries were all women, with 85% from the
Roma minority; the beneficiaries were mainly illiterate or with limited primary education. The
average loan size was €1,720. The positive impact of the programme has been demonstrated by the
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Good practices gathered by EMN – Financial services / Housing microfinance – September 2011
general improvement in living conditions through the reconstruction of the clients’ houses, and also
an increased awareness among the beneficiaries of the importance of having appropriate housing. As
an indirect impact, the housing loans added value to the beneficiaries’ businesses; many members of
the Roma population generate income either from small businesses run from their homes or,
alternatively, use part of their homes as storage space.
Replication
From an MFI perspective, the key factors for successful replication of the approach would be:
For MFIs that lack specific technical expertise in housing, the establishment of a partnership with
a local organisation that has such expertise;
Conducting a comprehensive client needs and financial assessment in order to identify housing
needs and the client’s indebtedness capacity;
Promoting the importance of affordable housing in the community and increasing awareness of
the long-term benefits from this investment;
Using the housing partner’s resources for training Loan Officers in general housing characteristics
and how this product differs from a business loan;
Exploring the opportunity to find a guarantee fund as a third party in the partnership if the
client’s indebtedness capacity is very low;
Planning for a pilot project in a specific area/target group for a trial period and evaluating the
results.
Sustainability
The sustainability of the project is defined by the depth of outreach (100 new families per year) and
the financial sustainability (< 5% loan losses per year), two indicators set by Horizonti and HabitatMacedonia to balance social versus financial achievements. During the three and a half years of the
project, 251 loans were disbursed and the average loan losses per year were 1.92% which is below
target. Projections of growth for 2011 include disbursement of 160 new housing loans, as a result of
the increased demand for housing loans that is coming from the field.
Funding Sources
The funding sources, as of December 2010, consisted of grants of around €1.9 million provided
during the period 2000-2005, and debt obligations for financing the loan portfolio in an amount of
€1.8 million as follows:
Grants
Caritas Norway – €1.1 mil
Catholic Relief Services – €400,000
Open Society Institute (OSI) and CEB – €400,000
Debt Financing
€500,000 commercial loans from local banks
€600,000 soft loans (concessional rates) from local development organisations
€700,000 soft loan (concessional rate) from SEDF.
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Good practices gathered by EMN – Financial services / Housing microfinance – September 2011
Financial achievements
Portfolio at Risk
Write-off Ratio
Portfolio Yield
Debt to Equity Ratio
Operating Expense Ratio
Cost per Borrower
Staff Productivity
Return on Equity
Return on Assets
Operational Self-Sufficiency
Dec. 08
Dec. 09
Dec. 10
7.75%
1.98%
28.57%
1.07
19.41%
€141.00
157.00
2.49%
1.35%
106.00%
15.6%
2.30%
23.77%
0.95
19.56%
€126.00
155.00
2.40%
1.20%
102.00%
13.90%
4.50%
23.95%
0.87
18.15%
€165.00
158.00
-1.80%
-0.90%
97.00%
Dec. 08
Dec. 09
Dec. 10
297,60%
100%
38%
14%
n.a.
€ 1,105
€2,465,836
8
39
19
16.8%
3,04%
100%
39%
14%
n.a.
€ 1,091
€2,729,508
8
39
20
17.7%
2,979
100%
39%
14%
n.a.
€ 1,183
€2,767,028
8
37
19
14.8%
Outreach achievements
Active Borrowers
Women
Migrants, Minorities
Youth
Below Poverty Line
Average Disturbed Loans
Portfolio
Number of branches
Staff
Loan officers
Drop out Ratio
Sources
Giordano Dell’Amore Microfinance Best Practices Award: The experiences of the
finalists 2011 and Winner 2010
www.horizonti.org.mk
http://www.slideshare.net/habitatmacedonia/microfinance-for-roma-in-macedonia
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Good practices gathered by EMN – Financial services / Housing microfinance – September 2011