100th Loan Approved - Week 14: 21st - 25th September 2009

MAKAZI BORA crossed two milestones in week 14. The 200th client was registered and the week was finished with 216 MAKAZI BORA clients. Registration gives the client a number, identity card, welcome packet and all the forms necessary to apply for a MAKAZI BORA loan. Clients are not considered active clients, however, unless they have received a loan and have an outstanding loan balance.

Also during week 14, the 100th loan was approved within a group of 22 loans that were approved by the credit committee on Friday 25th September. A total of 102 loans have been approved since the doors opened on 22nd June. Not all of these loans have been disbursed yet. The proposed disbursement date for the 22 loans approved on 25th September is on the 1st of October. Clients have been notified to come and sign loan agreements and will have to make an insurance payment and security deposit prior to having their loans processed and disbursed. One client who had a loan approved at a previous credit committee meeting travelled and has yet to have the loan disbursed. Approval does not necessarily mean immediate disbursement.

Within the loans approved in week 14 was a new loan use under the loan use category of finishing. One client is using the loan to have a water connection from a private water supplier. We have had several electricity connections and quite a few loans for septic tanks and latrines, but this was our first water connection. Water, sanitation and utility upgrades are important improvements in a household's living conditions.

Habitat Forum Tanzania - Week 13: 14th - 18th September 2009

24 new loans were disbursed during week 13, for a total of 29,400,000 shillings. (One approved client travelled out of Dar es Salaam and could not have the loan disbursed during the week.) The loans ranged from the lowest possible loan amount (TSH 200,000) to the maximum loan amount of 1,500,000. A large majority of the loans, 16 loans, were for the maximum amount. This continues to be a somewhat disturbing trend, as our hope is to disburse more loans of lower amounts that are affordable to households of lower incomes. We will continue to study and try to influence this trend, first through promotional efforts, but later through possible product or process design changes following evaluation of the MAKAZI BORA program early next year.

Habitat for Humanity Tanzania participated in a meeting of the Habitat Forum Tanzania (HAFOTA) on 17th and 18th September. HAFOTA is a forum of organizations and individuals who seek to promote an enabling environment for affordable housing. Other HAFOTA members include WAT Human Settlements Trust, Housing Development Society of Tanzania, Centre for Community Initiative, Mwanza Rural Housing Program, various housing cooperative groups and others.

The meeting included presentations by the Ministry of Land, Housing and Human Settlements Development on the Unit Titles Act (16) of 2008 and the Mortgage Financing Act (17) of 2008. The mortgage financing act is the first mortgage financing law in Tanzania, which is an indication of the level of development of housing finance in the country. It is a positive step forward in providing an enabling environment for housing finance. Other presentations included papers on mainstreaming gender in housing and a rights based approach to housing.

HAFOTA's Objectives are:

1. To engage and lobby the government at all levels to make shelter issues a priority on the national development agenda and to create an enabling environment for the housing sector.

2. To promote adequate and affordable shelter for all, especially low income groups, by joining and coordinating efforts of members and other stakeholders involved in the development of human settlements.

3. To coordinate, lobby and advocate stakeholders' burning issues on affordable and secure shelter.

4. To disseminate and share information among members on credit facilities, security of tenure, policies and laws, and technological  issues related to shelter delivery.

5. To create awareness to the general public on secure tenure, acccess to credit facilities, policies and laws, cooperative building societies, appropriate materials and technology, empowerment and mainstreaming gender and environment in relation to shelter delivery and human settlement.

6. To document best practices on housing access and land and make these documents available for reference and information sharing.

7. To network and collaborate with organizations with similar objectives and aspirations for adequate housing and land development.

8. To advocate for realistic standards and regulations for adequate housing and land development.

9. To encourage the formation of cooperative building societies as a tool for mass mobilization in realizing the Forum's mission.

10. To encourage policies that foster self-reliance, sense of ownership, citizenship and national empowerment through increasing community participation in good governance, decision-making and implementation.

Early Statistics - Week 12: 7th - 11th September 2009

Verification of some of the loans disbursed that were in August took place during the week. One client who is had taken a loan of 370,000 shillings (+/- $275) to do work on a toilet and put doors and windows on a house that is not yet occupied. He completed the work, having bought used doors and windows that he could afford. The client worked within his means to achieve his objective of closing the structure with a MAKAZI BORA loan. During the same verification exercises, another client had put in doors and windows valued up to 250,000 shillings each. The same loan product serves people of different income levels in their housing processes.

The credit committee met on Friday and 25 loans were approved for disbursement in week 13. It was decided that due to the intensity of the process of approving and disbursing loans, they would be disbursed twice per month instead of on a weekly basis.

Also during the week, we worked on some analysis of the first 55 loans disbursed (not inclusive of the 25 approved on Friday 11th September). It is still very early in the program, so we do not expect the data to necessarily be conclusive. Furthermore, we are still working on improving the accuracy of income assessments and are under the belief that many of the early assessments had overstated business income. Here are some of our first findings, to be upgraded in the future as we continue to disburse home improvement loans and collect data on our clients, the loans and our performance.

(click on graph for enlarged version)

The majority of the first 55 clients (57%) were women. Some, but not all, were women-headed households. The households of our female clients had slightly higher incomes than the households of our male clients. This is not necessarily representative of anything, but it is simply a surprising observation within the set of our first clients.

Household income is tracked as per capita household income per day in dollar equivalent using 5 categories that range from $1.00 and less to over $5.00. Our target is to have less than 20% of clients in the Over $5.00 per day category. Within the first 55 loans, we had 40% of clients in this category, with diminshing amounts with each category as income levels decreased. Part of the problem may be overstated incomes, but a significant number of clients appear to be relatively more wealthy and established than our general target. Many of these are coming for loans to connect to electricity. We will continue to monitor these trends. Next year we will be revising the product and may need to make adjustments to ensure that we are serving a low income target group.

So far the majority of loans have been finishing. Finishing is new work undertaken on a house that is already occupied. The second most common loan use has been completion: New work on a house that is not yet occupied. Completion loans tend to be for roofing, doors and windows, while finishing takes on a variety of uses such as ceilings, floors, plastering walls, connecting to electricity, etc.

Clients are able to choose their own loan periods as loan as the proposed loan amount falls within affordability limits. Because the interest rate is flat, a longer loan period means that the client pays more interest over the cost of the loan. Shorter loans result in less total interest paid, but because the principal is divided among fewer months, the monthly installments are usually higher. Clients study tables to see the costs of various loan amounts at different loan periods. Each of the four possible loan periods (6 months, 12 months, 18 months or 24 months) was chosen by various clients, with 12 months being the most common.

It is too early to tell if these trends will be representative of MAKAZI BORA's future. We hope to present more analysis on a regular basis in the future.

Chairperson Visit and Diverted Loans - Weeks 8 - 11: 10th August - 4th September 2009

The BOARD CHAIRPERSON discusses MAKAZI BORA with Boaz in the Mbagala Office.

It has been some time since we posted an update. During the period from 8th August, we were fortunate to have a visit from Dorothy Massawe, the board chairperson of Habitat for Humanity Tanzania. She visited the Mbagalal Office to meet with the staff, some clients and to see first hand how the program was going. Afterwards, she reported to the rest of the board.

On the not so positive side, one of the credit officers resigned. Her portfolio was divided among two other credit officers and we have not yet engaged a new one. While staff turnover is a fact of life and part of business, this was unexpected so early after start-up.

As of the close of week 11, the total number of registered clients are over 175. Out of these registered clients, 55 have received MAKAZI BORA home improvement loans and others have applications in process. It appears that most clients are ready to begin the process of obtaining a loan soon after registration. Although we are happy with the 55 loans disbursed so far, our short-term target is to increase loan disbursement to 50 loans per month. To achieve this, we may have to expand into several additional wards in Temeke Municipality. We are currently working in Azimio, Chamazi, Charambe, Kibada, Mbagala, Mbagala Kuu, Mtoni and Tuangoma.

The first group of loans has gone through the loan verification process. 4 loan were considered "diverted" and will continue to attract a higher interest rate instead of being discounted after having loan use verified. Two of these diverted loans were for electricity connections. Our indicator to have loan use verified was that electricity is connected. Unfortunately, TANESCO (Tanzania Electric Supply Company) was unable to install the electricity in the 30 days given for the work to be done. We are considering accepting a receipt from TANESCO for payment for the installation as evidence of loan use and allowing the client to have the discounted interest rate that goes with loan use verification.

Two other clients were also considered to have diverted loans. One failed to roof his house in the given time, saying that he had been waiting for a builder from Tanga Region who disappointed him. Another did only part of the work agreed upon, which appeared to be a deliberate loan diversion. Both of these clients remain with the punitively high interest rates. Our objective, however, is to see the home improvement completed and we will allow a second-chance verification after six months.

The clients who had their loans disbursed in July made their first payments in August. There is a one month grace period on principal, so the August payments were interest-only payments. The first complete installments will be paid in September. As at the close of August, all clients were current on their payments. This is a good start, but there will still be challenges ahead.

The Board Chair visiting the Mbagala Office