HMF Working Group - Week 19: 26th - 30th October 2009

ACTIVITIES DURING THE WEEK

The week opened with promotional activity on Monday. Boaz, Hamida Mwanga (Credit Officer) and I put up MAKAZI BORA posters at shops in Mzinga and Makwata in the Tuangoma Ward. Tuangoma is one of the wards in Hamida's portfolio and demand has been relatively low compared to other parts of the MAKAZI BORA operating area. Unlike previous promotional activities at Kongowe, we did not attempt to collect information on hardware dealers where we placed posters. We simply put up the posters, distributed brochures and spoke to the dealers and potential customers. This made the work go much smoother. The very act of putting up posters and talking to people as we did so seemed to generate some "buzz" in the area about MAKAZI BORA.

Only a few loans were disbursed this week (less than 10). We had hoped to make 50 loan disbursements during the month of October, but will fall slightly short of that target. We had also hoped to recruit an additional credit officer from two credit officer candidates who were trained in early June. The additional credit officer would be assigned to expansion into the Yombo Vituka and Makangarawe Wards. Unfortunately, neither of the trained credit officer candidates accepted the assignment. Boaz is considering expanding into Makangarawe (population +/- 50,000) with an existing credit officer.


HOUSING MICROFINANCE WORKING GROUP
On Thursday evening, Boaz and I met with representatives from the Community Centre for Initiatives (CCI), WAT Human Settlements and the Tanzania Gatsby Trust (TGT). It was an informal meeting to discuss what each organization is doing in terms of housing microfinance. We all have slightly different approaches to housing and housing microfinance, but we have similar objectives and there is potential for collaboration, sharing and learning. We hope to develop into a housing microfinance working group in the future to promote and housing microfinance in Tanzania.

All of the organizations at our informal meeting had attended a housing microfinance conference in Dar es Salaam in May of 2008 and are in the process of implementing or preparing to implement housing microfinance programs. Again, it is always a pleasure to be able to informally discuss housing and housing microfinance with people and organizations that share a similar passion.

A Look at the Scenary - Week 18: 19th - 23rd October 2009

ACTIVITIES DURING THE WEEK:

The head office in Sinza was robbed this week. Thieves broke in on Monday night and took two safes, a bicycle and an old laptop computer. Fortunately, it appears that they were only after cash and did not touch the other computers and equipment. Although they carried the safes off with them, they apparently forced them open while still on the property, because they left us all of the documents and cheque books that had been inside. We are thankful for that!

We had several visitors during the week. A representative from the Bank of Tanzania (BOT) visited our offices to learn about our housing microfinance program. A World Bank funded program is being planned to offer support to the housing finance sector. We also had a visitor on behalf of FinMark Trust, doing research for a study on housing support services within housing microfinance. It is always a pleasure to talk to people who share similar interests in developing the affordable housing finance sector.

On Friday the credit committee met to review applications. Several applications were rejected or returned to the credit officers for further work due to what appeared to be inflated budgets for the proposed work or inconsistencies in the proposed home improvement project. 10 clients had their applications approved for disbursement next week.

A LOOK AT THE SCENARY:
A credit officer making an assessment visit in the area called Kibonde Maji (Charambe Ward) looked out from the plot of the client she was visiting and took a few photos. The photos give a sense of what an expanding informal settlement looks like, with a variety of types of houses at different levels of construction and completedness.

In the photo below, you can see several houses built to roofing level, but not yet roofed. This type of house would be categorized as a completion if it were to receive a MAKAZI BORA home improvement loan for roofing, doors and windows. On the left-hand side slightly up from the bottom of the photograph, there is a house being extended. The extension has not yet reached roofing level. Another house appears in the process of being roofed, with one sheet missing. To the left of and slightly below the almost-roofed house is a is a small house with "teeth" extending from it that has obviously been built in view of extending it later. One house (behind the one with the red roof) looks as though it might have been constructed with previously used roofing sheets. To the right of that house is a two-roomed house that has one room roofed and occupied and the other built to roofing level but not yet roofed.

The photo below is taken from the same location, but looking in a slightly different direction. The first thing of note is apparent income disparity of the dwellers. The house in the foreground has a satelite dish, is painted, has facia board and shuttered windows, which seems to denote a higher income than that of the neighbours. Informal settlements are not homogenous in terms of the income levels of the people who live there.

A small house in the center left appears to be build for extension forward. In front of the house is a plastic structure that is a latrine or bath. Latrines are also visible slightly up the hill, one made of blocks and unroofed with a cloth door and the other made of plastic covering on a stick frame.  In the middle of the photo is a fairly large structure that only has one small room roofed. It may be occupied by the owner, but it might also be someone hired or allowed to stay there to guard the property against encroachment. Next to that on the right is a small, but fairly well completed house, with some blocks saved next to it. The windows, however, appear as though they may be of temporary materials.  In-kind saving of materials can be seen above that house on a plot in the upper right-hand corner. There is some sand in a pile surrounded by blocks to proteck against run-off and some blocks stacked nearby. In fact, there appear to be blocks saved on at least three plots across that level of the hill.

Below are other houses in various states of construction. The houses at the top of the hill on the upper right seem to be older and more established. They may have been the first to settle in the area, while others who came later accessed plots further down the slop of the hill.

The photo used as the banner for this posting is from the same area. The cropped version below shows two small one-roomed houses that appear to be designed for expansion by building another room in between. This is an unusual method of extending, as extension is usually off the side of the house or extending forward or backward. (Verticle extension is not common among low income households in Dar es Salaam.)

None of the houses in the photographs belong to MAKAZI BORA clients. They are the view from the house of one of our clients and clearly show the environment in which we work.

Updated Stats: Week 17: 12th - 16th October 2009

The owner of this house received a loan this week that includes a door.

ACTIVITIES DURING THE WEEK

It is a disbursement week, so the early part of the week was used in preparing loan agreements and calling in clients approved last week to pay their insurance and security deposits and then sign their agreements. Because Wednesday was a national holiday (in remembrance of Julius Nyerere, the first president of Tanzania), cheque processing took place on Thursday and loans were disbursed on Friday morning. Verification and client assessments were also taking place throughout the week.

After our first quarter of operating the MAKAZI BORA pilot, reports were prepared for Habitat for Humanity International. Much work went into reconciliation of manual loan tracking records at Mbagala Branch and the computerized accounting program at the head office. The reconciliations were successful, but we look forward to having a computerized loan tracking system in the near future to facilitate the work of reconciliation as well as prompt follow-up of clients.

UPDATED STATISTICS:

As of 16th October 2009, we have 116 active clients at the Mbagala Branch. Here are some summary statistics:

1. Average Loan Amount: 1,101,987 shillings (+/- $830)

2. Average Loan Period: 16 months

3. Portfolio at Risk: 0%*

4. Repayment Rate (Current) at at 30th September: 98.8%*

5. Percentage of Women Clients: 55%*

6. Average Household Per Capita Income in US Dollar Equivalent: $2.24*

7. Break Down of Loan Uses:

• 
  
  Auxiliary Structures: 9%
  
  
  
• 
  
  Completions: 24%
  
  
  
• 
  
  Fininishing: 53%
  
  
  
• 
  
  Repairs: 12%
  
  
  
• 
  
  Extensions: 2%
  
  
  

COMMENTS ON STATISTICS:

• 
  
  Loan Period: Loan periods can be for 6 months, 12 months, 18 months or 24 months as per the clients choice after viewing the various pricing options. The most common loan period selected is 12 months.
  
  
  
• 
  
  Portfolio at Risk: The current portfolio at risk (30 days) is truly 0%, but it is still too much early to be taken as an indicator that can reliably predict future performance.
  
  
  
• 
  
  Repayment Rate Current: Some clients have missed their payments, but paid promptly when followed up, (sometimes through their guarantors or spouses). Only one client was behind in payment at the close of September. This was due to a conflict over his verification status. We considered his loan as diverted and he considered it as verified and paid at the verified rate. This resulted in an incomplete payment against his repayment schedule that uses the diverted rate. It is a problem in which we are partially (or maybe even largely) to blame and we are taking steps to avoid it in the future.
  
  
  
• 
  
  Percentage of Women Clients: This has remained remarkably consistent within a few percentage points. We have not specifically targeted women with the product, but women who hear about it seem to come back bringing their friends. This indicator is for women clients, which is not necessaily women headed households. Some are married, but presented themselves as the clients.
  
  
  
• 
  
  Per Capita Household Income in Dollar Equivalent: These figures are still experimental and should be considered very rough estimates rather than accurate calculations. The degree of reliabiilty is still very uncertain.
  
  
  
• 
  
  Loan Uses: Finishing (new work done on an occupied house) continues to be the most common loan use. Extension is the least common, but there have been problems in classifying extensions. At times extensions have been classified as finishing or completion based on the level of work already done to the extension at the time of assessment. Given our loan use criteria as they have developed,  extension may no longer be a relevant loan use category. If we find the extension walls there and the extension is not occupied, it is often being counted as completion. If the extension is an unfinished part of the house that is somehow occupied, it is counted as finishing.
  
  
  

Promotion: Week 16: 5th - 9th October 2009

Activities During the Week:

The credit committee met on Friday and reviewed 15 applications. 13 of the applications were approved for disbursement the following week. The average loan amount appoved during the week was TSH 1,070,000 or approximately $790. Four of the clients were approved for the maximum loan amount of 1,500,000, but the other had loan amounts of 1,000,000 or less.

The approved clients had a wide variety of income sources, including selling cloth, raising livestock, small business, catering, decorating for special events and others. Several of the clients were widows or represented women-headed households. The next credit committee meeting will be on 23rd October. We expect that October may be our first month to disburse 50 or more home improvement loans.

MAKAZI BORA posters were received from our printers and several were displayed at hardware stores in Kongowe, in Tuangoma Ward. The posters will be used for a coming promotional campaign.

PROMOTION CAMPAIGN:

The Need for Promotion:
Because MAKAZI BORA loans are relatively small, a large volume of loans are needed on a consistent basis to achieve operational self sustainability and cover all operating costs. In these early stages of the MAKAZI BORA pilot, one of our fears was that demand might overwhelm our capacity to meet it, which could result in dissatisfied customers, poor lending and overall weak performance. In these first few months, we have relied primarily on word of mouth and distributing some brochures as a means of promoting the MAKAZI BORA product. This was successful in getting started and still bring an ever-increasing numer of clients. A good product and good service seems to sell itself to a large extent and we continue to see "volunteer promoters" who bring their friends to hear about MAKAZI BORA.

Although the number of new clients per month continues to grow, we are beginning to look into the future when we will need a larger volume. Various means of promotion could assist in attracting more clients who have not yet heard of the MAKAZI BORA home improvement loan. With that in mind, we have decided to begin a promotional campaign with the objective of increasing the number of new clients within our current operating area, especially towards the end of this year and into the beginning of next year.

The Poster:

Although calling it a campaign might be an exaggeration, we have started a promotional exercise of distributing MAKAZI BORA posters. The poster prominently displays the MAKAZI BORA logo, which we are in the process of registering as a trademark of Habitat for Humanity Tanzania with the slogan: "The loan for improving your house."  It lists the general loan uses along the side: Completion, Finishing, Extension, Repairs, Auxiliary Structures and has photos of people working on houses and some smiling faces. The loan amounts are included, which is designed to let people know that they can get loans for  small home improvement activities, but also to let people know that the maximum loan amount is relatively small and is not targeted to very large construction projects. The poster includes the Mbagala Office contact information and the physical location of the office, with the assumption that many people will simply come to the office for a visit. The poster is colorful and attractive and hopefully will generate some interest.

The Target Locations:

The promotion exercise targest hardware and construction supply dealers in the MAKAZI BORA operating area. An attempt will be made to work with construction supply dealers as potential promoters of the MAKAZI BORA home improvement loan. Construction Supply dealers potentially could be good partners in promotion, because:

• The MAKAZI BORA loan is for pre-existing home improvement projects. Our target is people who are already in building process and therefore purchasing, have purchased or thought about purchasing materials. They are likely to already be frequenting their local dealers of building supplies.
• Independent dealers of building supplies tend to follow the market and are located close to where people are building. Small construction supply shops are in a sense a proxy indicator for the home improvement market.
• The MAKAZI BORA loan is disbursed in cash for the purchase of construction supplies and services. Dealers of construction supplies have a mutual interest with Habitat for Humanity in that people with home improvement projects in their area who obtain MAKAZI BORA loans are likely to buy supplies from them and increase sales.
• Shops are not only places for the purchase of goods, but serve as areas for discussions, exchange of ideas and social interaction. An informed shop keeper has multiple opportunities to explain and promote the MAKAZI BORA loan in his/her area.
• Attractive posters at construction supply shops may attract potential customers for the shop keeper.

Promotion Methodolgy:
MAKAZI BORA staff will visit construction supply shops in the MAKAZI BORA operating area and do the following:

• Provide the shop owner / manager with a letter introducing MAKAZI BORA.
• Explain the MAKAZI BORA loan product and initiative to the shop owner / manager.
• Ask the shop owner / manager if he or she would like some promotional items and be willing to inform customers about the availability of MAKAZI BORA loans.
• Provide the shop owner / manager with a MAKAZI BORA poster for display
• Provide the shop owner / manager with at least 20 MAKAZI BORA brochures.
• Provide a MAKAZI BORA t-shirt to shop keepers / manager with large stores that include cement and iron sheets among the products sold.
• Take down information about the shop using the PROMOTIONAL ACTIVITIES WITH CONSTRUCTION SERVICE SUPPLIERS form.
• Take the GPS coordinates of the shop.
• Take a photo of the shop if permitted
• Enter GPS coordinates and shop name into Google Earth for Reference.
• Create a booklet of participating shops in the operating area.

The idea is that the promotional activities could also lead to having a list of construction supply dealers in the area; something like a construction supply and support service directory. This could be used to direct clients who are looking for materials and also to verify the current prices of materials in the various parts of our operating area when reviewing client budgets. We could even promote a Construction Supply Dealer of the Month in the Mbagala Branch Office, with a photo of the shop and list of items sold. Working with construction supply dealers could be a win-win-win situation for Habitat, the dealers and clients.

A Dose of Reality:

We had set Tuesday 6th October as a full day for trying out the promotional exercise. Unfortunately, the printers failed to deliver the posters as promised and we did not get them until the morning of 8th October.  Boaz and I decided to go out in the field in the afternoon to try out our promotion methodology. Boaz thought that Kongowe (within Tuangoma Ward) would be a good place to start, because we have had very few clients from that area, despite apparent construction activity taking place. We boarded a bus at Rangi 3 (near the Mbagala Branch Office) and took a short ride to Kongowe to start off our promotion exercise.

At most of the shops we visited, we did not find the owners. After explaining why we were there and telling them about the MAKAZI BORA product and our potential mutual interests, the people working at the shops were more than willing to let us put up a poster or two. At one shop, we were even told to put our poster over top of a faded poster for a popular cell phone network. Putting up posters at shops was apparently not going to be a problem.

When it came to recording information about the shop or taking a photo, however, it was a completely different story. We had some simple forms to record some very basic information such as the name of the shop, where it is located, the name of the owner, a contact number, the types of materials sold and they types and quantities of promotional materials we left there. Most of the employees became immediately suspicious of providing any information or even allowing us to write down what we could visibly see with our eyes. They also would not let us take a photo of the shop showing the poster. "Unless the boss is here..." was the standard answer. Some shops did not even think they could take brochures in the absence of the boss. Posters are going to work fine, but the wider initiative may take a lot more work and time than originally expected, if it will even work at all.

Going Forward:
To get the promotional materials out in the targeted areas, it may be necessary to separate the distribution of posters from a wider partnership and creation of something like a construction support directory. It might just take too much time to get the information in cases where "the boss" is not available at the shop when visited. We have also thought of providing posters to our clients who have shops in the operating area, whether construction supply shops or not. Many are small business owners and would likely be willing to display the poster. As clients, they are also able to explain the product to others. The key will be ensuring that our clients have a positive experience to relate.

Loan Disbursement - Week 15: 28th September - 2nd October 2009

The week was a normal work week for MAKAZI BORA. It was a loan disbursement week (disbursements now take place every two weeks).  There was a lot of work involved in getting out the loans that were approved at the previous week’s credit committee meeting. Thursday was disbursement day, which meant heavy activity for Boaz and Irene at the MAKAZI BORA office. Credit officers were out in the field verifying loan use for home improvement loans that had been disbursed the previous month.

Boaz at the Mbagala Office

 

Loan disbursement is quite a process with an inherent challenge between trying to deliver reasonably quick service to the client after approval and having adequate internal controls. We are dealing with money, which can lead to all kinds of problems from fraud to mistakes that can erode the trust that is a foundation in a credit relationship. MAKAZI BORA loans are disbursed as cash checks written in the name of the client. MAKAZI BORA staff does not handle cash in disbursement or collection of loans. This is how the process works as soon as the loans are approved:

Friday: The credit committee meets and approves loans. Clients are contacted almost immediately to inform them of the status of their loan application and when to come to the office. Before the credit committee meeting takes place, clients have already negotiated loan terms, learned procedures and been advised of what they will need to do in the event that their loans are approved.

Theresia, Irene and Osnery during a Credit Committee Meeting

Monday: Loan agreements and repayment schedules are prepared and a letter of offer is prepared for the client that includes the terms of the loans and the specific amounts needed for an insurance payment (1% of the principal per annum) and a security deposit (8%) of the principal prior to disbursement. This is a formality, but keeps a clear and transparent record of the agreed upon terms. Clients make their payments into the bank and bring deposit slips as proof of payment on the day of signing loan agreements.

Tuesday: Clients arrive at the office to present their deposit slips for insurance and security deposit payments and review and sign their agreements. There is often a client or two who is not yet ready with the deposit or has travelled or is otherwise not available. Requisition forms are prepared by Irene (the Administrative Assistant) for each loan disbursement and approved by Boaz (Program Manager) and then sent from the Mbagala Branch Office to the National Office in Sinza (slightly over 30 kilometers away by road in another part of Dar es Salaam).

Wednesday: The check requisitions are reviewed by Osnery (accountant) and then signed and passed to me (Scott). I review the agreements and payment schedules against the approved applications and requisitions and then start signing. Two copies of each loan agreement are signed and initialed on each page and the requisition forms are signed. These are then passed on to Pamella (National Office Secretary) who is the custodian and writer of checks. She writes out all of the checks based on the requisitions and puts the check numbers into the requisition forms as a reference. The checks then come to me for signing. A check confirmation list is also prepared for the bank, indicating each check, the amount the client name and client identification number. The signed checks, check listing and files are then sent back to Mbagala.

Writing the Loan Disbursement Checks

Thursday: Boaz signs his portion of the checks first thing in the morning, Irene takes the check listing to the bank and then clients begin to arrive to receive their loan disbursements. As checks are handed over to the clients, they sign a check disbursement voucher that is returned to the head office as proof that the check was actually disbursed. Clients take their checks to the bank, present their MAKAZI BORA identity card that matches the client number indicated on the check and the check listing and they receive their loan in cash from the bank teller and then proceed to get started with their home improvement project.

That’s how everything is supposed to work. Aside from common delays from a client or two in coming in to sign their contracts, we also are still prone to make mistakes. Sometimes the wrong client number has been written on a cheque, creating a problem for the client at the bank. Other times a requisition has not arrived at the head office with the associated client file. This week, I signed everything for one client but somehow missed the actual check and sent an unsigned check back to Mbagala. This meant that the client arrived at the branch office, but could not receive the loan disbursement. We tried to rush over to the Mbagala branch office to solve the problem, but the first rain in many months rained locally exactly in between Sinza and Mbagala, creating a huge traffic jam and the inability to respond in a timely manner as soon as the problem was discovered. The client ended up coming back to receive the check on Friday, which was poor customer service our part.

Prevention is better than cure.

An unexpected rain caused traffic jams that prevented

 a quick reponse to a glitch in the loan disbursement process

 for one client on Thursday.

Small mistakes like a missed signature happen, but they represent an aggravation and cost to the client who has to spend additional time away from their income generating activities as well as bear the cost of coming to the office one more time than necessary. As gracious and understanding as the clients can be, we owe it to them to give them the best possible service and put in an extra review of the final documents to ensure that everything will be ready when they arrive for their loan disbursement. That loan disbursement represents a critical part of our core business processes as well as the next stage in client’s housing process. Despite hiccups like my missed signature on a check this week, our professionalism continues to improve in handling these critical transactions as we head into our second quarter of MAKAZI BORA operations. We are seeing progress and improvement, but must remain focused on service to our clients.