Select housing

An independent survey done in Eswatini in 2008 operations revealed that 38% of Select’s loans were used for housing linked purposes; comprising items such as roof repairs, plastering, painting, extensions and even construction of new homes on a room-by-room basis. It is this fact, coupled with the African continent’s shortage of housing, which sparked a more focused approach from Select to create housing products and services that would add value to the end user beyond the extension of credit.

Many Select clients use their loans to improve their homes, sparking the development of a unique, proprietary Home Product. Select Home represents a sustainable, private sector solution to the continent wide shortage of housing across Africa.

CONVENTIONAL MORTGAGE VS INCREMENTAL HOUSING MICRO-LOAN

The myth of mortgage finance always being cheaper
A comparative example:

	Conventional Mortgage	Incremental Housing
Total Capital Borrowed	USD 10,000	USD 10,000
Annual Intrerest Rate	25 percent	50 percent
Loan Structure	Single 10-year loan of USD	5 Back to Back two-year loans totalling USD 10.000
Monthly Installment	USD 227	USD 133
Total Interest Charge	USD 17,299	USD 6,011

A traditional mortgage home loan of US$10,000 at 25% interest per annum over 10 years will require a monthly instalment of US$227 per month, equating a total amount of US$27,299 paid for the loan. With an incremental housing microfinance loan, five loans for 24 months and US$ 2,000 each at 50% interest will require a monthly instalment of US$133 per month, equating the total amount repaid over the same period of US$16,011.

Incremental housing microfinance:

Extends relatively small loan amounts (compared to a traditional mortgage) based on repayment capacity
Incremental loans that offer affordable repayment terms
Are usually not collateralized
Allows the borrower to achieve scale by self-build
Reduces overall cost of the loan for the borrower
No title deed required for a loan
Entertains various land use forms
Enables asset generation
Select assists with the development of an asset rather than just consumer finance
Incremental building is a process whereby people build 1 room at a time – Select Home provides
clients with template plans for each room in the incremental process

	Conventional Mortgage	Incremental Housing
Security	Title	None due to prevalent traditional/tribal land tenure
Deposit	Five percent to 30 percent of house value	Typically Nil
Construction	Require formal plans singe staging process	Informal Incremental building process (“as and when affordable)
Income Bracket	Typically top one percent or less of the population	USD 125 to USD 1,000 per month

HOUSING RELATED LOANS FOR WATER PROVISION:

The UN Environment Programme report concluded that “Africa is not water scarce…the rainfall contribution is more than adequate to meet the needs of the current population several times over”

Home water harvesting systems are low cost, simple to deploy and require very little maintenance-
1mm of rain allows you to harvest 1 litre of water per square meter of roof area
Attractive products are available for the housing microfinance market:
Basic rain water tank;
Installed tank with gutter collection;

Select’s home loan products can be used for purchasing and installation of water harvesting set-ups.

HOUSING RELATED LOANS FOR THE PROVISION OF SOLAR POWER UNITS

Similar to above, certain solar products such as basic installed solar power systems can be funded through Select home loan products.

Solar energy is abundant in much of Africa
Solar electricity offers important benefits:
Provides electricity to communities that cannot afford or do not have access to grid electricity
Can meaningfully enhance quality of life by enabling children to study , providing media access (TV and radio) and ensuring connectivity (charging mobile phones)
Avoids fire and health hazard caused by the use of paraffin or kerosene lamps
Attractive products are available for the HMF market:
Portable solar batteries;
Solar water heaters;
Installed solar home systems