Testing the appetite of potential players in the housing microfinance field to develop niche loans for backyard shack formalization
Master Thesis
2014
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University of Cape Town
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Abstract
Backyard shacks prevalent in new government-sponsored housing developments is a distinctly South African phenomenon (Lemanski, 2009). Conventional housing finance and government housing delivery systems have consistently failed to meet the housing needs of lower income South Africans (Sisulu, 2005); however the informal market has responded to the housing need. The rate at which new households create informal housing now exceeds the rate of government housing - and infrastructure provision (Durand-Lasserve et al, 2002). Backyard shacks in formalized areas create a number of problems relating to urban management and public health; however backyard shacks have enormous potential as a means of achieving high-level government policy objectives such as densifying existing serviced neighbourhoods. South Africa's policy environment has not been successful in unlocking the potential that backyard shack formalization holds. Government interventions such as the provision of grants and subsidies have resulted in sub-optimal allocation of resources and unintended negative consequences. Housing Microfinance (HMF) is increasingly viewed as an important tool that can facilitate access to affordable, appropriate shelter for lower-income households (Daphnis and Ferguson, 2004); however the industry's potential remains untapped (Kihato, 2013). Whilst there are ranges of potential players in the HMF field that may be better positioned to intervene in the formalization of backyard shacks by means of providing financing products, they are not incentivized to achieve the high-level government policy objectives that have driven the unsuccessful government intervention thus far. This study tests the appetite of potential players in the HMF sector to develop a niche loan targeted at beneficiaries of government-sponsored houses, which can be used to finance the formalization of backyard shacks. Concerns around - and prerequisites for involvement in such an initiative were identified by means of conducting in-depth interviews with potential players in the HMF sector. The major concerns around involvement in the development of a niche loan related to using a RDP house as collateral for a loan and to social justice concerns in terms of assisting RDP recipients and not backyard tenants. Prerequisites for involvement related to partnering with other potential players and the community and to educate potential clients on personal finance and encourage investment in their own properties.
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Rousseau, E. 2014. Testing the appetite of potential players in the housing microfinance field to develop niche loans for backyard shack formalization. University of Cape Town.