Draft casesrecommendations access to housing

GLOBAL SUMMIT
2010
Draft Cases anD
reCommenDations

With the support of:

Acknowledgements

the authors would like to thank the social entrepreneurs who shared their innovative work,
and the experts who contributed insights over the course of this investigation. the research
and writing of the following cases and recommendations would not have been possible with-
out your support. We invite your continued collaboration, at the Global summit of Housing
entrepreneurs in Barcelona, to inform the final version of this report.

this Working report on access to Housing for the
Base of the Pyramid is sponsored by:

Access to Housing for the
Base of the Pyramid:
A Working Report

access to Housing for the Base of the Pyramid: foreword ........................................................ 5
market Based Cases ................................................................................................................7
Patrimonio Hoy ................................................................................................................................ 8
Jamii Bora ......................................................................................................................................... 14
Housing for all - india..................................................................................................................22
solutions addressing Barriers to scale ..............................................................................9
CoDi - Community organizations Development institute ...............................................30
saiban ................................................................................................................................................36
terra nova ......................................................................................................................................42
sParC – society for the Promotion of area resource Centres ......................................48
Draft recommendations for Various stakeholders ......................................................55
financial institutions: .....................................................................................................................56
Commercial Banks .................................................................................................................. 57
microfinance institutions .......................................................................................................58
Housing finance institutions................................................................................................. 61
Citizen sector organizations......................................................................................................62
real estate Developers (new Homes) ....................................................................................63
Building material manufacturers / retailers (Home improvements and new Homes)...65
Building materials retailers and Distributors (Home improvements).............................69
Public sector actors: national Government, Local Government,
municipalities and Public Housing finance agencies ............................................................ 71
investors and funders:.................................................................................................................. 74
Philanthropists and foundations.......................................................................................... 74
social investors ........................................................................................................................76
Private investors ......................................................................................................................77

About the Authors

Ashoka Innovators for the Public: founded in 1980, ashoka
is the world’s working community of more than 2,000 leading so-
cial entrepreneurs. it champions social change ideas and supports
the entrepreneurs behind them by helping them get started, grow,
succeed and collaborate. as ashoka expands its capacity to inte-
grate and connect social and business entrepreneurs around the
world, it builds an entrepreneurial infrastructure comprised of a
series of global initiatives that supports the fast-growing needs of
the citizen sector.
ashoka’s vision is to create change today, for an ‘everyone a
Changemakertm’ society to become the reality of tomorrow. for
more information, visit www.ashoka.org.

Ashoka’s Full Economic Citizenship (FEC): is one of
ashoka’s global initiatives striving to enable an environment where
every citizen has the opportunity and the capacity to exercise
his or her economic, social and cultural rights. the full economic
Citizenship initiative builds business partnerships that serve low-
income communities in the sectors of housing, healthcare and
small farming. these collaborations are Hybrid Value Chainstm
which combine the resources of the business and citizen sectors
to transform markets and redefine value in game-changing ways. for
more information, visit fec.ashoka.org.

Hystra: is a new, hybrid type of consulting firm. Hystra works
with business and social sector pioneers to design and implement
hybrid strategies through innovative business approaches that are
profitable, scalable and eradicate social and environmental prob-
lems; and combine the insights and resources of business and citi-
zen sectors. Hystra itself is a hybrid organization, a for profit tool
for social change. Hystra consists of a core team of full time con-
sultants and of a growing network of partners already present in 7
countries. for more information, visit www.hystra.com.

4

Access to Housing for the
Base of the Pyramid:
Foreword
Written by practitioners for practitioners, this report (due for publication in early
2011) looks at international examples of promising and already successful affordable
housing solutions that provide both new homes and home improvement solutions
for the urban poor. the following pages consist of two types of cases; market
Based Cases, and solutions addressing Barriers to scale; as well as a draft synopsis
of recommendations for various stakeholders who act across the affordable hous-
ing value chain, derived from the experiences of practitioners and industry experts.

A Word on Methodology
after an extensive review of over 70 housing solutions, we identified geographically
diverse cases titled market Based Cases, of which three are included in this draft.
these cases are termed as “market based” due to two primary criteria:

• the initiative delivering the home improvement or
new home is not highly subsidized
• the client purchasing the new home or home improvement solution
pays market value for the purchase

from these market Based Cases, which illustrate promising approaches to deliv-
ering new home and home improvement solutions, we surfaced some key cross
cutting themes. apart from context specific factors, we identified four key barriers
that, according to the practitioners involved in these cases, restrict the scale and
replicability of their solutions.

these Barriers are:

1. the lack of access to clear and secure land title (hereafter, Land rights )
2. Limited collaborative and cross-sector collaborative action
3. the lack of access to a policy environment supportive of affordable
housing markets (hereafter, supportive Policy)
4. the lack of access to appropriate finance options for low-income clients
(hereafter, finance)

We then identified additional solutions, called solutions addressing Barriers to
scale, which are not necessarily market based, but provide interesting and insightful
examples of addressing one or more of the above mentioned barriers.

5

the key differences between market Based Cases and solutions addressing
Barriers to scale are summarized below:

soLutions aDDressinG
market BaseD Cases
Barriers
finance, advocacy, access to land rights
or any product or service that alleviates
enD new homes or home a barrier to scaling affordable housing
ProDuCt improvement solutions solutions. occasionally new homes or
home improvement solutions are end
products as well

systemic issues, policy constraints,
Quantity or quality shortfalls in capacity constraints of low income
aDDressinG affordable housing segments, all of which inhibit scaling up
of affordable housing

DeGree of
Limited subsidies if any Higher level of subsidy
suBsiDy

sCaLe operational sustainability, expan-
mobilizing subsidies, removing systemic
sion and replication, opening and
tHrouGH barriers and influencing policy
developing markets

CLients
upper BoP income segments Lower BoP income segments
reaCHeD

the cases and analysis contained in this report culminate in series of recommen-
dations for various actors in affordable housing, from finance providers to Public
sector actors, from real estate Developers to Building materials retailers. a draft
of these recommendations follows.

A Collaborative Endeavor
this project, sponsored by the Hilti foundation, was completed over the course
of 6 months in 2010, and was led by ashoka’s full economic Citizenship initiative
with input from Hystra consultants, and industry experts. the report reflects a
co-creation process with social entrepreneurs and business leaders. the case stud-
ies in particular, have been discussed with the contacts from each project and the
recommendations that follow are the product of the insights of practitioners and
industry experts.

We invite your feedback and suggestions on the Cases,
solutions and recommendations that follow.

6

Market Based Cases
Patrimonio Hoy
Jamii Bora
Housing For All - India

7

market BaseD Case PATRIMONIO HOY

Patrimonio Hoy ProJeCt DetaiLs
Geography:
Latin-america: mexico (45 cities), Colombia,
Venezuela, nicaragua, Costa rica
Executive Summary Products:
incremental home improvements; integrated
Launched in 2001, Patrimonio Hoy (PH), is a profitable program and materials and financing for complete rooms,
bathrooms and kitchens
business unit of CemeX,1 an international cement producer and sup-
plier of aggregates (sand, gravel, etc.). the program provides low- Stakeholders:
income families in mexico and several other Latin-american coun- Private: CemeX, other suppliers, Distributors
social: Community based promoters
tries the opportunity to build additional rooms (bedroom,
bathroom, kitchen etc.) in their homes in about a third
of the normal time for roughly two thirds of the cost.2
low-income clients of a solution advanced
this is accomplished through an innovative arrangement, where by a private sector company. addition-
groups of 3 families use a combination of upfront savings and credit ally, PH has expressed its commitment to
extended by PH (76% of the project cost) to design and build a room serving low income communities through
in each of the participating 3 homes in 70 weeks. During the early improving public school infrastructure
weeks of the program, PH offers technical assistance to its customers through its PH escolar5 program.
to design and plan the project. 3 PH provides building materials from
CemeX and complementary building material suppliers (for windows, During its 10 years of operations, the
tiles, etc.), through selected CemeX distributors that offer a choice program has provided 250,000 6
between direct home delivery or temporary storage of materials.4 families (socios) with credit, ma-
terials and assistance to build
to qualify as a PH distributor, a company must not distribute products new rooms. PH is now poised for
which directly compete with CemeX offerings (to minimize odds that further national and international
competing cement and materials providers will benefit from CemeX growth.
financing and investments into this target segment). only 10% of
CemeX’s current distributors meet these stringent requirements. House upgrade in progress
the projects are marketed and sold through promotoras, local sales-
people (mostly women) with strong ties inside the target commu-
nities. these promotoras help overcome initial distrust by potential

stakeHoLDers ContriButeD GaineD
CemeX Building materials, new business opportunity, com-
full product financing, munity based sales force, under-
distribution system standing of customer segment
otHer suPPLiers Building materials Growth in sales, steady demand
Promotoras reach and trust inside income through sales commis-
low-income communities sion, social capital, sales training
Photo : Patrimonio Hoy

DistriButors Home delivery of prod- Growth in sales, highly profitable
ucts, storage facilities product mix, steady demand
Consumer market demand for improved living and hygienic
home improvement conditions
projects

8


The Business Model
over the last ten years PH has refined
its business model to successfully serve tHe stories of rosa anD marÍa
low-income markets in mexico and else-
where.
the stories of rosa magaña
Operations established in and maría Diega, two
the communities7 customers of Patromonio
Hoy (PH), illustrate the
the core of PH’s operations ist “cells” life-changing impact that the
which are established in every neighbor- program can have.
hood where PH is launched. Cells typi-
cally have 1 to 4 employees whose roles rosa magaña, Patrimonio
Hoy’s first customer, credits
include recruiting and training promotoras, Patrimonio Hoy with
planning, designing and scheduling proj- changing her life. she and her
ects, coordinating distribution deliveries, husband built their 120 sq
receiving payments and handling consum- meter house after living with
er inquiries. their two children in a 10-sq
meter carton shed with no
bathroom for six years. they
Sales and Marketing through
are now completing two
trained promotoras additional rooms and a
CemeX hires local promotoras – more soldering and welding
workshop. PH has helped rosa and her children in front of her
than 90% percent of whom are women8 – them build both a home and home, expanded from 10 sq- meters to
to identify prospective customers and 120 sq meters. Construction is ongoing
their own business. “Without
on 2 rooms and a welding shop for her
motivate them to enroll in the program. the program,” rosa says, “i’m husband.
these promotoras are the key to establish- sure we would still be living in
ing relationships with target clients and the same conditions.”
developing the trust necessary for the maría and her family of six lived in a single-room dwelling for eight
program to work within informal com- years. in just five years after maría became a PH participant—rather
munities. Promotoras are compensated for than the lifetime of work it may have taken otherwise—she and her
their work through a commission, based family added seven rooms and a staircase to their home. according
to maría, “Without Patrimonio Hoy, we would still be crowded,
on the number of families they attract and
uncomfortable, and angry. since we became part of the program my
how long they stay in the program. husband and i are more united, as he stays home during the week-
ends to keep building our house. We see the Patrimonio Hoy team
the PH program is further marketed as part of our family.”
through branding initiatives, for instance
the placement of PH logos on trucks de-
livering materials to homes.

Integrated offerings for
complete rooms, not just
CEMEX products
Photos : Patrimonio Hoy

PH supplies not just cement and aggre-
gates but a comprehensive and inte- maria Diega Chavero
and children in front of
grated offering of construction materials their expanding home,
for the completion of the room, kitchen under construction.
or bathroom. all items are packaged by
distributors and delivered according to

9


week for the complete 70 weeks. of that, mXn 165 per week goes
to the purchase of building materials and the remaining mXn 35 per
Poor people can spend more
week is the PH membership fee.
money than we think, on home
improvement. Companies need to the membership fee covers access to technical assistance, fixed pric-
re-invent, in large part, even core ing for materials during the 70 week project, materials storage, home
competencies to successfully serve delivery, community development projects through PH escolar, and
low-income markets.” the interest charged on PH financing.
– israel moreno,
Director, after 2 weekly payments are completed in each cycle (20% of the ma-
Patrimonio Hoy terials needed for completing that cycle of the construction project),
credit is granted by CemeX without additional prerequisites for the
remaining 8 weeks. the first cycle is an exception, where 5 payments
are needed before credit is disbursed (in total credit represents 76%
of the project cost).

the group savings and credit program of PH was built upon local
“tanda” (private savings groups) practices common in low-income
mexican communities, where groups of women set aside savings for
a specific purpose each week and one of the members is responsible
for collecting payments on a weekly basis.

Distribution: Flexible home deliveries through
Photo :Patrimonio Hoy

selected suppliers11
When they purchase material, PH customers have the choice be-
tween immediate home delivery or temporary storage at the dis-
tributor’s facilities. this helps minimize wastage of materials and ad-
ditional transportation costs to consumers.
Olivia Villanueva, a PH client,
unlike its parent company CemeX, PH mandates its distributors to
and children in front
be able and willing to provide a home delivery service and have stor-
of an upgraded house
age capacity.

a pre-approved schedule. PH receives a
commission of 6% on other construction
materials which are packaged into PH de-
liveries and financed by PH.9
Photo :Patrimonio Hoy

Financing: credit for groups CEMEX
of 3 families, based on local
employees
group savings practices10
at work
PH programs are divided into 7 cycles of
10 weeks, permitting each family enrolled
Additional social impact: school construction
to complete a 100 sq foot room after
70 weeks. Groups of 3 families organize additional programs have been launched for participant communities.
themselves to participate in the program, one such example is PH escolar, which helps improve infrastructure
and require only an official iD (no formal of local schools. four per cent of the membership service fee is al-
land title) to do so. each family contrib- located towards PH escolar.12 CemeX provides participating schools
utes mXn 200 (roughly usD 15) per technical assistance and building materials free of cost.13

10


Patrimonio Hoy Timeline

Patrimonio Hoy Timeline
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Project Milestones
First launch in Re-launch Launch of additional PH reaches PH receives World
Guadalajara including CEMEX programs (Te Impulsa, self-sustainability Business Award by
financing Calle Digna, PH Escolar) UNDP

Cumulative credit extended
(As of December of previous year) $1.6m USD $9.4m USD $22.7m USD $38.5m USD $52.9m USD $66.6m USD $82.3m USD $112.1m USD $134.8m USD

Social Value Creation
(Members served) 10,000 36,000 68,000 103,000 126,000 154,000 183,000 219,000 252,000

Patrimonio Hoy Operations

Recruiting and Training

PH Products Direct Sales of PH Products

PH Products PH Products

Legend

Other building
Clients Product
CEMEX material Distributors Promotoras
(groups of 3)
suppliers Services

$ Payments
Consumer Finance
Private
Enterprise
Payments Citizen Sector
Organization
$
Commission on Sales Customer

$

The Patrimonio Hoy Value Chain

ProJeCt ProDuCt ProDuCt marketinG retaiL after
ProCurement DistriBution
finanCe DesiGn DeV anD saLes finanCe saLes

• all materials • CemeX invested • CemeX • Technical • Direct sales • savings in groups • Distribution • Project and
(CemeX and in launch and provides assistance by to families by of 3 families, 76% through selected payment follow-up
complementary invests in expan- integrated cell at start local sales- product financing distributors, by promotoras
products) by other sion of profitable home of project people by CemeX storage facilities
manufacturers business unit PH improvement (no construction
provided through materials plus services)
CemeX distributors credit

social sector actors Private sector actors

11


Evaluation Framework

Is the solution SOLVING THE PROBLEM? Is the solution ECONOMICALLY VIABLE?

Patrimonio Hoy addresses a significant need PH is a profitable program for CEMEX and
among low-income communities — adding offers an affordable way for consumers to
space to existing dwellings — through an improve homes.
integrated offering of all materials and
necessary financing and technical assistance. Solution is affordable and saves time for the
targeted population.
Problem Magnitude
• average consumer family of 5 people has an income of
• yearly housing gap of 750,000 houses in mexico. usD 8,500 per year, about 5 times the minimal yearly wage.
• Half of homes built are in the informal sector, room by • Customer payment of usD 15 per week for building
room at a pace of ~ 4 years and a cost of usD 1,500 per materials, interest payments and ta, allowing them to rely
extra room.14 on financial discipline, rather than current assets, to finance
home improvement goals.
• 16 million self-built homes, 2.2 million rooms added each
year.15 • repayment rate of 99.8% since inception, proving affordability.
• PH estimates each extra room built through its program
Quality of Solution
costs usD 1,000 (2/3 of typical cost) and takes on average
1.5 years to build (1/3 of usual time to build).
• access to full range of building materials to construct an
additional room.
PH is a lucrative program for CEMEX.17
• Limited technical assistance in advising the right mix of
products for the project. • CemeX has invested usD 21million since launch.
• Generated sales of about usD 100 million since 2000.
Housing Impact- The Numbers Since Launch16
• extended usD 95million in credit to consumers in the
• 156,000 rooms built. same period.
• approximately 750 school infrastructure improvement • Donated usD 200,000 for public school infrastructure
projects with PH escolar. since launch.
• PH profitable since 2006.
Housing Impact- Quality of Life
• 20% of PH’s profits sent to CemeX corporate.
• increased family productivity and incomes based on ad-
ditional usable space for work. • Besides financial returns, recognition of CemeX in com-
munities as a business with a social conscience.
• improved quality of life attributable to greater space.
• Better health outcomes attributable to quality construc- For Social Stakeholders, Promotoras, PH is a
tion and sanitation upgrades. source of income and pride18

• 750 promotoras paid directly from CemeX, based on the
Other impacts
number of clients they attract and how long they stay in the
• new training and source of income for promotoras, who program.
are often consumers themselves. • usD 2.5 million in sales commissions to promotoras since
• Creation of deeper community networks through reach of launch.
promotoras. • in 2009, average usD 170 per promotora per month.

Dependence on Subsidy or Grants

Government subsidy is available for low income families who
want to upgrade housing conditions, for ~1/2 PH’s members,
representing ~ 30% of their weekly payments.

12


Is the solution SCALABLE AND REPLICABLE?

Patrimonio Hoy’s current structure as a pro- To be replicated by another manufacturer of
gram of CEMEX and its lack of partners with construction materials, this model requires
complementary skill sets constrain its ability investment, appropriate financing and distri-
to scale. bution systems.

• in-house financing: limited amount available for loans and • a materials manufacturer willing to invest resources into a
limited money available for re-investment. business unit catering to a new target market.
• financial constraints of a business unit within CemeX: not • availability of finance partners to finance consumer pur-
open to social capital or international donor funds, and with chases, or alternatively the capacity of materials manufac-
funding streams subject to corporate processes in line with ture to extend finance.
CemeX’s growth strategies, not PH’s.
• Distributors capable of packaging complete offerings,
• Lack of quality talent to manage growth and scale, knowl- and their willingness to extend storage and home delivery
edgeable about target communities (thus capable of identify- options.
ing promotoras) and able to drive sales.
• Community sales representatives with respect and reach
• Difficulty finding viable social sector partners to aggre- in communities who can serve the function of promotoras.
gate demand and recruit promotoras, in spite of trials with
several Csos.

Is the solution ENVIRONMENTALLY SOUND?

environmental sustainability is not articulated as a primary goal of Patrimonio Hoy.

Post Script
Cognizant of the above outlined barriers to scaling its operations, Patrimonio Hoy is looking to partner with social
sector organizations that have both an extensive network in communities and can adapt the business mindset re-
quired to meet PH’s ambitious growth targets.

1 Founded in 1906 and headquartered in Mexico, CEMEX is a global 7 Michigan Ross School of Business Case Study, December 12, 2003
building materials company that produces, distributes, and markets ce-
ment, ready-mix concrete, aggregates, and related building materials 8 Global Urban Development Magazine, Volume 4, Issue 2, Novem-
throughout the Americas, Europe, Africa, the Middle East, and Asia ber 2008
and has close to 47,000 employees worldwide. In 2008, the company 9 Interview with Israel Moreno, Director Patrimonio Hoy, October
recorded a revenue figure of USD 20.1 billion. In 1996, with the ac- 15, 2010
quisition of Colombia’s Cementos Diamante and Samper Companies,
CEMEX became the world’s third largest cement producer; and, in 10 Habitat Business Award Application 2009; Best Practice, UN
2005, the world’s largest ready-mix concrete producer after acquiring Habitat Website http://www.unhabitat.org
RMC Group Plc of UK. 11 Michigan Ross School of Business Case Study, December 12, 2003
12 Interview with Israel Moreno, Director Patrimonio Hoy, October
2 Michigan Ross School of Business Case Study, December 12, 2003 15, 2010
3 Technical assistance typically comprises guidance at point of sale on 13 Interview with Israel Moreno, Director Patrimonio Hoy, October
what items to purchase and design of new room. 15, 2010
4 Families are not required to buy all products from the list, or all 14 Global Urban Development Magazine, Volume 4, Issue 2, No-
products from selected suppliers/distributors. They can procure their vember 2008
own materials, which would fall outside of PH financing, delivery and
storage services. 15 Harvard Business Case; Patrimonio Hoy: A Financial Perspective,
November 1, 2007
5 Patrimonio Hoy Escolar is a partnership with local public schools
through which PH supports infrastructure improvements through 16 Interview with Israel Moreno, Director Patrimonio Hoy, Septem-
technical assistance and provision of building materials. Roughly 100 ber 14, 2010
school projects have been completed.
17 Interview with Israel Moreno, Director Patrimonio Hoy, Septem-
6 Habitat Business Award Application 2009; Best Practice, UN Habi- ber 14, 2010
tat Website http://www.unhabitat.org
18 Interview with Israel Moreno, Director Patrimonio Hoy, Septem-
ber 14, 2010

13

market BaseD Case JAMII BORA

Jamii Bora ProJeCt DetaiLs
Geography:
kaputei town, kenya 60 km outside the city
center of nairobi
Executive Summary Product:
new homes in new township
With more than 300,000 members, Jamii Bora (JB) is the largest 1
Stakeholders:
microfinance institution in kenya.2 Beyond micro credit, the organiza- Private: Construction and environmental experts
tion provides savings accounts, life and health insurance, counseling (e.g., architects, engineers, professors, and road
services focused on community capacity building, business classes and builders); funding Partners
social: Jamii Bora
larger ticket housing loans. finance: Jamii Bora

Leveraging its assets as a micro finance institution and
its experience delivering a host of services to its mem-
bers, JB launched its affordable housing initiative in
2002. it did so by purchasing and delivering private land3 60km out-
side of nairobi. its vision was to create a complete ecosystem that in total, JB plans to include 2000 new
would provide its members with residential, commercial and social homes (for 10000 individuals), cultural and
services.4 social centers, and commercial/ industrial
areas in kaputei. total cost is estimated
each resident of this new town, called kaputei, purchases new homes to be kes 900 million (usD 11.25 mil-
and therefore access titled land and infrastructure. all residents are lion), half for residential development and
existing JB clients who have a strong borrowing history with the mfi the other half for commercial develop-
and are either entrepreneurs or can support local entrepreneurs. JB ment. Construction costs have been re-
is the exclusive provider of financing for purchase of these homes. 5 duced through standardized design, local
Cost of homes depends on how long the client has been a mem- manufacturing of building materials and
ber of JB and can range from 350000 kes(usD 4320) for those who construction of homes by residents who
have been members over 10 years up to 750000 kes (usD 9375) for are paid by JB. the project is financed
newer members. through private loans, JB company savings
and consumer down payments, with mini-
mal funding through donations.
stakeHoLDers ContriButeD GaineD kaputei is still under construction6 as
Jamii Bora Provides homes, land Home loans are a new line legal protests7 from local environmen-
tenure, commercial of products cross sold to
properties, loans for their existing clients; additional
tal nGos and neighboring towns have
purchase , infrastructure, revenues from rent on delayed the process. as of september
community centers commercial units 2010, two neighborhoods, en-
PriVate funDers Provide funding for the equity; interest income, compassing ~500 homes in total,
(e.g., acumen fund, project impact investing related
stromme foundation) social value
have been built and ~200 are un-
der construction. Residents are
HousinG technical, environmental and service fee for technical
ProfessionaLs construction advice, knowledge of a new moving into completed houses
(e.g., architects, engi- knowledge market segment on an ongoing basis. 8 Some fami-
neers, professors)
lies, that have already bought
inDustriaL / Jobs to kaputei residents, Labor and new markets
CommerCiaL rent for offices
homes, have delayed their move
enterPrises due to personal considerations
Jamii Bora Demand for housing, con- new homes, additional of distance to work, and impact
memBers struction labor income through on businesses. JB has also opened two
construction jobs
schools in kaputei — a primary school

14


in January 2009 and a secondary school
in January of 2010.9 management expects
the township to be completed early 2012.10
tHe story of Jane nGoiri
With a current waitlist that far exceeds
the available homes, JB is in negotiations
for the purchase of additional land to cre-
ate another township. as the company
continues to expand, JB believes it must
actively manage its costs, while looking
for innovative ways to increase quality
and service for residents.11 Jane ngoiri
outside her new
home in kaputei

The Business Model Jane ngoiri, a third generation slum dweller, lived in a small one
bedroom shanty in the mathare slum of nairobi, along with her four
several features of the JB operating children. Her home was a 6 square meter, mud structure. a half
model, including engineering in-house complete wall divided her home from her neighbor’s, who made a
materials production, implementing a living from the illegal brewing of alcohol.
standardized manufacturing process, and
Jane was a commercial sex worker who had been struggling for
leveraging its existing client base and sales
many years to support her family when she found out that she was
channels, have allowed JB significant cost HiV positive. in late 1999, it took the mathare branch manager,
reductions in delivering homes to low in- Jane njoki, several months to convince Jane and her colleagues that
come households. another life was possible for them. the entire group decided to be-
come Jamii Bora members in December 1999 and their lives slowly
Procurement: Cutting costs but surely changed.
through making building Jane took sewing classes and started her own tailoring business. she
materials on-site buys old clothes and recycles them into children’s dresses for sale.
JB evaluated and reduced multiple cost she purchased her first simple second hand manual sewing machine
with a loan of usD 40 from Jamii Bora.
drivers in the procurement of raw ma-
terials. first, JB bought cheap land near Jane’s business is growing and she has taken out and repaid Jamii
the township to extract the raw gravel Bora loans 11 times over the past 10 years. However, even with a
needed for construction. it also built relatively stable income, an improved home remained unrealized
dream. Given her profile as a HiV positive former-sex worker with
a temporary, basic factory and hired
no formal income or official address, commercial banks would not
consider her a candidate for a home loan.

in 2002, Jane turned to Jamii Bora for a home loan for a house in
Jane ngoiri and family members in her new sitting room kaputei. Given her strong track record with previous business
loans, Jamii Bora accepted her loan application in 2008. it took Jane
six years to save enough for the down payment of 10% (usD 440).

today, Jane lives in a two bedroom home in kaputei. she has a
kitchen, a bathroom, a sitting room, two bedrooms, a garden and
enough space to sew and grow her business. she pays usD 40 a
month, which is not much more than what she paid for rent in nairobi.
Photos : Jamii Bora

Jane says she is proud to be a home owner and she thanks God
every day for the miracles that have happened in her life. she says
that even though she is HiV positive, she is determined to live to
see her children grow up and also wants to see her grandchildren.

15


members to produce cement blocks and roof tiles, saving on both
labor and transportation costs. on site production costs were kes
30 per block and kes 17 per tile, whereas purchased machine cut
blocks would have cost kes 28-35 each plus kes 4,000-8,000 (usD
50-100) in transport.12 the factory has also provided jobs to over 100
JB families, improving their ability to pay back loans.

Sales and Marketing: Cross selling to
entrepreneurs with strong credit history
JB leverages its existing sales channels to cross sell new housing loans
to its base of approximately 300,000 clients across kenya. Housing
loans are approved for clients who have a minimum three year
engagement with JB and successful repayment of at least three business
loans. those eligible for home loans in kaputei are either proven
entrepreneurs or hardworking individuals who can support the work
of entrepreneurs. JB proactively selects entrepreneurs who can ei-
ther provide goods and services to the town (e.g., food shops), who
can serve the surrounding areas (e.g., carpenters), or have outgrown
their current business space and need bigger homes or the commer-
cial area of kaputei.13 However, several entrepreneurs are hesitant to
move to kaputei until a critical mass of residents moves in, to support
their businesses and electricity (currently solar powered) is provided
as a utility.

Product Design and Development:
Cutting costs in a low cost Professionals working with the community on
housing project is a combination standardized homes
of hundreds of aspects of building to ensure quality construction, JB hired professional architects, en-
materials production, designs and gineers and professors to design and oversee the construction of the
construction methods, lay-out plans township, in consultation with residents.
etc. there are no shortcuts or simple
solutions to cutting costs. every little With an emphasis on cost cutting, these hired professionals developed
detail counts, and only the sum of several standardized home layouts that could be mass produced, and
involved simple, low tech construction processes and could leverage
all these minor savings can lead to a
cost savings through scale. each home was built with either 2 or 4
solution that is truly and affordable
bedrooms, a kitchen, sitting room and bathroom.14 Homes are basic
home for the poor.”
and finishings are minimal, as emphasis is placed on structural sound-
– ingrid munro, ness, quality and space efficiency.
founder and managing trustee,
Jamii Bora initially, kaputei did not have access to government utilities, which
necessitated the provision of basic services through alternative
means, for example through solar panels on homes. JB recently began
working with kenya Power & Lighting Company to bring electricity to
kaputei. to address the water consumption needs of the community,
university of nairobi professors were hired to conduct a hydro-geo-
logical study. they found a water source at a depth of 85 meters and
boreholes were drilled to create a hydro-pump system. additionally,
hybrid wastewater management systems have been implemented to
recycle 70% of water utilized in kaputei.15

16


Financing: Installments roughly equivalent to
slum rent, covering construction costs Housing projects for the
as a microfinance organization leading an affordable housing initiative, poor fail because they focus only on
JB offers financing to all of their home buyers. each client receives a housing. you can’t separate housing
loan with a tenure of 5-20 years and an interest rate of 8.5-10%.16 from the other issues because poor
Clients make a down payment of 10% of the total cost of kes 350000 people have so many needs. Poverty
to ~700000 (usD 4,375-8,750) and the average monthly installment has to be tackled from all angles.”
is kes 3,500 (usD 40).17
– ingrid munro,
through lowering its own cost of capital by utilizing patient capital founder and managing trustee,
Jamii Bora
from its investors, JB offers a low interest rate to its clients. Com-
bined with an increased tenure as compared to other microfinance
loans offered, monthly installments work out to amounts similar to
what residents formerly paid as rent in nairobi slums.18

the purchase price of the home covers all construction costs of the
home (roughly kes 150,000 / usD 1,875 for 2-bedroom), 50% of
infrastructure and land cost (kes 75,000 / usD 938), and a modest
margin.19 the remaining 50% of infrastructure cost is covered through
rent payments from commercial and industrial space.

Aerial shot of Kaputei Township
under construction
Photo : Jamii Bora

17


Time Line

Jamii Bora
Feb. Sept. Jan. Oct. June Jan. 2007 Mar. 2009 Sept. 2010 Sept.
2002 2002 2003 2003 2004 2005 2007 2009 2010

Project Milestones
JB Purchases land First plan for Temporary JB receives 1,000+ Kaputei project NEMA JB wins High Court To date 300 families School finished, Com
-
from private Kaputei factory built applications within approved by County rejects appeal and resumes moved into Kaputei mercial plan approved,
owner completed the first month Council Kaputei production one 200 additional families
project month later move to Kaputei

Jamii Bora Operations

PRIVATE FUNDERS

Equity $ Project finance

Technical Advice Offices
INDUSTRIAL/
CONSTRUCTON
JAMII BORA COMMERCIAL
PROFESSIONALS
$ $ ENTERPRISES
Service Fee Rent

Legend Consumer finance $ Installments
Product Home
Service Construction Income $ Labor

$ Payments

Private
Enterprise
Labor
Citizen Sector
Organization

Customer
CLIENTS
$
Employment Income

Jamii Bora Value Chain

ProJeCt ProDuCt ProDuCt marketinG retaiL after
ProCurement saLes
finanCe DesiGn DeV anD saLes finanCe

• JB set up • Project • Professionals • Professionals • Advertise- • JB provides • JB provides
local factory to financed by design the supervise and ment to cur- housing loans community
mass produce consumer standard, oversee quality of rent members at 8.5-10% maintenance
tiles and down green com- contruction; and approval interest for •Commeri-
cement blocks payments, munity with local resi- of those with up to 15 to cal center
JB Trust and the residents’ dents, most strong credit 20 years provides
private loans input of whom are record and livelihood to
JB members, livelihood residents
build homes opportunities
in Kaputei
social sector actors Private sector actors

18


Evaluation Framework

Is the solution SOLVING THE PROBLEM? Is the solution ECONOMICALLY VIABLE?

Jamii Bora is providing quality home solutions The Kaputei Town Housing Project is a viable
with titled land to microfinance members model for Jamii Bora, investors and involved
by taking a comprehensive approach to low stakeholders. The provision of finance for
income population needs. Impact so far has purchase of homes makes this solution a
been small as the project is in mid stages of viable one for BoP communities in Nairobi
construction. desiring home ownership.

Problem Magnitude Slum dwellers pay roughly the same
• ~1.5million slum dwellers in nairobi and 7.5 million in installment as their previous rent.
kenya. 20 • Client families live in the nairobi slums, paying average
• many households (~6 members each) live in a single room rent of kes 3500 (usD 40 for 2-bedrooms), roughly equiva-
without security of tenure. lent to installments in JB program.
• ~ 94% of nairobi’s slum dwellers are without access to
adequate sanitation. • typical client family earns between usD 80 to usD 200
per month.21

Quality of Solution • Client acquires loan for 90% of home value (kes 350,000
to 700,000 ie usD 4,375-8,750) over a 5-20 year term, at
• Design and oversight of home construction by professional 8.5-10% interest rates.
architects and engineers, with quality control on each home.
• new homes result in increased incomes for some resi-
• extensive consultations with potential residents to ensure dents who are employed by JB in home construction.
needs are addressed.
Jamii Bora is striving for financial sustainability,
• inclusion of commercial space for entrepreneurial busi- ensuring loan repayment through selection of
nesses and livelihood generation. creditworthy clients.
• in 2010, JB repaid in full a usD 250,000 loan to acumen fund.
Housing Impact - The Numbers
• Purchase price of homes allows break even on each home,
• over 2000 JB member applications for a home in kaputei. land plot and related infrastructure.
• 470 homes built and families served. • JB charges fees for additional services offered by JB to resi-
• 50 entrepreneurs currently working in township, providing dents (e.g., schooling, electricity, township maintenance).
jobs to other members (working from residential homes at • Credit extended at low rate of 8.5-10% made possible by a
time of writing, as commercial center is not yet built). mix of funding sources including company savings, member
deposits, and down payments.
Housing Impact - Quality of Life • Home loans granted only to creditworthy JB members
• ownership of a home and land title, a leverageable asset, (minimum 3 years as JB clients, at least 3 loans already
is an immense source of physical and financial security and repaid, capable of 10% down-payment).22
pride, elevating social status.
Other stakeholders benefit from additional
• expected increased health outcomes due to improved revenues and value created for communities.
sanitation conditions, access to clean water and sewage
• fee for service for housing and environmental experts,
systems.
architects etc.
• expected improved productivity outcomes due to
• Local entrepreneurs access new revenue streams and abil-
increased space for livelihood activities and solar lighting
ity to expand business/revenue with additional work space.
increasing productive hours.
• Jobs created for 100+ JB members and local maasai community.
• expected improved education outcomes due to commu-
nity access to new resources like nursery schools, play- The solution is economically viable and is not
grounds, sports facilities, library and communal halls. reliant on subsidies. Clients pay the full cost
of the home, land and related infrastructure.
Additional programs such as the school and
other facilities are subsidized by JB.

19


Is the solution SCALABLE AND REPLICABLE?

Jamii Bora’s ability to scale is constrained by Going forward, Jamii Bora is attempting to
a lack of partnerships and access to funds: address these barriers by:

• Limited amount of funds for disbursable loans due to lack • recently becoming a registered bank, giving it access to
of access to funds with low cost of capital and long term funds with lower cost of capital.
maturity.
• Considering partnering with other organizations to in-
• Difficulties convincing would-be BoP clients to relocate crease scale and reduce costs.
outside the city, especially to new townships, before a
critical mass of residents is reached (due to limited liveli-
To be replicated, this model requires:
hood options, increased commute times, and lack of public
• Large pool of low income individuals willing to move, and
infrastructure in new townships).
an effective organization, with deep knowledge of the com-
• Lack of government relationships to effectively provide munity able to aggregate demand.
public infrastructure and utilities (and ideally limit JB’s
• understanding of low income individuals’ creditworthiness
involvement in creating access roads, electricity water and
(likely require a long term relationship with clients).
sewage systems).
• access to affordable, long-term financing with low cost of
• Lack of partnerships with private sector players that could
capital or subsidies to offer low-interest loans.
boost employment opportunities in new townships or oth-
erwise alleviate JB’s need to reinvest in various processes, • availability of affordable and contiguous land, in close
such as training labor in construction practices in potential enough proximity to city centers.
new townships.
• economic opportunities near location of new homes, or
transportation to these opportunities.
• a culture and environment where standardized low tech
building is acceptable.
• Productive relationships with local groups and neighbor-
ing towns to avoid delays and potential legal battles and
protests.

Is the solution ENVIRONMENTALLY SOUND?

Jamii Bora has attempted to build an
eco-friendly township after legal fights with
• inclusion of sewage system that cleans and recycles water
environmental NGOs. back into the community.
• JB prevailed in court proceedings after a 2-year legal battle • Homes powered by solar panels and technologies such as
against nGos, who claimed kaputei would disturb wildlife hybrid waste water management.
migratory patterns.

20


Postscript
at kaputei, Jamii Bora has been able to develop a sustainable, relatively closed ecosystem by allowing communities to
engage in the construction of their own homes, by supplying infrastructure and relying on members’ entrepreneurial
nature to stimulate livelihoods. However, as the organization considers growing their housing initiative both in kaputei
and through new ecosystems, partnerships with the government and private sector players are likely required to more
easily scale and replicate.

Partnerships with the government for the provision of infrastructure and public utilities, like the one being pursued
with the kenya Power & Lighting Company, would allow JB to scale to new areas more efficiently. Private companies
can provide more scalable employment opportunities, thereby allowing Jamii Bora to offer homes to a greater number
of its members who do not fit the current entrepreneurial criteria. With more occupational opportunities, more slum
dwellers will be willing to relocate to Jamii Bora’s ecosystems. Leveraging cross sector partnerships would better al-
low JB to focus its efforts on scaling home development and financing.

1 Jamii Bora means “good family” in Swahili Company%20Industry/-/539550/861970/-/item/1/-/514y0hz/-/index.
html
2 JB founded in 1999 as a small micro-finance operation for a group
of 50 beggars 13 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii
Bora, July 2010
3 350 acres of contiguous land were purchased
14 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii
4 Interview with Ingrid Munro, Founder and Managing Trustee, Bora, July 2010
Jamii Bora, July 2010
15 Jamii Bora Company Website, http://www.jamiibora.org/index.
5 Two types of homes are offered. The first, a 2 bedroom, sitting htm
room, bathroom and kitchen layout is approximately 540 sq feet in
size on a 2000 sq feet plot. The second type of home is 4 bedroom, 16 Jamii Bora Company Website, http://www.jamiibora.org/index.
740 sq feet, on roughly the same sized plot. htm
6 Construction began in late 2007 and is ongoing. 17 Yasmina Zaidman, Helen Ng & Adrien Couton. Knowledge Neces-
sary to Meet Poverty Alleviation Goals: Building Enterprise to Reach
7 Jamii Bora prevailed in a court case brought on by local NGOs Low-Income Markets.
alleging that Kaputei township blocked the animal migration corridor
to Nairobi National Park. 18 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii
Bora, July 2010
8 Over 250 families had moved in at the time of writing
19 Jamii Bora Company Website, http://www.jamiibora.org/index.
9 Roughly 250 students are enrolled in the primary school. In 2010, htm
the government recognized both schools as official public schools.
20 Homeless International (http://www.homeless-international.org/
10 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii standard_1.aspx?id=0:2350&id=0:276&id=0:262)
Bora, July 2010
21 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii
11 Interview with Ingrid Munro, Founder and Managing Trustee, Jamii Bora, July 2010
Bora, July 2010
22 Jamii Bora Company Website (http://www.jamiibora.org/housing-
12 Turana, Johnstone ole. Private Sector Now Steps In To Provide Low- time.
cost Housing. February 15, 2010. http://www.businessdailyafrica.com/

21

market BaseD Case HOUSING FOR ALL - INDIA

Housing For All - India ProJeCt DetaiLs
Geography:
india, Gujarat; ahmedabad (more cities in
pipeline). other Hfa projects in Colombia,
Executive Summary Brazil and egypt
ashoka’s Housing for all (Hfa) initiative, supported by the Hilti Product:
foundation,1 works to catalyze sustainable and scalable new home new homes in new apartment developments
and home improvement solutions for low income communities. it Stakeholders:
does so by advancing business models for collaborative action be- Private: real estate Developers: santosh
tween private and social sector actors capable of delivering solutions associates, Vintron, DBs. CHL (Community
Housing Limited) - construction management
in this sector.2
company and ksa DPs - architecture and design
finance: seWa microfinance, micro Housing
Launched in 2008, Hfa3 india brings together real estate de- finance Company, GruH finance, Dewan
velopers with access to land and capital; Citizen Sector Or- Housing finance Ltd.
ganizations (CSO) with the ability to aggregate demand in target social: saatH and mahila Housing trust (self
communities; and housing finance institutions willing to lend employed Women’s association, seWa)
to low income clients. all partners benefit from these engagements:
low income communities buy affordable new homes with options to
designed with a long-term commitment
finance mortgages and down payments, real estate developers and
to community needs, notably through:
finance institutions gain new clients, Csos receive a fee for their ser-
1) maximizing space utility according to
vices and further their objectives to help communities through pro-
the lifestyles of the target customers; 2)
viding access to housing solutions.
creating common spaces that preserve
Beneficiary families have, on average, 5 family members collectively the social dynamics of low-income com-
earning an average income of usD 6-104 per day. Low-income clients munities; and 3) in some developments,
assume a mortgage against their new homes and repay regular loan including the designation of physical space
installments to the finance provider. new home developments are for Cso resource centers where capac-
ity building activities such as training for
livelihood development is provided.
stakeHoLDers ContriButeD GaineD
reaL estate Land procurement, access to new markets, Cso
Currently, four projects (all in ahmed-
DeVeLoPers delivery of complete marketing partnerships, cash abad) are in various stages of develop-
housing units flow benefits of shorter term ment, with the first expected to be com-
and pre-sold developments
plete at the end of 2010. roughly 2500
finanCe Consumer finance for access to new client base
units are on offer for low income
ProViDers low income clients and opportunities to cross
sell; support from Csos customers across the 4 projects.
All projects are scheduled for
ProJeCt technical expertise, opportunity to work on
manaGement design innovation innovative design challenges, completion by the end of 2011.
ComPanies anD new market expertise
arCHiteCts Twenty five units5 in the first
Community knowledge of target service fee for sales and development have been sold to
orGanizations population, network of marketing; opportunities
low-income communities. advance
potential clients, input for equity and diversified
on appropriate design for revenue streams; ability to bookings (through payment of a deposit
homes and developments, extend housing to clients of below 5% of the value of the home)
community and livelihood
generation projects
in the other three projects are ongoing
and were at 1540 at the time of writing.
LoW-inCome Demand for new homes titled and design customized
Customers new homes with access to Loan disbursements for mort-
basic utilities; continued sup- gages are also ongoing, with 670 6
port from Csos
loans originated to date.

22


While pre-bookings look positive in
early stages of the projects, the degree to
which low income communities are able tHe story of
to assemble necessary down payments,
and can access and then repay mortgage
sunita kanHayaLaL
financing over several years, remains to
be seen. sunita lives in a small one-room house in a slum in indiranagar, 15
km away from the city of ahmedabad in Gujarat, india. she has
been living there with her husband and two sons for more than 10
years, earning her livelihood by working as an attendant at a bank
The Business Model for the past decade.

now that her sons are grown up, and are wage-earners them-
Partnership: CSO and real selves, the family – which is increasingly crowded in their one-room
space – has the capacity to afford a bigger home. owning a home,
estate developers
a secure asset, has been a longtime dream of sunita’s. However,
as of mid 2010, the above actors are en- there was neither a home on the market that she could afford, nor
gaged in three kinds of partnership models did she have access to financing options which would allow her to
consider such a large purchase.
to deliver a total of 2500 new homes to
low income communities by end of 2011. today, her situation is much different. sunita has made an advanced
booking for an apartment with an Lambha Hfa india project, and
1. Cso is engaged as one of many pos- will soon realize her dream of owning a home with more space for
sible marketing agents by the devel- her family and better facilities. the home costs usD 9050, and she
oper and receives a commission for is in the process of being approved for a mortgage loan that will
have her paying roughly usD 85 per month for 15 years.
units sold.
sunita was made aware of these affordable housing options through
2. Cso is an exclusive marketing agent the work of community organizations who market these units.
for a period of time and receives the community organizations also build the capacity of would-be
commission. in one of the iterations customers like sunita, through livelihood training, access to govern-
of this partnership model in india, the ment resources and other services.
partner Cso founder has assumed a
position on the developer corpora- sunita kanhayalal, Hfa india client, soon to move
tion’s Board. this ensures greater into her new home.
planning and design input by the Cso
to represent the client needs in the
development of homes and after sale
of homes.

3. Cso and developer corporation are
formally engaged in a for-profit joint
venture allowing equitable distribu-
tion of risk and returns.

these varying partnership dynamics are
Photo by: Elisabeth Real

complemented by the services of finance
providers, architects and project man-
agement companies to enable target cli-
ents to purchase high quality affordable
homes.

23


Sales and Marketing: Aggregated
demand through CSOs
Cso partners play the role of marketing agents who aggregate de-
mand for the developer as well as the finance providers involved in
the project. they market new homes to low income clients through
various channels which include existing physical spaces organized by

Photo : Ashoka
the Cso to address several needs of the community, and direct mar-
keting managed by field workers.

Financing: New Market, New Products,
Many Unknowns A typical slum home, Ahmedabad India
Housing finance for low-income communities is a relatively nascent
market in india. Hfa india works with several lenders from mfis to
commercial banks who are all on a learning curve in terms of defin-
ing products and services responsive to this market, which are in line
with their cost structures and business models.

at the time of writing, 670 loans7 were originated, supplied by lenders
at a maximum Loan to Value (LtV) of 80%. Loan amounts range from
inr 300,000 to 600,000 (usD 6500-14,000), with a tenure of 15
years and at interest rates ranging from 12% to 14%. average monthly
payments amount to roughly inr 3000 to rs 6000 (usD 65-140), and

Photo : Ashoka
typically range from 35% to 40% of a household’s monthly income.

several potential buyers of homes, though confident of their capacity
to pay monthly installments on a home mortgage, experience difficul-
ty accumulating the nearly 20% down payment required to originate New housing development site,
a mortgage loan. Ahmedabad, India
today, finance providers including mfis housed within partner Csos,
are looking to provide shorter-term loans to finance specifically this
down payment. on the one hand, short term financing along these
lines might be looked at as necessary to enable low income families to
buy these homes. Conversely, conventional financial wisdom, which
cautions against extending finance beyond 80% loan to value on a
home, suggests that doing so would excessively increase the defaults
on loans. the years to come will demonstrate the appropriate bal-
ance of short term and long term finance and whether customers are
able to afford down payments and the mortgages they take on.
Photo : Ashoka

New housing development under
construction for low-income clients in
Ahmedabad, India

24

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