Housing Microfinance for Low-Income South Africans

Housing Microfinance for Low-Income South Africans

South Africa
Organization type: 
nonprofit/ngo/citizen sector
Budget: 
$50,000 - $100,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

The Kuyasa Fund is a social development organization that uses microfinance as a tool for improving the housing conditions of South Africa’s poor communities. Kuyasa provides microfinance services to those with secure occupational rights, typically home owners, who are excluded from formal finance, in the belief that improving the quality of housing adds essential social value and because no other appropriate sources of housing finance are available. Our clients, who earn under R 3,500 ($US 490) a month or who are informally employed, are eligible for loans of up to R10,000 ($US 1400) for use in improving their housing situation. Many low-income South Africans live in informal shacks and desperately need housing upgrades; however, they often lack the resources to do so.

About Project

Problem: What problem is this project trying to address?

We have specifically targeted South African women as a priority due to the gender discrimination in the regions we work. Women headed households are a readily identifiable group and there is evidence to support their above average risk of poverty. Gender disparities in terms of rights, education, capabilities and lower earning have all contributed to the phenomenon. We believe that with the right amount of support both financially and socially, these women, our clients, can overcome the barriers imposed on them by strong gender and racial norms.

Solution: What is the proposed solution? Please be specific!

The Kuyasa Fund has helped disadvantaged people accrue social and economic stability through the use of housing microfinance; however, extending financial services is not Kuyasa's sole mandate. Not only do we help those who have suffered from the exclusion of credit access, but we also employ people from the areas in which we work. We recruit, train and hire new employees who never had the opportunity to finish school and therefore never amassed proper vocational work experience. We employ people who are enthusiastic and ambitious and give them the opportunity to excel. All Kuyasa employees are encouraged to further their education in a breadth of programs ranging from certificates to degrees. We facilitate access to education by subsidizing 100% of tuition fees, and offering flexible work schedules to accommodate course-loads. Furthermore, we are a female dominated organization, with women representing 63% of our staff composite. One of our new initiatives promotes the use of renewable energy products, namely solar panels. We offer our clients wholesale rates on solar powered lights and hot water geysers. We encourage our clients who have restricted access to electricity to purchase these products as a means to reduce their monthly bills and help the environment. The hot water geysers can be purchased with a Kuyasa loan and will provide hot water for the family year round. The Kuyasa Fund further adds significant social value to the community at large: Financial Literacy Education Greater self- esteem Greater security from crime Income generation opport.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The Kuyasa Fund has achieved great success over the last ten years. We have dispersed over R103 700 000 in small loans to over 23 500 clients. The Kuyasa Fund has grown from six employees in one branch to 105 employees in six branches in the Eastern and Western Cape. We can also measure our success through the improvements in our client's lives. For example, a government subsidy funded home in the Western Cape is valued at R50 000, and is typically 23m2 to 36m2 in size. After investing their savings (about R2 800) and two Kuyasa loans (R12 000 to R15 000) the homes of Kuyasa clients are on average 60m2 in size and valued at between R150 000 and R250 000. This represents a massive increase in asset value for poor and very poor households.
About You
Organization:
The Kuyasa Fund
About You
First Name

Olivia

Last Name

van Rooyen

About Your Organization
Organization Name

The Kuyasa Fund

Organization Phone

+27214483144

Organization Address

3 Wrensch Road, Observatory

Organization Country

, WC

Country where this project is creating social impact

, WC

How long has your organization been operating?

More than 5 years

Innovation
What stage is your project in?

Operating for more than 5 years

Share the story of the founder and what inspired the founder to start this project

The Kuyasa Fund began as a small pilot project under the leadership of Oliva, at DAG in 1999. Development Action Group (DAG) is a South African NGO which creates, implements and supports opportunities for community-centered settlement development and advocates for pro-poor policy. While DAG was lobbying for low-income housing it became apparent that there was a need for housing microfinance. After the initial test stage, Olivia spearheaded the project and thus the Kuyasa Fund was born. The first year of operation saw 169 loans dispersed, worth over R520 000. By 2003 the Kuyasa Fund had made a clean break from DAG and a new dawn in housing finance had begun.
Over the last decade, the Kuyasa Fund has evolved into a highly specialized housing finance institution, which has pioneered an effective microcredit methodology geared towards supporting low-income homeowners.

Social Impact
How many people have been impacted by your project?

More than 10,000

How many people could be impacted by your project in the next three years?

More than 10,000

What barriers might hinder the success of your project and how do you plan to overcome them?

The two major elements of risk within the Kuyasa environment are maintaining portfolio quality and securing sufficient funding.
The major asset and source of revenue within the Kuyasa Fund is our loan portfolio. It is therefore essential that we mitigate risk relating to the deterioration of our portfolio quality. The Kuyasa Fund has implemented a number of initiatives to curtail our risk in this area. The Credit Risk based acquisition model is used to reduce loan disbursements to financially high risk clients but must maintain the balance of granting credit to the poorest communities who are currently being excluded from finance offerings by traditional banking institutions and other microfinance organisation.

How will your project evolve over the next three years?

Kuyasa’s primary goal is to deliver housing microfinance services to the widest outreach of the unbanked in South Africa. Kuyasa forecasts a loan portfolio of approximately ZAR R353 million and 152 999 cumulative new clients over the 3-5 year growth period. The total value of loans disbursed will reach approximately ZAR 1.3 billion over 5 years and an estimated 500 000 loans will have been disbursed cumulatively.
Kuyasa’s expected growth:
• 6 branches to 30 branches
• 5 300 clients to an additional cumulative 500 000 clients over the course of the projection
• 105 staff to 683 staff
Given the embryonic nature of the housing microfinance market and the limited outreach existing MFIs have achieved in South Africa, Kuyasa hopes to leverage its expertise to expand nationally.

Sustainability
For each selection, please explain the financial and non-financial support from each

Kuyasa clients, through their monthly repayments, cover a portion of the administrative costs. We have also received wholesale financing from Cadiz, Oikocredit, and the National Housing Finance Corporation among other organizations. Furthermore, foundations from around the world have sponsored selected programs through various grants.

How do you plan to grow and/or diversify your base of support in the next three years?

We are constantly applying for wholesale financing and submitting funding proposals.

Collaboration
Please select your areas of intervention in the home improvement market

Financing, Renewable energy, Urban development, Citizen/community participation.

Is your innovation addressing barriers in the home improvement/progressive housing market? If so, please describe in detail your mechanisms of intervention

South Africa enjoys a strong formal banking system that provides extensive services to the “top of the pyramid” – i.e. the minority of the population that is able to access and take advantage of financial services. The proportion of the population that remains unbanked presents a challenge to the potential for housing transformation in the country, with some 68 per cent of the South African low-income population unable to access formal financial services. In particular, there has been a widespread failure by the South African banking sector to respond to the need for finance of those homeowners who qualify for the state housing subsidy. Of the 2.4 million housing units delivered through the South African government’s housing subsidy system, only about 100 000 units are also linked to credit from the formal financial sector. It is therefore clear that very few households that accessed a housing opportunity through the government subsidy programme were able to access appropriate sources of housing finance. The result has been households continuing to live in inadequately-sized housing units that are unable to provide for the development needs of their families. The consequence of this is that the opportunity to build asset and wealth creation through housing is limited.

Are you currently collaborating with private companies, or have you partnered with private companies in the past? With which companies?

The Kuyasa Fund was initially conceptualized and tested under the DAG umbrella.
Kuyasa currently works with SEG to manage our information technology. Abacus is the application we use to calculate installments and repayments. Each Loan Development Officer uses a PDA to collect and enter data in the field in real-time.

Please describe in detail the nature of the partnership(s)

Our current partnership with SEG is to manage the mobile PDA system and our information technology at large.

Select the unit(s) with which the partnership was formed

Foundation of the company, Other (please specify).