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For more than two decades, the partnership between the CitiFoundation and Habitat for Humanity International (Habitat) relied heavily on a “one house, one family,” volunteer

house-building model. As a result, more than 500 Citi-sponsored Habitat homes were built with the help of Citi volunteers. While this is no small feat, we know this it is simply not enough, nor is it a sustainable solution.

The need among the world’s poor far exceeds what can be achieved through house-building programs alone. A shift to a strategy that increases the supply of financial products and services that accelerate financial inclusion is urgently needed. Our two organizations have already started working together to make this shift.

With increasing demand for both access to affordable housing and appropriate financial products across the globe, both Habitat and Citi have realized that an enormous opportunity exists: one that provides

products that help low-income households build assets that can be used to improve living conditions and, more importantly, to join the financial mainstream and accelerate financial inclusion.

The growth of microfinance now provides savings, credit, insurance, and remittance services to nearly 200 million of the world’s poor, and it has created a platform of varied institutional types that we believe are ready to begin taking on new strategies to help

clients build assets that improve their living conditions. In fact, expanding the range of products offered to the base of the pyramid was rated as the second highest priority by financial inclusion industry participants in the Center for Financial Inclusion’s recent publication Opportunities and Obstacles to Financial Inclusion.¹ This, coupled with research well-documented in Portfolios of the Poor, affirms that property and housing were the first or second investment priorities for low-income individuals surveyed in

Bangladesh, India and South Africa.²

1 Garveda, Anita and Rhyne, Elisabeth. Opportunities and Obstacles to Financial Inclusion”(Accion International Center for Financial Inclusion, Publication 12, July 2011) p. 39.

Collins, D. et al. The Portfolios of the Poor (Princeton

Edwardo Pereira, a copper miner in Los Andes, Chile, works outside his family’s home. The addition he will build onto a Habitat house will mean an extra bedroom and a slightly larger kitchen. Photo: Steffan Hacker

Even more compelling is the fact that already we see up to 30 percent of

microenterprise lending is used for clients’

shelter-related needs.³

This is not surprising, as a home often plays a prominent role in household livelihoods, frequently serving as a warehouse,

production site, rental rooms for tenants or as a sales windows. Armed with this knowledge, we conclude that to make a catalytic shift, we must focus on creating the

“next generation” of microfinance products.

We must take into account the demand for new products and the need to innovate to reach scale. We already know that savings has a special role in improving one’s living condition in other sectors, and it likewise

3 This is noted repeatedly by those working in affordable housing and microfinance: see posts in this book by Steven Weir and Susana Rojas Williams, Sadna Samaranayake, Ashoka’s video about its housing work in Brazil highlighting low-income families’ need of appropriate housing for small business development, and their few housing finance options to build it.

can have significant relevance in the housing sector. Property, housing and infrastructure can be useful and a form of savings. The poor’s ability to save, and their desire to do so, is increasingly documented in research and practice. In fact, the outrageously high costs they incur indicates the value households place on the ability to save.

Citi Foundation’s experience that savings is a critical element to establish long-term financial security and a way for the poor to participate in the economy gave us an opportunity to link savings closely with household plans to build assets and improve living conditions.

Habitat’s focus on moving beyond

microenterprise credit and designing new housing microfinance products started with the Citi Foundation’s support in Latin America. This innovative asset-building approach is now advancing our work in Asia Pacific. Here is how we are seeking to test this new approach in these regions.

Habitat’s Center for Innovation in Shelter and Finance. Habitat launched the Center for Innovation in Shelter and Finance (CISF) to work collaboratively with a wide variety of actors in the public, private and the philanthropic third sector, many of whom have not yet focused their strengths on shelter and affordable housing. In the financial service sector, many actors — such as MFIs, cooperatives, banks, microfinance networks, development finance institutions, impact investors and consulting firms — will be needed to take affordable housing solutions to meaningful scale.

Guatemala City, Guatemala – Juanita Alvarado and her grandson Javier stand in front of their home.

Photo: Ezra Millstein.

The CISF provides advisory services and knowledge management of promising practices around shelter finance, starting with the

experiences obtained in recent years with Citi Foundation funding.

In the next five years, Habitat will work with 60 institutions to develop the financial services that could potentially benefit more than 40,000 households – creating an estimated

$40 million funding stream for shelter asset building with US$8

million coming from household savings.

We are already moving forward by piloting the Housing Microfinance Toolkit that presents a methodology to help financial service providers design demand-driven housing finance products and housing support services for home improvements.⁴ The toolkit was designed and tested in collaboration with Latin American MFI partners – ADEMI, ADOPEM, ASPIRE, FIME and MUDE in the Dominican Republic – and ProMujer-Argentina and Vision Banco in Paraguay. It will be available for a global audience in 2012.

4 For copies of this Toolkit in Spanish and English, request Housing Microfinance Toolkit: A guide to market-based products and services (Habitat for Humanity International:

Citi-Habitat Home Improvement

Microsavings Program. Our most recent joint initiative further advances Habitat’s new approach to catalyze innovation within the microfinance sector. With a US$1 million commitment from the Citi Foundation, Habitat is launching an innovative three-year, multi-country micro savings and financial education initiative.

The Citi-Habitat Home Improvement Micro savings Program will target communities living in substandard housing in the Philippines, Thailand and Vietnam which are especially vulnerable to frequent natural disasters such as flooding and typhoons.

Cabaret, Haiti, 2010: Islande Isnardin, 32, lives with her husband and two small children in a transitional shelter. Photo: Steffan Hacker

By providing savings products, financial education and construction technical

assistance, the program will help 3,000 low-income homeowners save a total of US$2 million to strengthen their homes against these devastating natural disasters.⁵ This initiative demonstrates Citi’s commitment to financial inclusion by

developing a scalable savings model. It also expands Habitat’s ability to provide housing support through new product design for the benefit of low-income families to

improve their homes. Indeed, based on the experience of our two organizations, the consensus of numerous researchers and the responses of our clients, we believe a multi-stakeholder approach represents a new model for growing the assets of the poor, while reducing the 1.6 billion living in below-standard housing around the world.

5 Building safe housing need not be beyond local populations’ means. See post by Rochelle Beck on page 23 of this book on engineer Elizabeth Hausler’s global experience through her organization, Build Change, teaching people in low-income communities how to build safer, stronger hurricane and earthquake resistant homes using local materials with better design.

Aldea Los Regadillos, Chiantla, Guatemala (2006) Alfonso Rodriguez helps to build a house his daughter Ofelia will own and occupy with her family. Photo credit: Steffan Hacker.

In the Race for Affordable Housing,