Shared Interest News

Buoyed by a budget surplus, the South African government has increased spending on housing to nearly triple the level three years ago. But the backlog in housing, particularly for low-income South Africans, still stands at homes for approximately 2 and a half million families. 

Even if government efforts continue to increase, bringing affordable housing to all South Africans, as is their right under the constitution, remains a formidable task. Shared Interest is committed to doing its part by reinforcing South Africa’s efforts with the multiplier effect of micro-finance loan guarantees.The feature article below from Shared Interest’s Spring 2007 newsletter focuses on Kuyasa, an innovative organization using our guarantees to apply micro- finance techniques to housing. You can download the full newsletter, as well as earlier newsletters and annual reports, from the Shared Interest website at www.sharedinterest.org.

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Donna Katzin 
Executive Director, Shared Interest

Microfinance for Housing 

“Hope that’s what we sell,” explains Olivia van Rooyen, executive director of Kuyasa. “The journey of hope started when people came to the city looking for work. Kuyasa’s challenge is to convert that hope into something concrete, such as a house.” 

Located in Cape Town, Kuyasa (whose name means”dawn”) is one of the few organizations in South Africa adapting microfinance methods to housing. Kuyasa educates and organizes lowincome residents like the Mbanes to save and deposit together in a local bank, and then lends them money to build or improve their houses, based on their savings records.

Shared Interest’s recent guarantee of R1.5 million enabled Kuyasa, which could not currently access commercial credit on its own, to obtain R2 million loan from ABSA Bank. Kuyasa is using this facility to expand its base from 4,988 in 2006 to 11,500 clients. 

Kuyasa understands savings as a primary development tool, and helps people begin the housing process by organizing into community-based savings groups. Sixty-five percent of their clients take no loans, but participate in the groups to save for their own housing. Clients are eligible to borrow three times what they save during a sixmonth period up to a maximum single loan of R5,000 and must repay in 30 months.

Typically, the loans enable clients to expand their houses from 36 to 60 square meters often by adding a new room. As Kuyasa teaches and rewards savings skills, its staff observes a close correlation between savings and repayment behavior. Kuyasa serves a population typically considered “unbankable.” Today, despite recent initiatives by the major banks, 86% of Kuyasa’s clients do not have individual accounts. Seventy-four percent are women; 60% are informally employed or pensioners. The population is at the lower end of South Africa’s economic ladder, with 93% earning less than R3,500 a month, and 70% less than R1,500. 

This means that virtually all Kuyasa borrowers are eligible for the government’s income-linked housing subsidies, which they are able to stretch further (to build larger and better houses) with their own savings, and Kuyasa loans and building strategies including sweat-equity and the employment of small community contractors. Kuyasa calculates that with the amounts of subsidies that government provides for 583 people to employ established contractors, Kuyasa can leverage support for 5,500 clients to build the same houses. 

While banks have extended housing loans to low- income clients backed by formal sector wages, pension and provident funds in recent years, unsecured loans like Kuyasa’s would be much less common, and extremely expensive. As the organization seeks to grow to scale and increase its own capacity, Kuyasa is addressing new challenges. It is also working to replicate its model, help clients obtain energy-efficient appliances, and promote positive housing development policies. 

The Mbanes 

“We expect that our children will live with us for many years to come,” noted Mrs. Mbane. “Especially our son Andile, who hopes to become a doctor.” Eunice and Govan are the proud parents of three children ages 16, 17 and 20.

The couple left their shack in the township of Crossroads, outside of Cape Town in 1986, as violence, fueled by the government and “third force” agents, erupted when President P.W. Botha attempted to establish a tri-cameral parliament that excluded black South Africans. The Mbanes moved to a shack in nearby Khayelitsha, which was quieter and safer at the time. 

When South Africa became a democracy, and Kuyasa was established, the family discovered they could obtain secure and permanent housing with Kuyasa’s help. After the couple received a government subsidy of R10,000 (to build a house on a serviced site), Eunice applied to Kuyasa for a loan to expand the home to accommodate their family. She joined a savings group and saved a total of R1,000 over a six- month period, which entitled her to borrow R2,500 from Kuyasa. She used the first loan to purchase materials that Govan used to add two more rooms.

Eunice continued to supplement the family income by sewing and selling clothes.  She then saved more and returned to Kuyasa for a R5,000 loan. Just before she had finished paying off her second loan, when her husband was injured on his construction job and laid off, she came to Kuyasa in tears. The Kuyasa staff worked with her until the loan was repaid, and then lent her an additional R5,000 to finish the inside walls. She plans to apply for a final loan to install a ceiling below the roof to improve insulation.