RURAL HOUSING RURAL HOUSING LOAN FUNDLOAN FUND

MAKING HOUSING DREAMS OF THE

WORKING POOR A REALITY

RHLF’s Vision Statement

RHLF is a world class rural social venture capital fund that creates new financial arrangements and opportunities for rural families to improve their housing, economic and living environments.

RHLF set-upRHLF set-up

• Established in September 1996 as a Section 21 company

• Helps address the housing needs of rural poor > 2MLL

currently R 4 670

• Assists with financial sector development in rural areas

advocated by ISRD Programme

• Independent board appointed by the Minister of Housing

• Capitalised with DM50 million grant from German

Development Bank, KfW

Core PrinciplesCore Principles

• Social venture capital fund

• Targets working poor households

• Supports incremental housing construction,

extensions & improvements

• Targets Rural Areas—Non-metropolitan and

enhance urban-rural linkages

• Promotes non-use of asbestos products

RHLF implementation RHLF implementation strategystrategy

R3500

R2500

R1500

R600

RHLF Strategy

M arket served by establishedretailers.

SEGMENT 1: Regular Incom e - Form ally Em ployed - earningabove R3500 per m onth.

SEGMENT 2: Regular Incom e - Form ally Em ployed.

SEGMENT 3: RegularIncom e Inform ally/ SelfEm ployed.

SEGMENT 4: Irregular Incom e/ Unem ployed

20002%

20%34%

44%

Achievements of RHLF Board approved Business Strategy

• Continue to fund profitable and adequately capitalised established entities– R 37 m new commitments

• RHLF will use its venture capital investments to leverage additional debt funding from banks– Leveraged R 9.3 m (25%)

• Financial sustainability and access to financial services– No clients in distress

Key Performance IndicatorsFull YearBudget

6 MonthYTD Actual

6 MonthYTD Budget

Total Cumulative Commitments

R343,0M R325,2M R343,5M

Cumulative Loan Commitments

R325,3M R307,3M R325,2M

Cumulative Equity Commitments

R17,7M R17,8M R17,2M

Total Cumulative Commitments

-

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006

Rand

Equity and investments

Loan facilities

Projections

Key Performance IndicatorsFull YearBudget

6 MonthYTD Actual

6 MonthYTD Budget

Total Cumulative Disbursements

R335,7M R278,5M R296,3M

Cumulative Loan Disbursements

R325,4M R268,5M R286,0M

Cumulative Equity Disbursements

R10,3M R10,0M R10,3M

Annual Disbursements

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006

Rand

Equity investments

Loan facilities

Projections

Key Performance IndicatorsFull YearBudget

6 MonthYTD Actual

6 MonthYTD Budget

Average Loan size

R5 000 R4 725 R5 000

No NewLoans

14 860 3 619 6 980

Cumulative No Loans

68 069 56 828 60 189

Potential No of Loans

81 326 79 759 73 446

Sustainability Indicators

Full YearBudget

6 MonthYTD Actual

6 MonthYTD Budget

Interest on Advances

R11,1M R4,2M R5,0M

Interest on Investments after funding

R2,9M R2,6M R2,0M

Loan Loss Impairment

R3,3M R0,0M R1,6M

Operating Costs

R11,1M R5,2M R5,7M

Surplus / (Deficit)

(R0,4M) R2,5M (R0,2M)

Commitment to BEE

• Four distinct strategic thrusts– Demand driven developmental

needs of end-users– Funding black owned and

managed companies– Warehouse RHLF shares for future

acquisition– Employment equity

Gender distribution of end-user loans

45%

55%Male

Female

Key Performance Indicators

Full YearBudget

6 MonthYTD Actual

6 MonthYTD Budget

CumulativeClients

35 36 35

CumulativeClients BEE

16 16 16

ActiveClients

6 6 5

DistressedClients

Nil Nil Nil

RHLF Empowerment Clients(Both MDF Grants and Loans)

814 15 15 15 16 16 16

7

12 12 13 16 16 18 20

0

10

20

30

40

1998 1999 2000 2001 2002 2003 2004 2005

Other clients

Empowerment clients

Warehouse RHLF shares

• RHLF owns shares in the following number of clients: – Protea Financial Services Group– Norufin Housing– Lendcor– Indlu Finance– Bayport Financial Services– Izwe Loans

RHLF Development Impact: Some key RHLF Development Impact: Some key findingsfindings

• Loan usage: 69% (vs 70% RHLF target for 2002/03 FY)

of the loans are used for developmental purposes

– 54% housing

– 14% education

– 1% working capital for in micro/survivalist

enterprises

• Satisfaction: 61% of the end-users said they were

satisfied with the outcome of the loan use, and

• 68% said they would recommend their retail lender to

friends and relatives.

• 55% of the end-users are females

RHLF Development Impact: Some key RHLF Development Impact: Some key findings (cont…)findings (cont…)

• Direct correlation between end-users receiving consumer

education and those who are up-to-date with payments;

– But only 19% report having received consumer

education

• 11% of end-users live in RDP housing, and 3% used the

loan to top up subsidy at acquisition

• End-users live in the RDP house an average of 24 months

before borrowing to improve or extend the RDP house

RHLF Development ImpactRHLF Development Impact: Some key : Some key findings (cont…)findings (cont…)

• On average end-users who built new space on the RDP

house or existing dwelling, added 22 m2 to the house at

cost effective amount of R617 per square metre

• 7% of the end-users are informally employed

• RHLF currently has small exposure in 3 ISRDP nodes in

Eastern Cape and Limpopo/Mpumalanga-

This house has three bedrooms, a kitchen, lounge, inside toilet and has a tiled roof. Initially, the house was a simple 2 room house and has now improved beyond recognition. Standing at the foreground of the house is Mrs Mthethwa, proud mother of Philile who took small successive loans (amounting to R12, 000) to buy building materials and to pay a local builder who built the house. Philile also used R10, 000 of her own saving. The family resides in Thulasi Reserve, a deep rural area of Mandeni, KZN.

This house belongs to Nyalunga family in Lydenburg Extension 6. Towards the back, with greyer bricks, is an original RDP house that the family got in 1996 and that has been extended into a big house. Nyalungas started by stockpiling building material and built foundation. Later they took four successive loans amounting to R22, 000 to buy bricks, tiles, door and window frames and pay for labour.

The front elevation of the Nyalungas’ house with Mrs Sophie Nyalunga in the foreground. She states that they will go back to the RHLF retailer lender for another loan for fencing.

Martha Mthimunye of Mashishing Township (Lydenburg) borrowed R9, 000 from one of RHLF retail lenders (Indlu) and added that to her own saving of R2, 000. She added a verandah and an extra room which she uses for business purposes—productive housing. She runs a home based business of dressmaking and selling clothes and curtains. The house also shows consciousness about security which is important as she runs her business from home.

Martha shows her sewing machines and garments which she sells from her house. She is very happy with the working space which she now has after obtaining a loan from RHLF retail lender. She makes cash payments to repay the loan and is very aware of dangers of defaulting.

Ella Nkosi is a single mother of four and works as a domestic worker for a doctor in Lydenburg, where she earns R700 per month—working 3 days a week. She is as entrepreneurial as you can get. To augment her income, she sells sweets, snacks and hand-made brooms from home and at a nearby school. She also has a pay phone in her house. Her entrepreneurial drive plus her meagre regular income have enabled her to afford 5 successive loans ranging between R2, 000 and R4, 000 to build a four bedroom house for her family. She lived in a tin shack for 10 years before building the house in the background. She says she is a strong believer in Vukuzenzele.

Ella with materials she uses to make brooms which sell like hot cake in the community. Members of the community us these brooms mainly to sweep the grounds of the yard. She says finding this niche market was a blessing as she has used income from this economic activity to help improve the living condition of life of her family.

Critical Success Factors

• Government remains committed to policy of sustainable development

• Inflation remains below 10%• National Payment System does not

introduce discriminatory practices• Implementation of new consumer

credit regulation• Shrinking formal sector

Positive Impact of DoH Funding

• Concretize government’s ongoing support in eyes of external institutions wanting to develop partnerships with RHLF

• Continue to support New Housing Agenda with cutting edge new financial products and arrangements

• Lower RHLF’s borrowing costs to “incentivise” intermediaries to make “higher risk, higher transaction cost” rural housing loans

• Enable RHLF to mitigate credit risk associated with new shocks similar to small banking crisis

• Make new commitments to at least 3 new pipeline clients

Thank You