The challenge of housing for the BOP

The challenge of structuring appropriate Acumen Fund housing investments is that they do not - cannot - look like traditional real estate development projects. The population we target does not have the disposable income needed for 15-20% equity down payments, and often the full family’s monthly income flow is insufficient to carry a very large mortgage. This means that we are looking for innovative financial structures, or small-scale projects that have primarily demonstration value. These features translate to higher lending risk, which causes most property lenders to step back from commitments. Acumen Fund’s strength in bringing commercial lenders to the table is that we have a higher threshold for risk then other institutions, and thus are in a position to leverage their involvement by bearing the first loss. We are demonstrating this leverage in launching a commercial mortgage lending program, as well as in lending to squatter property purchases in Pakistan, where our Housing portfolio is varied and growing after four years of investing.

In India, we are still looking for the initial momentum to build our learning and credibility. The scale of numbers, projects and expectations is higher then in Pakistan, which makes the role we are trying to play much more difficult. But having just returned from India and Pakistan, I am excited by the opportunity and optimistic about the possibilities.