RURAL HOUSING LOAN FUND

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RURAL HOUSING LOAN FUND
RHLF Strategic Plan for 2011/2012 FY 16 March
2011 Presented to National Department of
Human Settlements by MR. JJ Fakazi CEO MR. H
Potgieter - CFO
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Outline

• RHLF Mandate
• Vision
• Mission
• Policy Context HS Other Policy Priorities
• Provincial Involvement
• Partnerships with other Development Finance
  Institutions
• Business Environment Internal and External
  Implications
• Key Performance Areas
• Financial Projections
• Materiality Framework
• Corporate Governance

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MANDATE

• To facilitate housing credit to low income rural
  households including communal land, rural towns,
  small towns
• To support Governments Rural Development
  priority(Comprehensive Rural Development
  Programme)
• To support governments effort to expedite
  housing delivery in rural areas through
  administering the delivery of the Individual
  Rural Housing Voucher Programme once
  implementation is approved by MINMEC
• Focus on low income market upper limit increased
  from R7, 500 to R9, 800 per month
• Takes into account inflation
• Covers the gap market who cant access mortgage
  (limited affordable housing product, and no title
  to land in communal land)

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VISION

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

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MISSION

• To empower people in rural areas to maximise
  their housing choices and improve their living
  conditions with access to
• Housing finance from sustainable retail lenders
• Government subsidy through the Individual Rural
  Housing Subsidy Voucher Programme

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Policy Context RHLFs contribution to
Sustainable Human Settlements

• Financial Services Market
• Repeated access to credit for incremental housing
  and fixed home improvement
• for the rural working poor
• 2. Entry level credit building credit history
• 3. RHLF scales-up using its venture capital
  investments to leverage additional debt funding
  from financial sector
• Incremental Housing
• Existing core financing opportunity for RHLF
  business
• Enable borrowers to progressively improve quality
  of their housing asset
• Supporting Rural Human Settlements Development
• Provision of loans for improving traditional
  houses in communal land
• Support building of new quality
  housesespecially rural gap market
• Enable access to services water, energy
  sanitation

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POTENTIAL CONTRIBUTION TO OUTCOME 8

• Encourage intermediaries to explore financing
  opportunities in
• Informal Households Upgrading
• Target can be only set once clear understanding
  on delivered service sites have been ascertained
• Backyard rentals
• Cannot set targets at this stage
• One client conducting feasibility on this
  financing opportunity will submit proposal to
  pilot
• RHLF will liaise with the Provincial DoHS on
  these two opportunities in order to identify
  opportunities

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Policy Context Other Govt Priorities

• Rural Development
• SMME Development
• Job Creation (within intermediaries local
  builders)
• Addressing needs of the 2nd Economy productive
  housing
• Local Economic Development

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Provincial Involvement

• RHLF is a national wholesale housing finance
  institution
• Has national reach through intermediary lenders
  who lend in all provinces
• Engage support with provinces on human
  settlements development issues
• Ensure that RHLF programme helps in enhancing
  housing delivery in rural areas and small towns
• Improvement of basic core house and improvement
  of quality of traditional rural houses
• Enabling people in the gap market to access
  housing finance, without need for collateral
• Engage Traditional Leaders as partners in the
  improvement of quality and delivery of housing
  on communal land

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Partnerships with other DFIs

• Engagement with NURCHA on the Subsidy Voucher
  Scheme Pilot Implementation
• RHLF has strong funding relationship with
  DBSAresulting from KfW loan to RHLF
• Possibility of RHLF to establish funding
  relationship with NHFC to scale up incremental
  housing financewhich is RHLFs only core
  business.
• Especially clients in which RHLF has reached max
  exposure

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• RHLF Strategic plan for 2011/2012

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Business Environment Internal Factors

• Internal factors affecting RHLF
• Funding RHLF received R49,5 million during
  2010/2011
• Expecting
• R49,5 million in 2011/2012
• R51,9 million in 2012/2013
• Human Resources Small but dedicated team
• Mr. JJ Fakazi appointed CEO in Sept 2010
• Need to build capacity Employed following during
  2010/2011
• Risk Analyst
• Marketing Consultant
• Intern Client executive
• DFI review RHLF is playing an active roll in the
  ongoing DFI review process.

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Business Environment External Factors /
Economic Climate

• Steady growth rate predicted but recovery will be
  slow and fragile for next 12 months
• High level of job losses Around 1 million.
  Seeing some improvement but re-employment in the
  formal sectors will lag the economic recovery
• Inflation has moderated somewhat Risk of oil
  price, food prices and effect of ESKOM price
  increase
• Over indebtedness - household debt represents on
  average between 70 and 80 of their disposable
  income
• At the end of 2010, South Africa close to half of
  the credit active consumers had impaired credit
  records
• Lower interest rates to remain for rest of the
  year
• Liquidity crunch - credit supply conditions
  remain tight

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Implications of Environmental Considerations

• Targets must be set in the context of these
  economic realities
• Targets for 2011/12 are still on the conservative
  side
• Intermediaries are starting to look at growth but
  they will remain focused on improving portfolio
  quality
• Consumer protection critical avoid pushing
  credit and then looking at portfolio as
  sub-prime later

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KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Number of end user loans financed by RHLF

Average loan size in 2010/2011 R4500 Budget for
2011/2012 based on R4855
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• KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Annual Disbursements

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KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Value of Loans in place and impairment provision

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KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Impact

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KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Finance

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KEY PERFORMANCE AREAS

• Rural Housing Finance Reach
• Strategies to increase number of loans
• RHLF plan to add at least 2 more community based
  organizations to its delivery channel. In this
  process we would give preference to organizations
  that are based in the provinces where our impact
  is currently on the low side, like Northern Cape
• RHLF plan to add at least 1 new intermediary with
  a foot print in the provinces where our impact is
  currently on the low side as well as rural
  provinces in general.
• RHLF will be extending a facility to RPH and
  Lendcor Group Low leakage risk due to business
  model allows RHLF to introduce lower interest
  rates
• RHLF to roll out its low interest rate loans to
  all other clients who have capacity and
  distribution channels to on-lend the low interest
  rate product
• Will reduce rates by between 6 and 8

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Lendcor Low Interest loans

• Lendcor gives 94 housing loans in deep rural
  parts
• R40 mil revolving facility R5 mil disbursements
  per month
• In April 2010 Lendcor lowered its rates on the
  18, 24 36 month loans
• RHLF interest rate to Lendcor 15p/a
• To assist Lendcor RHLF lowered its rate to
  12p/a
• From 1 Now 2010 RHLF lowered rate to 9.5 on all
  new disbursements
• 2 of the saved points will be passed on to
  endures.

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KEY PERFORMANCE AREAS Statement of Financial
Position
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KEY PERFORMANCE AREAS Statement of Financial
Position
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KEY PERFORMANCE AREAS Statement of Financial
Performance
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KEY PERFORMANCE AREAS Statement of Financial
Performance
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KEY PERFORMANCE AREAS Statement of Financial
Performance

• 62 increase in Directors fees Fee increased
  from R4000 to R4500. Budget based on all
  directors at all meetings
• Staff cost up 20
• COO appointed from Sept 2011
• New positions
• Intern for Client Executive team
• Receptionist
• Annual increase for current employees based on
  inflation and performance
• Travel Expenses up 88
• Increase activity new clients, monitoring low
  interest loans, risk reviews
• Increase in fuel prices and toll fees
• Increased travel re Rural Housing Subsidy Voucher
  Scheme
• Marketing cost, up 39
• Consulting, up 104
• Inflation increase for internal and external
  audit
• Increase in legal fees new agreements for new
  clients and low interest loans
• Impact audit at clients
• Rural Housing Subsidy Voucher Scheme
  R1,5million

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KEY PERFORMANCE AREAS Cash Flow Statement
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KEY PERFORMANCE AREAS RHLF high level
organisational design
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CORPORATE GOVERNANCE

• The board of directors retains full and effective
  control over the company, monitors management and
  ensures that decisions on material matters are in
  the hands of the board.
• The composition of the board of directors
  provides for a majority of non-executive
  directors, including a non-executive chairperson.
  RHLF CEO is the only Executive Director on the
  Board
• The sub-committees of the board are as follows

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CORPORATE GOVERNANCE

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CORPORATE GOVERNANCE

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Thank You