Building communities through access to home financing in India
Shubham Housing Development Finance Company provides housing finance solutions to families with informal incomes through an innovative credit program that looks beyond income proofs on paper. It does this by taking a holistic view of customers needs and providing credit to people who are outside the purview of formal credit structures, enabling families to secure home ownership and make improvements, which gives them access to other services and a standing in the community.
Since formal financial institutions will not invest their time in assessing this population's credit-worthiness, families with informal incomes are charged high interest rates by informal lenders or completely excluded from home financing. Exclusion from financing creates a poverty trap, where home ownership is virtually impossible, and families with informal incomes are forced to rent their property. Instead of building equity in a home, tenants in urban India are often restricted to short-term leases that are subject to huge increases upon renewal or eviction.
Shubham has responded to this need by engaging informal customers in a discussion about their life story: where they come from, what they do, how they earn, spend and save. Relationship officers meet with potential customers and establish their personal and familial integrity through a comprehensive process, while credit officers follow up with financial due diligence. The company hires its officers from target communities since local people understand clients needs and the challenges they face.
By 2018, the company aims to be provide 50,000 families in India with home financing. The company is now exploring options for lowering the rate of interest at which it borrows money so that it can pass on those savings to its clients.