Loan Officer thoughts

The Loan Officer, a borrowed concept from microfinance to help us keep close contact with the customer, is going to be probably the most important cog in MHFC's wheel. He or she is going to be not just the initial screening point / advisor in filling out the loan application form but also is envisaged to be the ongoing Relationship Manager for all borrowers in a development. The LO will be the face of MHFC to the client, and research has generally indicated in the case of microfinance that repayment rates are higher when the client / LO relationship is good (one of high trust). How do we know who will make a good LO is the million dollar question. But if we had to hazard a guess, he / she needs to be a certain standard in financial acumen though probably more importantly, the LO should be passionate (about the social nature of MHFC's business in terms of helping people find appropriate shelter) and compassionate (sensitive to the client's needs and helping them understand their finances).
In line with this, I just re-read the chapter on training Grameen staff in Mohammad Yunus's book "Banker to the Poor" - and thought the following passage was quite relevant and inspirational.
"Unlike any other commercial bank workers, our staff members are above all else teachers. They are teachers in the sense that they help their borrowers to unfold their full potential, to discover their strengths, to push their horizons and capabilities further than ever before. We give our staff an opportunity to use all their knowledge, imagination and experience to become true teachers. The job of manager (loan officer) is a personal adventure, the type of challenge a student has never had an opportunity to take up before."

Time Out story - Devendra

Link to a story in the latest TimeOut Mumbai (cover story on Dharavi and its enterprising residents)- this is the one on Devendra Tank, who is a J P Morgan employee living in Dharavi.

http://www.timeoutmumbai.net/client_coverstory/client_coverstory_details.asp?code=628

Forget about housing loans, he wasn't granted an educational loan by a major bank because of his residential address ! His story is inspiring in any case, but also adds validity (as are some of the other stories in the issue) that people with reasonable incomes are being denied finance by the current banking system, and change is necessary.

Yes we can

another post not directly related to MHFC - but the inauguration was inspirational
the BBC has done interesting interviews with a variety of people on the inauguration - below is the link to the one with Maya Angelou - she thinks Obama is a person with intelligence and compassion - and how difficult it is to find those 2 qualities in the same person.
the other issue she raised was "I think that each of us can find a place to give some time... I think these seem to be small things but they accumulate. And I do believe that good done anywhere is good done everywhere." I know she meant this for Americans (to do what they can to help the new President) but I guess it applies to everyone.

http://news.bbc.co.uk/2/hi/programmes/world_news_america/7838941.stm

Ahmedabad Trip

Ahmedabad has an interesting city dynamic – rural in the outskirts and quite urban in the heart of the city. A lot of land available at affordable prices in the outskirts, coupled with higher FSI translates into decent margins for builders even in the low-cost to affordable housing segments. In spite of that, there are hardly any projects coming up in this segment. Like Mumbai, Ahmedabad also faces problems due to excessive migration to urban areas, so demand is not the issue. But demand for housing is more of an aspiration without purchasing power – an empirical proof to our belief at MHFC – Lack of financing is the major cause for the lack of low-cost housing in cities today.

Ahmedabad was one of the first cities Monitor had started experimenting with its social change initiative. It was quite evident that they had made a lot of progress in terms of relationships with builders as well as building a database of prospective customers.

After we landed in the morning, we saw three plots that were shortlisted by developers for starting their projects – each of roughly 2000 flats in the affordable segment (sub 5lakh category). On one of the plots, the builder was in final stages of getting approvals and had a mock apartment built already. We met a couple of prospective customers on site along with DSAs appointed by Monitor, to get a feel of the consumer psyche. Their aspirations were quite different from their counterparts in Mumbai. They wanted the 1BHK flat though it was slightly above their affordability. Their argument – this flat would be a once-in-a-lifetime investment, so they wanted something big enough for their family. When we asked why they would not go for the smaller 1RK today and wait for a couple of years till their salaries increased, they felt, 1BHK would always be a little outside their reach even then, with rising property prices. So it made sense to invest in that today, and live within means to service the higher EMIs – not something we could deny; though I feel they looked at this project as a one-off, not realizing that if this pilot did work, competition would eventually keep a check on both property prices and loan interest rates.

Overall, it was a morally satisfying trip, and I left the city feeling reinforced as far as our belief was concerned – the lack of housing in cities should have a market driven commercially sustainable solution.

TM City: Loan mela visit

A couple of months back I had been invited for the loan mela organized by TM City (http://www.tmcity.in/) They had invited everyone who had been allotted a flat (through the lottery process) and a few housing finance companies (hfc) so that the customers could explore available financing options under one roof. Though we were not ready to start operations, I wanted to talk to prospective customers and other hfc's to get a better understanding of what they thought of the project. TM City employees were very helpful and gave me a desk next to other hfc's.

I think the mela was a big success, quite a few people had come with necessary documents and were sanctioned loans on the spot. It was very useful for me - I got to meet various categories of customers. One slightly worrying factor was that a decent chunk was looking at the house in karjat as an investment - or a house in the future when their kids grow up, so not as a primary residence. Their main argument was the lack of schools and other general infrastructure. Interestingly, the long commute into the city was not bothering them as much. A few were just looking for financing only because they got selected in lottery. Some already asked about selling them onto others and get the appreciation, though there were quite a few who were genuinely willing to move to Karjat and commute to Navi Mumbai or Mumbai city. Almost everyone who got allotted the 3 lakh house were in the 10k household income range with most of the income in cash. (and other hfc's rejected them because of that - eg. wife taking tuitions at home earning 6000 a month, or private employers giving 1/2 cheque and 1/2 cash)

On the whole, I had a good q/a session with them. But my interpretation - for people this seems like a subsidised project, and think that market price of such a product will be higher - so quite a few speculative investors!