The Housing Microfinance Loan Programme, a facility launched by the National Housing Trust, NHT, back in 2017 in partnership with credit unions to lighten the burden on contributors funding home purchase fees and incidentals upfront, has been revised to widen the pool of contributors who can access the low-interest loans.
The housing agency has also expanded what potential homebuyers can spend the borrowed funds on. But despite the revisions to make the loan offering more attractive to potential homebuyers, the take-up rate has been low. For example, for one partnering institution – Educom Co-operative Credit Union — the take-up has stayed below 25 individuals annually since 2018 when it incorporated the product into its loan portfolio.
Moreover, the number of individuals accessing the loan at the financial institution last year dipped to half of 2021’s total take-up, or down to 10 approved applicants, and then sunk again to four approved applicants over the first half of this year.
The weakened performance comes amid decline the in NHT housing starts for fiscal years 2021 and 2022, which has been largely blamed on restrictive measures brought on by the pandemic.
For FY 2020/21, the NHT reported a 57 per cent drop in housing starts to 1,744, from the previous year which recorded 4,086 housing starts. Housing were down again for the last fiscal year at 1,608 housing solutions, although exceeding revised post-pandemic targets set by the Trust.
The NHT did not say when it relaxed qualifying requirements on the external loan programme, but currently contributors earning up to $42,000 weekly or less can access the loan, up from the previous limit on contributors earning $30,000 weekly or less.
“This represents the vast majority of NHT contributors,” the agency told the Financial Gleaner.
The Micro Finance Loan Programme got started with two credit unions, but that has now expanded 12.
The programme allows contributors to access credit of up to $1.5 million over the life of the loan to cover upfront homeownership costs. It can also be used in addition NHT housing benefits, which means that beneficiaries of the programme can receive up to $9 million in total funding towards homeownership – $7.5 million directly from the NHT and $1.5 million from the NHT Housing Microfinance Loan Programme.
NHT says a maximum disbursement of $850,000 is facilitated at any one time and can be used for services such as: land purchase; titling; new infrastructure or upgrades; utilities installation; construction preliminaries, for example, valuation report, surveyor’s ID report, quantity surveyor’s report, housing design and approved building plans; completion of different stages – whether of a building or section of a building; to install fixtures and fittings finishes; incremental new construction; down payments or deposits; and solar energy saving products.
The loans are offered with tenure of up to five years and attracts interest rates of six per cent for secured loans and nine per cent for unsecured loans.
“The programme boasts the most competitive microfinance rates on the market,” the NHT said. It is open to both existing and non-NHT contributors.
Data provided by Educom shows that borrowers favour the unsecured loans.
So far, the unsecured Housing Microfinance Loan has been largely used for home deposits, 74 per cent, followed by home improvement at 12 per cent. Another 10 per cent of borrowers use the funds on construction preliminaries, while two per cent put the money towards construction and one per cent on land acquisition, according to the data supplied by Edu-Com.
Educom Co-operative was the only one of three credit unions that responded to queries from the Financial Gleaner about the performance on the loan programme since its inception.
Other credit unions participating in the programme are: Community & Workers of Jamaica Cooperative Credit Union, Jamaica Police Co-operative Credit Union, Jamaica Defence Force Co-operative Credit Union, First Heritage Co-operative Credit Union, Public Sector Employees Cooperative Credit Union, Lascelles Employees Co-operative Credit union, Trelawny Co-operative Credit Union, Manchester Co-operative Credit Union, Correctional Services Co-operative Credit Union, Gateway Co-operative Credit Union and PWD Co-operative Credit Union Limited.
To date, EduCom says it has disbursed 207 loans totalling $131.05 million. While the ceiling per borrower is $1.5 million, the NHT has capped disbursement amount at $850,000 at any one time. On average, Educom says some $773,000 is offered to members on the first drawdown on the loan.
NHT says the loan programme has performed ‘creditably’ since its inception, and has been a key enabler in bridging the affordability gap for contributors. Nevertheless, the housing agency says it will be reviewing the loan programme during this fiscal year ending March 2024, with a view to further exploit its growth potential.
In that regard, it’s in talks with other credit unions to join the programme. Its current partners account for less than half of the 26 credit unions in operation.
“A key selling point of the programme is that its interest rate is below the standard offerings of most credit unions, commercial banks and building societies, which aids contributors in acquiring or improving a housing solution on more attractive financing terms,” the NHT said.