| Housing Loan Market Survey for Earthquake-Affected Communities |
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An earthquake with a magnitude of 5.9 on the Richter scale struck Indonesian provinces in Yogyakarta and Central Java on May 27, 2006 at 5:54 am. During the 57 second quake and its ensuing damage, over 5,000 people died and almost 40,000 were injured. Over half a million homes were destroyed or damaged. In August 2006, the international NGO Mercy Corps contracted MICRA, an Indonesian foundation focused solely on the development of the microfinance sector, to deliver a program for microfinance institution (MFI) recovery in Yogyakarta. A part of this program involved conducting research related to the possible demand and profile of a microhousing loan product, to assist with area recovery among low-income people. Microhousing loans are not typically available in Indonesia and are not offered by any of the 75 MFIs which MICRA has assessed in Yogyakarta. Objectives The purpose of this research is to identify the characteristics of demand for micro and “progressive build” housing loan products among earthquake-affected clients of participating MFIs in Yogyakarta and the surrounding area. The study will further seek to understand the existing scope of housing-related services currently offered by microfinance in Yogyakarta and finally provide recommendations for the future development of such products. Methodology The research project was designed to answer a number of questions regarding access to and demand for financial services among the specific target group. The target group is broadly defined as “affected clients”, meaning that they are existing clients of participating MFIs who were impacted by the earthquake at their home, place of work or both. Data collected for this study was primarily gathered through structured questionnaires delivered by a team of enumerators through individual interviews with specific target group of existing MFIs clients. Interviewees were selected without regard to age or gender. For the purposes of this study, the following qualifiers were used to select the study participants:
The participants were selected from the five MFIs participating in the Mercy Corps/MICRA support program in Yogyakarta. The selected MFIs provided a list of active clients (savings and loan) affected by the earthquake to be potential survey respondents. A total of 253 respondents were selected for the survey with the following breakdown. Key Findings The survey also showed that the vast majority of MFI clients’ businesses are still viable four months after the disaster. Survey results show that a very high percentage of affected persons (96%) suffered from damage to their homes following the earthquake. Less than half of those surveyed had received housing reconstruction support from local government or other sources as of the end of September 2006. There appears to be a high demand for micro housing loans to either supplement these forms of assistance or to reach people that did not qualify or could not be serves. Nearly 50% of those interviewed indicated immediate readiness to borrow for housing purposes. Of those who do not wish to borrow, a key concern is ability to repay and also the desire to borrow for productive purposes only. Also, there are many people who still expect (as of September 2006) to receive grant funds for housing purposes. Notably, for those who are willing to borrow for housing purposes, they would prefer a long term loan (3.5 years) with lower interest rates (1.5% monthly), with an average of amount of IDR 6 million. The majority of existing clients are prepared to present collateral, including land title, in order to secure a loan. Only 30% of those interested in a loan would wish to borrow for a total rebuild of their home, the remaining 70% would borrow for repairs, which is relevant for the “progressive build” microfinance model which has been successful around the world. Recommendations
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