LFSUS helps low income settlers with housing loans
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Ms. K.B. Mangalika, one of the recipients of a housing loan after the project completion
“There was a time when no bank would help me for a housing loan. Today thanks to LFSUS I have a roof over my head and a better shelter for my family”Low income housing for the underserved settlers of the society in Sri Lanka has had a beneficial effect on the lives of those living off a daily wage. A roof over their heads in a permanent house has proved to be the best they can get for what they can afford, says Lanka Financial Services for Underserved Settlements (LFSUS).In a media release on the role of financing low cost housing, LFSUS said supporting the underprivileged segment is a national requirement of the day.
“Generally these people are innocent and trustworthy, but the main barrier is to find out finances to build their houses. Commercial banks would not look at their requirements as the loan is small, the profitability is low and on the other hand they will not get the collateral as they expect. Most of the villagers cannot offer acceptable securities to the banks for the housing loans as their lands are un-divided or the ownership is with the parents, no proper deeds to mortgage, no plans and less valuation, etc. On the other hand many banks or financial institutions are not keen on lending for this type of housing loans due to the high risk probability no guarantee of any pay back method,” the organisation said in a media release.
Though banks have the capacity to lend money, they do not have a proper mechanism to reach this segment in interior areas. However MFIs (micro finance institutions) have the capacity to reach this segment and but do not have sufficient funds to lend towards this segment directly.
In this respect LFSUS said it was created in 2007 to provide credit enhancement mechanism to encourage the banks and MFIs and to bridge the gap between the banks, MFIs and rural folk in order to finance this underserved people. LFSUS is a company limited by guarantee set up in partnership with the United Nations Human Settlement Programme (UN-Habitat) and the Ministry of Urban Development.
The methods adopted by LFSUS in distributing the retail loans to the community and by sustaining timely repayments will help sustain a self-sustaining project which in turn will help to expand the MFI’s portfolios. They will also receive technical guidance and support as required and advice on overall risk reduction, cost reduction and mitigation procedures while developing the ongoing projects. The additional strength and networking ability LFSUS provides helps in negotiating loans with commercial lending banks at acceptable prevailing market rates. LFSUS would carry out its own due-diligence on these projects individually, the organisation said in its media release.
Since its inception LFSUS has made a significant impact in uplifting the living standards of rural communities spread across the country. LFSUS launched 20 projects and successfully uplifted nearly 2000 families benefiting nearly 6000 people in the provinces of Central, Western, Sabaragamuwa, Southern and North Central of Sri Lanka. Out of these projects, seven have been completed satisfactorily and repaid the loans in full on the due date which is an evidence to prove the success of this scheme.LFSUS said it recently arranged three bulk loans of Rs. 10 million each for 3 MFIs in Medawachchiya, Kebithigollewa and Shrawasthipura benefitting 265 families and 1200 people for housing, house upgrading, sanitation, waste water management, access to clean water, lighting among other common amenities.