MICROCAPITAL STORY: Habitat for Humanity Accelerates Post-Tsunami Reconstruction with Creative Microfinance Initiative, “Save and Build”

In the wake of the 2004 Indian Ocean earthquake, Habitat for Humanity International (HFHI), a non-profit organization founded in 1976, is accelerating its efforts to return decent housing to the over 500,000 Sri Lankan citizens displaced by a devastating tsunami. Combined with HFHI’s traditional donation-funded building program, the organization has implemented a program entitled “Save and Build” to help low-income families pool funds to meet construction costs.Here is how the program works. HFHI facilitates the creation of small savings groups, or micro-credit cooperatives, consisting of twelve families. The families work together to save the equivalent of USD 0.15-0.17 per day for a period of six months, a hefty sum considering many of the individuals in need of housing earn less than USD 1 per day. As the families save, they also amass locally available building materials such as rock and sand to make bricks. After six months, the families’ combined savings are sufficient to construct a domicile for one family.

HFHI uses gift-donations to “match” the construction costs of two more houses for two additional families in the cooperative. The process continues for approximately 24 months until all twelve families are housed. After initial construction is complete, families have the option to remain in their savings group to work toward a new goal, expanding their homes.

HFHI’s “Save and Build” program targets the poorest of the poor. The program is designed to reinforce collaborative community effort and group savings, providing housing usually out of reach. It helps families escape the debilitating effects of paying rent while establishing an alternative to mortgage-based housing. The program is also active in India and is being deployed in many other Asian countries.

HFHI’s involvement in microfinance is not limited to its “Save and Build” program. HFHI also worked with ACCION International, a U.S. based non-profit which heads a network of 27 microfinance institutions, to further study the role of microfinance in generating adequate housing in Latin America. “Getting to Scale in Housing Microfinance” highlights findings of the two organizations.

-Steven Craig

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Additional Sources:

Habitat for Humanity International: http://www.habitat.org/

Habitat for Humanity International: http://www.habitatforhumanity.org.uk/lea_save.htm