RURAL HOUSING LOAN FUND

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RURAL HOUSING LOAN FUND
RHLF Strategic Plan for 2009/2010 FY PORTFOLIO
COMMITTEE ON HUMAN SETTLEMENTS 12 June
2009 Presented by Mr. JJ Fakazi Acting
MD Mr. H Potgieter - CFO
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Outline

• Background on Establishment of RHLF
• RHLF Mandate
• Vision
• Mission
• What we do Illustration by photos
• Policy Context BNG Other Policy Priorities
• Provincial Involvement
• Business Environment Internal and External
  Implications
• Key Performance Areas
• Financial Projections
• Materiality Framework
• Corporate Governance

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BACKGROUND ON ESTABLISHMENT OF RHLF

• Result of German-South African bi-lateral
  agreement
• Established by SA govt. in September 1996 as a
  Section 21 company
• Helps address the housing needs of rural working
  poor currently defined as those with housing
  income below R7, 500 (since 2004)
• Assists with financial sector development in
  rural areaslater advocated by ISRD Programme
• Independent board appointed by the Minister of
  Housing (now Human Settlements)
• Initially capitalised with DM50 million (R150
  million) grant from German Development Bank, KfW,
  to the SA government
• Has raised loan of 12.5 from KfW via
  DBSAexhausted

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MANDATE

• To provide affordable housing credit to low
  income rural households
• To support the implementation of the Integrated
  Sustainable Rural Development Programme

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VISION

• RHLF is a world-class rural housing social
  venture capital fund that creates new financial
  arrangements and opportunities for rural families
  to improve their housing, economic and living
  environments.

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MISSION

• To empower people in rural areas to maximise
  their housing choices and improve their living
  conditions with access to credit from sustainable
  retail lenders.

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What we do Illustration by photos
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Policy Context RHLFs contribution to BNG

• Financial Services Market
• Repeated access to credit for incremental housing
  and fixed home improvement
• for the rural working poor
• 2. Entry level credit building credit history
• 3. RHLF scales-up using its venture capital
  investments to leverage additional debt funding
  from financial sector (Clients reaching maximum
  RHLF exposure)
• Incremental Housing
• Existing core financing opportunity for RHLF
  business
• Enable borrowers to improve quality of their
  housing asset especially during post occupancy
  (Subsidy houses)progressive build method
• Rural Housing
• Provision of loans for improving traditional
  houses on communal land
• Support indigenous housing (maximizing housing
  choices)
• Enable rural residents to drive their own
  building process

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Policy Context Implementation of Other Govt
Priorities

• Rural Development IRSD
• SMME Development
• Indlu
• Norufin
• Mafori
• Lendcor, etc
• Job Creation (within intermediaries local
  builders)
• Addressing needs of the 2nd Economy productive
  housing also local builders

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Provincial Involvement

• RHLF is a national wholesale housing finance
  institution
• Has national reach through intermediary lenders
  who lend in all provinces
• Need to ensure that RHLF programme augments
  housing delivery where appropriate, e.g.
  improvement of basic core house and improvement
  of quality of traditional rural houses
• Intensify efforts to ensure that RHLF is seen by
  provinces as value adding in housing delivery and
  in the improvement of quality of housing in rural
  areas

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Business Environment Internal Factors

• Internal factors affecting RHLF
• Limited financial resources available for growth
  remain a challenge
• No new DOH funding for 2009/2010
• R50mil from DOH in both 2010/2011 and 2011/2012
• No other outside funding
• Applying the current DBSA covenant rules of 30
  of capital employed

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Business Environment External Factors /
Economic Climate

• Start of a lower Interest cycle smaller margin
  available to cover operating costs
• Liquidity crunch has reduced possible RHLF
  leveraging effect of private sector finance into
  the housing microfinance market
• Economy in recession and retrenchments are
  realreflection of domestic weakness and global
  recession
• Food prices remain high and thus erosion of
  disposable incomes of the target market
• Oil price decline absolutely important to tame
  adverse economic situation and inflationbut oil
  prices are generally volatile
• Overall economic outlook for 2009 is grim
  falling consumer expenditure and global
  demandhopefully see slight improvements last
  quarter of 2009 into first quarter of 2010
• Demand for micro finance high but not necessarily
  for housing
• Increases in rate of defaults

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Implications of Environmental Considerations

• Targets set in the context of these economic
  realities
• Targets for 2009/10 are more realistic lower
  growth than 2008/2009
• Intermediaries focus on improving portfolio
  quality and less growth best time to take
  stockholding position
• Intermediaries to tighten credit evaluation
• Consumer protection critical avoid pushing
  credit and then looking at portfolio as
  sub-prime later
• Consolidation / mergers may be an option for some
  intermediariescant be ruled out in this climate

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Challenges and Opportunities

• Challenges
• Increased risk of bad debts maintain balance of
  portfolio
• Leakage in terms of Non Rural and Non Housing
  more focus on intermediaries who are using
  building material suppliers
• High Interest rate charged to end users focus
  on community based origination channels (2 new
  for 2010) and give interest rate of between 7
  and 10
• Opportunities
• Direct government transfer in outer
  yearsopportunity to explore lower interest rate
  model
• Individual Rural Housing Subsidy Voucher
  Schemecurrently being considered for approval by
  the Executiveexpand RHLF role in housing
  delivery

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KEY PERFORMANCE AREAS Rural housing finance
reach
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KEY PERFORMANCE AREAS Rural housing finance
reach
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KEY PERFORMANCE AREAS Rural housing finance
reach
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KEY PERFORMANCE AREAS Building lending capacity
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KEY PERFORMANCE AREAS Cost Revenue Ratio
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KEY PERFORMANCE AREAS Impairments
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KEY PERFORMANCE AREAS
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KEY PERFORMANCE AREAS Disbursements and
geographic spread
Target for 2010 70 outside Gauteng
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KEY PERFORMANCE AREAS Disbursements by borrower
income level
Actual for 2009 59 earn below R3500 Target for
2010 58 earn below R3500
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KEY PERFORMANCE AREAS Loan Usage
Actual for 2009 78 used on Housing Target for
2010 74 used on Housing
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KEY PERFORMANCE AREAS Statement of Financial
Position
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KEY PERFORMANCE AREAS Statement of Financial
Position
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KEY PERFORMANCE AREAS Statement of Financial
Performance
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MATERIALITY FRAMEWORK
Determination of financial materiality for
2010 Note Disbursements made in
terms of approved client facilities and approved
equity investments shall be excluded from the
materiality framework as these transactions are
within the normal course of business of the
Company.
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MATERIALITY FRAMEWORK
Determination of qualitative materiality for
2010 Qualitative materiality refers to those
transactions where by their very nature indicates
that management should apply their minds with
additional care. The RHLF management shall
consider all transactions, which contravene any
regulation, law or statute as being material
despite the size of the transaction.
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CORPORATE GOVERNANCE
The board of directors retains full and effective
control over the company, monitors management and
ensures that decisions on material matters are in
the hands of the board. The composition of the
board of directors provides for a majority of
non-executive directors, including a
non-executive chairperson. RHLF MD is the only
Executive Director on the Board The
sub-committees of the board are as follows
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CORPORATE GOVERNANCE

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CORPORATE GOVERNANCE

RHLF Board member name Race Gender
Ms TBJ Memela-Khambule B F

Mr L Mashaba B M
Ms G Mthethwa B F
Ms T Chiliza B F
Mr KR Oliver W M
Mr MP Silinga B M
Mr M Hathorn W M
Ms N Makiwane B F
Ms N Sihlwayi B F
Mr M Pule B M
Mr JJ Fakazi (acting CEO) B M
Demographics Black 9 White 3 Female
5 Male 6
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Thank You