questions & answers about the rhlf

 

What are the main differentiators that set RHLF apart?

 

We focus on a rural market where incomes are low.

We have expertise and experience in financing incremental housing or progressive build.

RHLF is an endorser brand, not a micro-financier. We also provide consumer education for free.

We are a social venture capital institution - putting our service and our clients before profit, yet prudentially looking after our funding.

A flat organisational structure promotes teamwork.

Peer Support Group, MDF and equity risk sharing build operational capacity.

Our foundation on a German government grant enables us to blend grant capital with loan capital to keep funding costs low.

We consult our clients every year with Annual Workshops.

Why work with intermediaries?

It is more cost effective and enables greater geographic reach. Our clients enable rapid and efficient service to applicants and end-users. The retail lenders respond more quickly to events and to local needs and circumstances. The intermediaries are relatively better able to ensure high repayment rates.

 

How is the consumer protected from over-exposure and excessive interest rates?

 

No more than 25% of gross household income can be used for servicing and repayment of credit. Interest rate margins of the intermediaries are capped and monitored. Our clients promote family budgeting.
Further, are intermediaries registered with the Micro Finance Regulatory Council.

 

What is regarded as a rural area?

 

In line with RHLF mandate, we are define it as: agricultural areas, settlements near small family-owned farms, villages on communal and proclaimed land, dense settlements on communal land or small proclaimed towns, new settlements arising from restitution and redistribution. Metropolitan areas are excluded but some "grey areas" have been serviced. Some of RHLF's clients are well positioned to take advantage of nodes identified in government's Integrated Sustainable Rural Development Strategy.

What are acceptable purposes of end-user loans?

 

We monitor loans to be used to buy, build, or improve fixed property on which the borrower lives. They generally cover construction, purchase of building materials, fixed improvements, connections to water, sewerage and electricity, fencing, water harvesting and the purchase of land. No asbestos-based materials may be used.

 

What support is provided to end-users?

 

Consumer education and support. To help end-users to obtain more housing per loan, we help them to avoid common building problems with our publications. We also publish a directory of available subsidies, sample plan catalogues and building advice handbooks. RHLF tries to promote acceptable construction quality.

 

What are RHLF's investment instruments?

 

Pilot loans in areas not yet tested, equity and matching Market Development Fund (MDF) grants. These are venture capital type strategic investments. In addition, RHLF's core business is to provide structured loans to intermediaries of up to R25-million.

What is RHLF's risk philosophy?

 

We have always understood that because rural households are generally poor, operating in the incipient rural market is high risk. The biggest risk is that of the failure of borrowers to pay. The other risks are the contagion effect of irresponsible lending and the operational liquidity and solvency of the intermediaries.