In India, though housing microfinance has been present for some time in rural areas, there is little experience in an urban setting. The DIG market assessment conducted in six Indian cities in 2007 revealed high market demand for microfinance services for both housing and micro/small enterprises, but a huge institutional gap. From its review of national housing data, housing finance products and field visits, DIG observed a steadily growing urban housing deficit, substandard housing quality and a scarcity of housing microfinance products serving the urban market. From a livelihood perspective, DIG determined that both formal and informal sector micro/small enterprises were underserved by the mainstream financial sector, with most households relying on family, friends and informal sources for their financing. On that basis, DIG established CapStone Financial Services Private Ltd.
CapStone began lending in February 2008 as a unique provider of financial services to lower income households in urban India. Through professional delivery of competitively priced microfinance loan products and a range of other financial services, CapStone is pioneering growth to an underserved market segment. The institution’s small pilot fund of $200,000 has been revolved 3 times, resulting in more than 1,000 loans with an average size of $550. With a PAR of less than 2% and more than 50% of clients taking on a second loan, CapStone is strategically poised for growth.
CapStone is also unique in its strong emphasis on
housing microfinance. Housing-related loan products comprise 60 – 70% percent of its total loan portfolio.
CapStone targets urban, low-income householders in India.
CapStone Housing Microfinance
India’s housing problem is amongst the largest in the world. Backed by DIG’s housing microfinance expertise, CapStone is making aggressive and successful inroads into the home improvement market. The response has been outstanding and the market dynamics and cost of typical improvements are aligned with the CapStone product.
Over 99 percent of CapStone’s housing microfinance customers possess no previous loan experience with formal finance institutions. For those customers without a bank account, CapStone further facilitates their opening one with a local bank. Nearly 85 percent of customers are self-employed; many conduct their businesses out of their homes. For these customers, not only is housing microfinance a way to improve their living conditions, but also a means to increase their livelihoods. To these ends, CapStone’s average housing loan is approximately Rs. 25,000 (US $500) with a duration of one year. Women comprise 35 percent of CapStone’s housing loan recipients.
India’s housing problem is amongst the largest in the world. Backed by DIG’s housing microfinance expertise, CapStone is making aggressive and successful inroads into the home improvement market. The response has been outstanding and the market dynamics and cost of typical improvements are aligned with the CapStone product.