Continuing our if-the-opportunity-will series of Great Posts By Others (GBPO), here are three more provocative slices of the housing finance world:

Down these mean streets a blogger like Jockin goes

2.1 Business for Development

The site Business For Development [Hat tip: Yousuf Marvi] advertises Martin H. Klein’s book, Poverty Alleviation through Sustainable Strategic Business Models, written from his doctoral thesis, which yields this AHI-resonant insight:

Conditions in the low-income context differ from those in high-income markets. These include differences in cultures, institutions, cognitions, dependence on the informal economy, economic development, living conditions, and motivation.

The per-customer revenues are minuscule, but the customers are limitless

The characteristics of the poor and the challenging circumstances in which these firms operate necessitate business model innovation to enable firms to operate successfully in low-income markets. This includes disruptive innovation in distribution, price-performance ratios, value chain management, workflows, organization, payment schemes, customer education, and human resource management. Hence, success at the BoP requires simultaneous disruptive innovation of multiple aspects of the ways in which firms do business.

To that I’d add, new financial products, such as Home Asset Finance.  Finance and governance are the DNA from which visions grow into Mission entrepreneurial entities (MEEs).  We don’t yet know how to grow them, so any insights that help are welcome:

Plenty of skills down there: DVD repair, Dharavi

Among the key features covered in the book are:

1. The first rigorous survey of pro-poor for-profit businesses. In cooperation with NGOs, development organizations and micro finance institutions, I collected a unique dataset of 143 firms operating in base-of-the-pyramid markets in a total of 105 countries. Their focal group of customers, employees, suppliers, and/or distributors have an average daily purchasing power of $2 or less.

2. Building upon this dataset, I develop a classification of the business challenges pro-poor for-profit firms face and investigate how these challenges change as firms develop and as the investment climate changes.

3. An examination and testing of the central postulate that embedding social and environmental value in a firm’s business model drives a firm’s financial performance at the base-of-the-pyramid. I find evidence that firms’ profit motive motivates firms to do well by doing good socially, and that addressing social issues is not adjacent but central to strategy at the base-of-the-pyramid.

That’s certainly correct.  If it’s not built into your DNA from the beginning, the talent updraft will always take you to more profitable, higher-income bands, and away from the BoP.

Always looking for the updraft, aren’t you?

4. A conceptual explanation of the concept of “business models” from a strategic management perspective.

5. Building upon case studies of pro-poor businesses, the book creates an understanding of why some businesses are successful at the base-of-the-pyramid whilst others fail.

6. A management support model for developing profitable pro-poor business models. I present business model qualities divided over five dimensions around which firms focused at the base-of-the-pyramid should build their business model.

The right model has to be fund asset management of social venture capital model, concepts we’re developing and putting into practice here at AHI. 

Rummaging about in Chapter 1 (available as a .pdf for free download), I found this useful listing of ‘business-school’ fallacies:

Prahalad and Hart (2002: 57) explicate six of such, often false, assumptions:

C. K. Prahalad is the doyen of BoP thinking, based on this book

1. The poor are not our target consumers because with our current cost structures, we cannot profitably compete for that market.

2. The poor cannot afford and have no use for the products and services sold in developed markets.

3. Only developed markets appreciate and will pay for new technology. The poor can use the previous generation of technology.

4. The bottom of the pyramid is not important to the long-term viability of our business. We can leave Tier 4 to governments and nonprofits.

5. Managers are not excited by business challenges that have a humanitarian dimension.

6. Intellectual excitement is in developed markets. It is hard to find talented managers who want to work at the bottom of the pyramid.

All this is incredibly thematic with AHI’s work, so we’ve ordered a copy.

2.2 Access Housing, from FinMark Trust

FinMark’s banner

Access Housing, published by South Africa’s FinMark Trust, whose housing director Kecia Rust is an AHI affiliate, puts out a fantastic periodical [Hat tip: Kecia Rust], Access Housing, whose most recent issue shines a spotlight on South Africa’s Financial Sector Charter:

Kecia Rust, FinMark Trust

The first phase of the Financial Sector Charter came to an end on 31 December 2008. By this date, it had been promised that financial institutions would lend R42 billion into the low income housing sector, with a promised growth in net book value of R32 billion.

Five years ago, I twice spent a week with the Banking Association, helping them brainstorm ways the banks could collaborate on structure and compete on products and customers to meet the target. 

I also got a little time for game parks

They were heady days, and it appears in some small way, we contributed to pointing the banks in the right direction.

They did it!

All too often advocates find fault or quibble about success.  Nice to see Kecia giving credit where it is due.

You gotta give it, Ali G

More so even.

Unaudited figures from the Banking Association show a total value of R44,8 billion originated by the Big 4 banks (Absa, FNB, Nedbank and Standard Bank), constituting a total of 984 730 loans extended to the FSC target market between January 2004 and 31 December 2008. This is no small task and the housing sector has clearly benefited.

In a paper prepared for the FinMark Trust by Linda Sing [Scoping the Pension-backed Loans market, forthcoming on the FinMark web site – Ed.], Linda offers the following analysis:

“With the commencement of the FSC, originating banks invested aggressively in resources and significantly heightened focus on the lower income market. Through 2004 to mid-2007, this resulted in historically pent up demand for housing finance being satisfied through a frenzy of marketing initiatives, amply bolstered by a generally booming property sector. Towards the end of 2007, however, the effects of the sub-prime crisis and the shortage of housing stock finally began to take effect, and the sector’s performance was only salvaged by a few, exceptional property finance transactions. The apparent spike in unsecured housing loans is mainly due to previously unavailable data being included in the report, following upgrades to banks’ measurement systems, rather than an actual increase in the number of loans granted.”

All this shows in the charts, with steady loan numbers and a falloff in aggregate loan volume, as the banks, having picked all the low-hanging fruit, were moving down-market almost in spite of themselves.

Excellent work – thorough, quantitative, evenhanded.  Read the whole nine-page issue, and subscribe (free) to Access Housing.

2.3 Future Pundit

In the century of cities, public transportation will be essential – but let us not think public transportation a panacea, as revealed in this HIGH-VOLUME POST, Mass transit is hard on your hearing

Hard on what?

Contrary to the view in some quarters that mass transit is an unalloyed blessing, buses and subways around New York City generate harmful levels of noise.

Cities are intrinsically noisy, and city streets very noisy, as anyone knows who’s tried to hold a cell-phone conference call outdoors in a city.

Using sensitive noise dosimeters, the team of researchers, led by exposure scientist Richard Neitzel from the School of Public Health at the University of Washington and Robyn Gershon, DrPH, an environmental and occupational health scientist and faculty member at the Columbia University Mailman School of Public Health, conducted hundreds of measurements of noise levels at platforms and stations, as well as inside of vehicles on New York City subways (MTA and PATH), buses (MTA), ferries (Staten Island), commuter railways (LIRR, SIRR and Metro North), and the Roosevelt Island tramway.

Gershon descended into noisy subways so you don’t have to

The scientists found that on average, the MTA subways had the highest noise levels, at 80.4 decibels (dBA), followed by the Path trains, at 79.4 dBA, and the tram, at 77.0 dBA.

Having ridden both systems, I can attest that when it comes to noise, Boston’s subways are little better.  Nancy and I often ride the Boston subways, and she’s taken to plugging her ears when trains are squealing around

The lowest average levels measured, 74.9 dBA and 75.1 dBA, were obtained from the LIRR and Metro-North trains, respectively. The very highest levels measured in the study were found on an MTA subway platform (102.1dBA) and at a bus stop (101.6 dBA).

In contrast, the noise level of a whisper is 30 dBA, normal conversation is 60 to 70 dBA, a chainsaw is 100 dBA, and gunfire is 140 dBA.

Quieter than an MTA subway?

According to Dr. Gershon, of all mass transit, subways had the highest noise levels, with roughly half of the maximum levels exceeding 90 dBA. “At some of the highest noise levels we obtained (ex. 102.1 dBA on the subway platforms), as little as two minutes of exposure per day would be expected to cause hearing loss in some people with frequent ridership, based upon the International Organization for Standardization models for predicting hearing impairment from noise.”

Here’s the authors’ punchline, from their study’s abstract:

Conclusive, I think

Conclusion

Recent research has shown that many construction workers are exposed to levels of noise which are high enough to cause permanent noise-induced hearing loss.  In Washington state, construction workers represent approximately 7% of the workforce, but file 21% of accepted workers compensation hearing loss claims. Obviously construction noise exposure and the resulting hearing loss is a big problem. A number of research groups and regulatory agencies are working on ways to lower construction noise exposures and reduce hearing loss claims. While noise control efforts have the best chance at long-term success, effective hearing conservation programs will always be needed to insure that workers receive adequate training and protection from noise exposure.

Here’s the blogger’s point, one not to be lost:

Cars take you from where you want to start to where you want to end up. You can control who you ride with. You can choose a car with very good noise insulation and a quiet engine. You can choose which music to listen to and do not need ear plugs to listen to it. Granted, you have to drive and pay attention to the road. Cars come with trade-offs.

But given the advantages it is not surprising that most people choose to drive.

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