Questions/Answers

The core objective is to improve access to affordable housing, housing finance and services for low income households in Egypt. The related objective is to strengthen the capacity of the Social Housing & Mortgage Finance Fund (SHMFF) to design, coordinate policies, programs in the social housing sector across Egypt. Strengthen the governance and institutions of the housing sector, as well as design procedures that ensure effective coordination, synergies across levels of government and public & private sectors, and establish an accountable, competent and responsive bureaucracy. SHMFF focuses on designing, subsidizing housing programs for underserved households, youth, low income households, and households in lagging regions. To that end it provides a broad choice of locations, tenure and house types, including rental options. SHMFF supports demand side social housing subsidies linked to credit provided by financial institutions to increase affordability and access to housing. To reduce risk of increasing sprawl and spatial inequality, the program incorporates requirements to ensure that units have access to basic services and infrastructure, and that project sites are designated for social housing by urban planning authorities, are connected to basic utilities, transport networks and have access to services such as schools and health clinics. The outcome of the program is to promote well located social housing, equitable access to services, connectivity and amenities to foster well-functioning urban areas and to ensure long term sustainability of the housing sector.

SHMFF offers Programs to subsidize low income households, incomes ranging from LE 1500 to LE 5700 ($84-320). Applicants have equal opportunities to apply on a public web-portal, and registering with SSN. Till October 2018, a total of 190,000 beneficiaries have received units, 62% are employed in private sector or self-employed, 38% are public servants. Women and youth have equal opportunity to apply and receive units,18% of beneficiaries are female headed households, 74% are under 40 years old, and 88% have incomes below LE 2500 ($141). Recently, SHMFF has introduced 6000 units for rent in 24 cities/centers in 11 governorates targeting lower income households below $ 83.3 and LE1499 per month with subsidized monthly rents ranging from LE 300 ($17 per month) two bedrooms to LE 410 ($ 23 per month) 3 bedrooms

SHMFF’ s programs will make a major contribution to achieving Sustainable Development Goal 11 in the majority of Egyptian cities, addressing serious service shortage in a participatory matter, and bridging the affordability gap by innovative solutions. The program is targeting million units distributed over 283 cities in Egypt for impoverished youth and families and for the upgrading or resettlement of slum areas. AHP has provided 6,000 units for rent within 24 cities for very low incomes people (below LE 1,499 per month $84). Number of beneficiaries below Household Poverty Line is expected to reach 1.6 million, which represent 37% of the beneficiaries and around 7% of the total poor in Egypt (22 million based on poverty rate of 27.8% in year 2015). SHMFF’s program also, makes a major contribution to achieving Sustainable Development Goal 5. Applicants have equal opportunities to qualify for program based on their income criteria, Preference given to women headed household with the worst housing conditions, women have equal opportunities to apply and be allocated a housing unit with full property rights. Total number of women who applied for the program is 164.500 out of a total of 697,547, making up 24% starting 1/6/2014 to Nov 2018. Remarkably, women do not have higher rejection rate for loans as 26.5% out of total rejected are females and up to 18% out of total beneficiary are females.

SHMFF home ownership program provides demand-side subsidies to complement a mortgage loan by a financial institution, and a down-payment (ranging from 15% to a maximum of 50%) for the purchase of new or existing houses. One of the main additional contributions and positive impacts of the program is that banks have opened up mortgage lending to much lower income groups, and informally employed citizens, a category that never served before and have found that the credit risk of these households is not necessarily worse than for middle income households. The second positive contribution is that the system of registering and providing rights to land in the New Urban Communities for special housing programs has been facilitated as a result of the program and many more low-income households have a transferable ownership title than before. The total number of Program beneficiaries is targeting 830,000 household that is more than 3.6 million individuals. As of October 2018 total number of beneficiaries is 190,000 applicants.

The (AHP) has been innovative in structure, products and services. The old subsidy programs were mostly supply driven and not scaled according to needs of the individual households, allocation criteria were easy to circumvent and little control was exercised over the use of the units. The Program introduced subsidies increasing progressively with income and very transparent. The demand-side subsidy is linked to maximum affordable loans, which reduces the required subsidy amount relative to subsidizing the overall cost of housing. After 2011 when inflation and interest rates were high, mortgage loans were too expensive, SHMFF and Central Bank of Egypt coordinated stimulus package of LE 20 billion to banks and MFCs to make below market rate loans available on an interim basis to complement the demand side subsidy. This stimulus program is now being phased out and the interest rate subsidy will be integrated in the demand subsidy program for greater transparency and will be decreased over time when the macro-economy normalizes. In this way bank lending to this income group will not be interrupted

Innovation in the rental program reflects the housing needs of low-income Egyptian citizens for those who require greater mobility and for whom home-ownership is not desirable. Rents are based on a rent to income ratio of 25 % this initial program is a public rental program. AHP intends to expand its rental programs with private rental housing complemented with housing vouchers for low-income renters. AHP is currently conducting a detailed housing demand survey to understand housing preferences of its population. When results are available, AHP intends to expand its rental offerings in priority locations and offer alternative types of ownership options according to expressed affordability and preferences.

The initiative was work shopped with Afghanistan during a World Bank Housing Finance Workshop Series, in June 2018, “State Support for Housing Finance”. The AHP may function as a model for the Afghanistan government to start a new housing project. Also, the program was presented to Saudi Arabia during the bilateral housing committee in Egypt April 2018 as a model to improve the affordability of formal housing for low income households. Moreover, the initiative was presented to the countries participating in the 8th Global Housing Finance Conference (several times lastly May 2018) "Innovative Solutions for Reaching down the Income Distribution" May 2018 at the World Bank in Washington DC. Interested countries included India, Pakistan, Brazil, Mexico, Malaysia, Indonesia, Argentina, Nigeria, Kazakhstan, Australia, Colombia, Romania, Kenya, and South Africa.

World Bank had supported SHMFF with a concessional loan of $500 million, repayable over five years and the Central Bank of Egypt supplied banks and MFC's with a stimulus package of LE 20 billion to make below market rate loans on an interim basis. Further contributions came through the sales of 50,000 housing units donated by the United Arab Emirates. Funding for construction of units came from the State budget as part of the stimulus package. SHMFF further receive the proceeds of the sale of the units they produce (190,000 units till October 2018) and funds from the government budget and the Urban Development Authority of the government. SHMFF has 160 employees, including professional and clerical staff, and is an efficient and tightly managed operation.

Economic impact: SHMFF is improving access to affordability of housing for low & middle-income households allowing construction of houses, increasing economic production, employment and GDP growth. Ownership program expands mortgage sector, improves access to services, employment and building up of wealth by its low-income population. SHMFF indirectly contributed to creating job opportunities for labor in construction sector - 1.5 million jobs over 6 year will be created. Approximate calculation showed that by end of year one GDP increased by 0.6% and is expected to grow by 2% in subsequent years. Environmental impact: SHMFF improved efficiency of housing sector, which leads to a decrease in growth of informal settlements, leading to reducing associated negative environmental impacts. Careful selection of location of projects helps to reduce commuting times to employment, schools and other destinations, resulting in lower environmental impacts from traffic (100 % of beneficiaries reside within a maximum of 60 minutes commute of job markets). Social impact: AHP facilitates access to appropriate ownership and rental housing schemes among low and middle income groups, contributes to discouragement of growth of informal and unstructured housing, also ensures equitable access to social housing by various socially marginal groups including female-headed households families in marginalized governorates and lagging regions (18% of social housing program beneficiaries are female-headed households) as well as allocating 5% of units for those with special needs. Self-employed people were exempted from insurance certificate, and income statement was replaced by Income certificate from an accredited legal accountant's. AHP not only resulted in improving welfare and social cohesion but also it is a facilitator of opportunities and wealth creation. New units stimulated economic activity and created wealth for low income people as the value of unit's increases over time. Owning a home has many positive impacts on families individually and on communities collectively, as it helps families build wealth and in some cases facilitates low-and moderate-income households entering the middle class.

Yes

The Internal Audit Department (IAD) has unrestricted access to all operations, records, data files, computer programs, personnel and site visits. In order to preserve independence of the internal audit function, the Head of IAD reports directly to the Audit Committee on audit matters and to ED on administrative matters on a quarterly basis. Yearly audit plan is formulated to ensure a systematic coverage of all operations, and it is reviewed regularly to reflect organizational changes as well as new services and operations introduced by SHMFF. External audit before starting implementation, they meet management to determine if any internal changes in control, procedures or other factors have affected the program. Such factors can include changes in regulations, legal matters or changes in structure and operations. Auditors examine the program's ability to record and process data accurately on site, by going through the program used and its reports and site visits, and any other related documents. During this phase, the auditors may request additional files or documentation from the internal auditors or ask questions about how conclusions were drawn become compliant.

Program eight indicators are: 1: Establishment & operation of an internal audit function within SHMFF providing assurance service for ownership and rental programs. 2: Establishment and functioning of a housing monitoring and evaluation system, an M&E unit, responsible for preparation of Multi-Year Plan and Annual Targets informed by M&E system 3: Establishment and functioning of an accountability and transparency mechanism within SHMFF for implementing the Program. 4: Establishment of a functioning mechanism to monitor occupancy and vacancy of housing units by households receiving demand–side housing subsidy and percentage of ownership housing units occupied by low-income households after at least 1 year of receiving subsidies. 5: Number of households receiving demand-side home ownership subsidies for new housing units in each Fiscal Year during Program implementation. 6: Number of new households participating in rental subsidy programs in each Fiscal Year during Program 7: Percentage of demand-side subsidies provided supporting purchase or rental of housing units located within a commute of 60 minutes or less to an employment center 8: Number of demand-side subsidies provided supporting purchase or rental of housing units developed by private sector entities in each Fiscal Year during Program implementation.

Internal audit reports are issued to respective Department Heads informing them of the identified deficiencies together with recommendations for immediate rectification on a timely basis. IAD regularly review the progress of control deficiencies and Perform on-site audit for occupancy rates to conform to latest amendments of mortgage finance law which introduced stricter rules and penalties on fraud by beneficiaries. The external auditors prepare and deliver a Final Report which details all of the findings from the audit. This includes discrepancies found in the reporting and non-compliance of rules and regulations if found, the auditor offers SHMFF a way to correct any discrepancies to become compliant. Thus, the expected tranche of the loan is released upon approval of the external auditor.

1. Ministry of Housing is providing lands for constructing units and supervising their implementation, to provide affordable housing units for low-income citizens. 2. The Central Bank of Egypt (CBE) initiated a LE 20 billion stimulus package for the housing sector, lowering banks’ cost of funds and allowing them to on-lend to qualifying low income households. Lending rates are 5%, 7% on a fixed rate depending on level of income, over 20 year loan. 3. Commercial Banks contribute to expansion of mortgage finance base to deal with a larger number of citizens, in line with demand of low-income citizens to obtain housing units. 26 banks have signed up for the program for a total amount of LE 18 billion as of October 2018. 4. Investigations companies have contracted with SHMFF to verify place of residence and work of applicants and the validity of the documents submitted. 5. Private sector housing developers provides units for low-income. A new initiative is being planned where land will be provided for private sector to deliver middle income units and receive 30% of units built. Currently subsidy is offered to eligible buyers from private sector developers at a set ceiling price of $11,111 for semi finished units and $13,888 for fully finished units. Total numbers of 1,777 beneficiaries were subsidized based on their income level.

SHMFF did Shift from supply side to demand side subsidy which enhanced efficiency, the transparent and targeted subsidies reduced down-payment requirement for income-constrained households. Subsidies are set to increase with decreasing income levels, and are linked to a maximum affordable mortgage loan by a financial institution. E-government applications were also implemented to facilitate the provision of services to citizens through an automated system for recording and querying citizen's documents. New Complaints system is applied to strengthening the Citizen-State Compact through Feedback to Articulate Citizen Voice and Improve State Response, complaints are being handled through a number of mechanisms most importantly “ customer service centers, call center service, SMS service “to receive and answer applicant`s complaints and inquiries in addition to Inquiry system on portal. Creating Pilot system: SHMFF did initiate a pilot system aiming at alleviating and shortening the processing of subsidies and envision a pilot scheme for checking loans on a sample instead of all applications.