Questions/Answers

SHMFF focuses on designing and subsidizing housing programs for underserved households, youth, low income households, and households in lagging regions. The program supports demand side social housing subsidies linked to credit provided by financial institutions to increase affordability and access to housing so far more than 300,000 households were able to get their houses and 700,000 are in different constructions stages makes the program one of the largest in the world. To reduce the risk of increasing sprawl and spatial inequality, the program incorporates requirements to ensure that housing developments have access to basic services such as schools, health clinics, infrastructure, including transport networks, and that project sites are designated for social housing by urban planning authorities. The program provides a broad choice of locations, tenure and house types, including rental options. SHMFF facilitates the choice of options through an on-line automated process that facilitates the application process for units in specific areas, the allocation and delivery of unit, and other functions of the Fund, both for the citizen or for fund employees. Challenge: Although digitalizing provided services results in efficiency and accuracy of the process, it necessitated considerable efforts from SHMFF to overcome the cultural barriers that citizens face in the use of automated services – specifically those citizens who are used to do all their transactions manually. It requires the capability to manage hundreds of thousands of applicants, approvals, and allocation procedures across the business. Objective: • The core objective of the program is to improve access to affordable housing, housing finance services for low income households in Egypt as well as to foster well-functioning urban areas and to ensure long term sustainability of the housing sector using automated procedures to make the process transparent and efficient

Through an integrated digital system SHMFF’s applicants are able to apply for social housing digitally through an online self-service portal, which allows the citizens to apply for the subsidy and upload all their supporting documents online guaranteeing equal opportunities, and avoiding loss or damage of the documents during the transport process from the post offices to SHMFF’s headquarters, as well as expediting the time it takes to bring the applications to the SHMFF office. Automated allocation of the units ensures transparency and prevents any kind of fraud. Detailed reports can be extracted from the automated system to highlight any discrepancies or redundant requests. SHMFF also expanded its digital reach to all involved parties in the process: • Background checks are uploaded digitally to the system • Mortgage companies and banks have been incorporated into the system • Mortgage installments due date reminders are sent out to citizens by SMS • E-Payment Services were introduced in the process. • Tracking the status of all applications is done directly on system.

One of the Program’s core objectives is empowering women, giving them equal opportunity to apply through the portal using the social security number and be allocated a housing unit with full property rights based on their income level and housing needs. Priority is given to female headed household with worst housing conditions (widows, widows with kids, divorced or divorced with kids) and ensuring that contractual provisions are in place to protect women if they contribute financially to the down payment and monthly payments alongside their spouses. 227,729 female-household applied for units making up 24.5% of the total applicants of the program since 2015 until October 2019. Remarkably, women do not have a higher rejection rate for loans - only 27.6% out of total rejected number of applicants by banks are females. Indeed, 20.5% out of total beneficiaries are females. The Fund is also contributing to achieving Sustainable Development Goal 6. As it ensures that all delivered social housing units are connected to basic infrastructure in order to provide inhabitants with easy access to clean water sources for human consumption. The fund is keen on providing vulnerable areas with needed utilities. SHMFF’s housing programs made a major contribution to achieve Sustainable Development Goal 11 in the majority of Egyptian cities, addressing serious housing shortages, and bridging the affordability gap. Using innovative digitalized solution (AHP) the fund is targeting to reach over million units distributed over 283 cities, and avails of its applicant's units in their preferred locations through one network. prioritizing impoverished youth and families and inhabitants of slum areas. Moreover, this program will offer 102,400 housing unit for rent for lowest income groups (below LE 1,500 per month $84) who could not afford ownership. So far rental units have been delivered to applicants in 24 cities

Social impact: According to the Special repertoire “Leilani Faraha “in her human rights report-adequate housing and right to none discrimination- during her visit to Egypt from September24, to October 3, 2018. She mentioned that “The program does not differentiate between genders as approximately 24% of the applicants of the program are female-headed households; the priorities for allocating units are given to Women headed households and women with kids in addition to Widows”. SHMFF encourages women’s right to ownership through prioritization in the beneficiary selection process and ensures that contractual provisions are in place to protect women if they financially contribute to installments alongside their spouses, as well as allocating 5% of units for those with special needs. Self-employed citizens were exempted from providing an insurance certificate, and the requirement to produce an income statement was replaced by income certificate from an accredited legal accountant. These measures expanded the participation of the large segment of informally employed. SHMFF improves citizen’s engagement through, facilitating access to appropriate ownership and rental housing units. Replacing manual paper applications with a digital process that has enabled citizens from all governorates of Egypt to access the application process for social housing and include various socially marginal groups, including families of female-headed households in poor governorates and lagging regions. The digitalization of the application process resulted in a decreased financial and physical burden for citizens located far away from the fund headquarter. Launching a computerized complaints system to ensure citizens’ share their experience and providing feedback for further improvements, has had a beneficial impact on program quality. Inquiring about their status online gives applicants a greater confidence in the transparency of the process. b) Economic impact: By constructing an average of 150,000-unit per year the fund contributes to job creation and, employment and GDP growth. The ownership component of the program expands the mortgage sector and improves access to services and employment and the creation of wealth and a social safety net by its low-income beneficiaries. SHMFF indirectly contributed to creating job opportunities for skilled and unskilled labor in the construction sector. An approximate calculation showed that by the end of year GDP increased by 1% and is expected to grow by 2% in subsequent years. Environmental impact: SHMFF improved the efficiency of the housing sector, which led to a decrease in the growth of informal housing, which in turn leads to reducing associated negative environmental impacts. Careful selection of the 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). The Program supports the operationalization of an environment unit at the fund which monitors key performance indicators (such as number of Occupational Health and Safety audits conducted, number of environmental audits, correction actions that have been endorsed by developers, and documentation of the findings in Quarterly Progress Reports) with an initial target of 25,000 units over the life of the Program.

SHMFF had a challenge of confronting the cultural barrier about automated and digital transactions. The end-to-end process was cumbersome, manual, paper-based, error-prone and slow. Citizens had to acquire the required forms from post offices, apply in person at a post office branch and attach the required supporting documents, which may sometimes be inaccurate or incomplete. All these paper documents were gathered from across the country and physically moved to SHMFF’s headquarters. From that point, SHMFF’s workers were in charge of validating the citizen’s background, his eligibility for down payment and interest rate subsidy and the attached supporting documents. This process, from submission until unit allocation, took up to 2 years. Furthermore, applicants were never able to track if they or his/her direct relatives have applied for the subsidy. Before or the status of their application Thus, SHMFF has digitally transformed their operations resulting in: • The end-to-end process duration reduced to 3 months, resulting in 87% reduction in turnaround time. • Increased the number of applicants from 19,000 in the first advertisement /call for application- to over 220,000 in the last one, and no one had to come SHMFF’s headquarters. • Citizens can apply for subsidy service from anywhere anytime online through the portal. • SHMFF is able to deal with a wide spectrum of citizens across Egypt serving over a million applicants. • 29 banks and mortgage companies and 18 investigation companies are integrated into the electronic process, each with access to specific parts of the applicants’ information. • Contribution to Financial Inclusion, by adding 180,000 unbanked citizens to the financial banking ecosystem. • Improved allocation of subsidy funds to those more in need. • Improved monitoring, planning and strategizing for the upcoming projects. • Post office integration took place to facilitate down payment and installments payments. • Banks collecting monthly mortgage installment electronically ahead via MIS system which enables management of the fund to assesses the performance of the program, and its targets. (ref. to IBM case (attached).….

One core objective of the program is empowering women and giving them equal opportunity to apply for a housing unit through the portal using their social security number and providing their income statement. Upon selection, they receive full property rights on the housing unit. Priority is given to female headed household with the worst housing conditions (widows, widows with kids, divorced or divorced with kids single household headed mothers) and ensuring that contractual provisions are in place to protect women if they contribute financially to the down payment and installments alongside their spouses. 227,729 women applied for units making up 24.5% of the total applicants of the program since 2015 till OCT 2019. Remarkably, women do not have a higher rejection rate for loans, and only 27.6% out of all rejected persons are females, and up to 20.5% of total beneficiaries are females.

The program is targeting low-income households. SHMFF provides a subsidy to beneficiaries within the age range of 21-50 years, with total monthly income ranging from LE 1,500 – LE 5700. Citizens with incomes below LE 15,00 can apply for a rental unit. The fund is keen on improving outcomes for the target groups by provided automated application and allocation services as following: • Transferring the application process into digital form through portal instead of manual process. • Facilitating access to home-ownership through distributing 395,000 units all over Egypt for low-income citizens. • Subsidizing low income citizens with a direct subsidy ranging from LE 5000 to around LE 40,000 per citizen depending on income of applicants, the lowest income groups would get the highest subsidy to create Improved affordability • Cooperating with 29 mortgage finance lenders to provide mortgage loans (banks and mortgage finance companies) with discounted interest rates. • Working with 18 investigation companies to ensure that potential beneficiaries are in fact eligible. • Ensuring that all delivered units are connected to infrastructure and have access to basic services such as schools, hospital, commercial centers, transportations etc. • Conducting continuous monitoring and research to make sure that provided services for low-income citizens fulfills the needs and to determine the actual demand for units in each governorate. The outcomes of the above resulted in reducing application processing time to advertisement 3 months, with 87% improvement in turnaround. Total number of applicants increased reaching 220,000 in the tenth call for application compared to 19,000 applicants in first one (both lasted for one month) resulting in increasing number of beneficiaries and constructed units. Also improving applicant's engagement through automated complain system which helps applicants to submit their complaints and receive feedback online, till Oct, 2019 “31,806” complains were received and “31,759” were resolved with response rate reaches 99.8%.

SHMFF has digitally transformed its operations in a state of the art system, resulting in many benefits including: -Given the digital transformation of the project, SHMFF is now able to deal with a wide spectrum of citizens, especially the ones with lower income and lower education, across the 27 governorates in Egypt and provided the service to over million citizens. -More than 29 banks and mortgage companies and 18 background check companies are digitally integrated into the process, reducing the usage of paper and accelerating the response time. -Credit Scoring is now integrated in the process, giving almost immediate results on the citizen’s affordability to pay back the mortgage payments as the SHMFF sent applicants documents to the integrated banks automatically to check their I-score through automated integrated system with central bank then notify automatically the fund with applicant I-score results. -The centralized reporting capabilities allowed SHMFF to direct the subsidy funds to the ones in most need and has lowered rejection rates by banks from as high as 40% at the launch to less than 19% currently. The core system eliminates applicants not eligible for subsidy, either for beneficial income celling or age exceeded brackets this leading to lowering number of applications to increasing efficiency. -In the latest tenth call for application, over 220,000 applicants were able to apply for the service within one-month period, and none were required to feature at SHMFF’s headquarters, which is an unprecedented achievement. And resulted in increase in the total number of applicants reaching more than million applicants. In order to keep on going success SHMFF established internal audit unit to monitor and evaluate the fund performance and work accordingly to IVA reports 2015/2016 – 2016/2017 – 2017/2018. Monitoring is done continuously through the creation of digital reports through the automated system and followed up by CEO internal senior management across all departments internal and external auditors.

The main challenge is providing low income households with formal, decent housing in an environment of escalating house-prices and increasing interest rates. And doing so at a large scale in order to decrease the continuous expansion of informal construction and squatter areas. The 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 ranging from 5% to 7% over 20 years on an interim basis. SHMFF improved the effectiveness, transparency, and accountability of housing programs, which in the past were fraud with corruption and misallocation, and developed incentives for private sector investors to join the program for low-income tenants.

The Affordable Housing Program has been innovative in structure, products and services. The innovation which the AHP introduced was that: • Subsidies were made progressive with income and were made 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. • The program is currently implementing a scheme that progressively phases out the interest rate subsidy that was implemented by the Central Bank of Egypt when inflation spiked for different economic reasons. • SHMFF initiated plans for digitalization and digitized work mechanisms in 2015, with the Fund aiming for a gradual migration from the traditional paper system to a fully digitalized, automated system. • By using digital payment mechanisms and enhancing transactions with banking authorities, the social housing program has improved financial inclusion and increasing inclusion of informally employed (percentage of beneficiaries informally employed reached 15.2% of total program beneficiaries). This was a high priority to the government and the president under the announced establishment of the National Payment Council early 2017 • The creation of a Rental Unit within the SHMFF with a clear mandate to design and implement rental development strategies, policies, and action plans. It would also include a digital platform aimed at facilitating the enrollment of landlords and tenants and matching of rental demand and supply. The platform will provide all the information needed by both landlords and tenants on existing laws, procedures, types of contracts, and intermediation experiences in the rental market, as well as on the rights, benefits, and obligations pertaining to the specific SHMFF programs.

Not relevant

In 2019, Iraq, Saudi Arabia, Kenia and Tanzania approached the fund to help design and create the corner stones of a similar system. The initiative was work shopped in the last African AUHF conference in Cape town November 2019, and 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. Currently, Uzbekistan is implementing a housing program inspired by the Egyptian program. A delegation of Uzbek housing officials is to visit SHMFF in the early part of 2020.

Already transferred

-The World Bank: 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 temporary stimulus package of LE 20 billion in 2015 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 receives the proceeds of the sale of the units producing (395,000 units till October 2019) and funds allocated from the government budget as well as a percentage of 10% of sale of all land and unit made by different governorates bodies. SHMFF has 160 employees, including professional and clerical efficient staff, and tightly managed operation. SHMFF received technical assistance from the World Bank to implement its state of the art computerized and comprehensive application, approval and tracking system for its subsidy program and was supported to hire external auditors. -Ministry of finance: a new initiative is launched to end the CBE subsidized lending program and carry the interest rate subsides on MOF’s budget. MOF will cover the difference between subsidized rate and market rate, which is anticipated to decrease gradually. This phasing out is done gradually in order to make sure that the program will continue to be affordable for the targeted income groups (starting from minimum wages of 2,000 and up to 2.5 times minimum income). -National banks: LE 10 billion were allocated by local banks with interest rate lower than market rate by 55% in order to continue delivering social housing units

.purchase of their home through a down-payment and a maximum affordable mortgage loan for a maximum of 20 years. The program aims to implement a financially sustainable and fiscally responsible subsidy mechanism that progressively phases out the temporary interest rate subsidy and returns to making loans at market rates complemented by an on-budget direct demand subsidy. The implementation pace and exit strategy of the interest rate subsidy will depend on the trajectory of the macroeconomic environment particularly the interest rates. However, even with an extended stagnation of high interest rates for the medium term or even a potential increase in rates. The fund can financially afford to cover the required down payment and interest rate subsidy form its own resources stipulated in the law which includes a minimum guarantee income of EGP 4 billion annually ($250 million) -Institutional terms: training of pertinent SHMFF staff conducted to build institutional capacity covering good practices for: i) Stakeholder engagement and participatory approaches; ii) Grievance Redress Mechanisms iii) Information Disclosure and Sharing; iv) Digital Governance; v) Monitoring and Evaluation for social outcomes - Contributing to the development of effective and transparent affordable housing policies, and encouraging the design of effective and well-targeted subsidies for housing the poor, particularly women and youth. -The implementation of basic green initiatives in pilot projects: The Program will support an effective certification process of social housing units. The initial target is 25,000 units.

Да

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. Also 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 reviews the progress of control deficiencies and performs on-site audit for occupancy rates to conform to the latest amendments of mortgage finance law in July 2018 which introduced stricter rules and penalties on fraud by beneficiaries. These include: (i) restricted use of the subsidized unit to the beneficiary and his/her household; (ii) banned disposition of purchased unit for seven years to discourage speculation; and (iii) imprisonment or financial penalties (LE 20,000 to LE 100,000) for providing fraudulent data in applying to the mortgage subsidy. External audits are performed by a reputable independent auditing firm Horwath (Dr.A.M. Hagazy & Co.) They meet management before starting and implementation of each audit 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. The reporting phase is done on site. Auditors examine the program's ability to record and process data accurately. This is done by going through the program data, its monitoring reports and any other related documents and by making site visits. During this phase, the auditors may request additional files or documentation from the internal auditors or ask questions about how conclusions were drawn. At the end of the audit, 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. Evaluation done semi-annually by World Bank as a requirement to disburse tranches of the $500 million loan given the program of a PforR nature (program for results) given the excellent performance and high economic and social impact of the program, the world bank has carried a major evaluation of the performance of the program based on that analysis the bank is planning to extend to the fund an additional finance of $500 million expected to be concluded by the end of this fiscal year.

All program indicators are linked to Disbursement of the loan by the World Bank: Disbursement Linked Indicators are (DLI's): DLI 1: Establishment and operation of an internal audit function within SHMFF providing assurance service for the ownership and rental programs affiliated with the SHMFF DLI 2: Establishment and functioning of a housing monitoring and evaluation system and an M&E unit within SHMFF, and the preparation of the Multi-Year Plan and Annual Targets informed by the M&E system DLI 3: Establishment and functioning of an accountability and transparency mechanism within SHMFF for implementing the Program DLI 4: Establishment by SHMFF 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 under the AMP DLI 5: Number of households receiving demand-side homeownership subsidies for new housing units in each Fiscal Year during Program implementation under the AHP DLI 6: Number of new households participating in rental subsidy programs in each Fiscal Year during Program DLI 7: Percentage of demand-side subsidies provided supporting the purchase or rental of housing units located within a commute of 60 minutes or less to an employment center DLI 8: Number of demand-side subsidies provided supporting the purchase or rental of housing units developed by private sector entities in each Fiscal Year during Program implementation

• Total number of subsidized households receiving demand-side homeownership subsidies linked to mortgage finance loan for new housing units reaches 280,000 households. New rental component was created for lowest income groups (below LE 1,500 per month $84) who could not afford ownership through. According to the last IVA report: • Internal audit and inspection unit was founded in the SHMFF to review the performance of the ownership and rent programs. The MIS generated several reports in light of its function that were reviewed by the IVA. • Foundation of the follow-up and evaluation department of the SHMFF has been achieved to follow up and evaluate the performance of the programs. A multi-year plan was prepared and the annual targets were stated according to the requirements of this indicator. • A mechanism has been established to ensure achieving the accountability and transparency in the SHMMF which can be relied upon in implementing and reviewing the performance of the program. Call for applications was conducted with public awareness campaign launched for potential and current beneficiaries of the program. • A mechanism was established to monitor the occupancy and vacancy rates of the units offered by SHMFF to evaluate performance of the social housing program for the ownership and rent programs. The occupancy rate reached 69.1% occupied with eligible beneficiaries. • Based on the study carried out by the GOPP confirming that the distances between the subsidized units, whether owned or rented, are within the limits of a survey area not more than 60 minutes or less from the work centers. • New PPP initiative has been initiated to offer 125,000 social housing units constructed over the next 5 years for low income households with affordable prices

The most important feature of the initiative is Cooperation between state institutions, coordination with all stakeholder whether public, private or other institutions, and building a relationship based on sharing experiences with these actors. SHMFF receives allocated serviced lands with connected infrastructures from another governmental entity. The fund contracts with (195) private and public contractors to build social housing units for low-income households. Once units are being built the Fund launches a call for applications to receive applicants requests to obtain units through the automated system developed in cooperation with ministry of communications. After processing received requests and automatically allocating units to eligible applicants the fund starts to allocate subsidies to households. State and private banks and mortgage companies underwrite the potential beneficiaries and if approved for a mortgage and upon receiving the down-payment for the beneficiary and the direct subsidy from SHMFF, the financial institution makes a loan to selected eligible beneficiaries and begins servicing the loan. The financial institution receives the differential between the agreed market rate and the subsidized rate from SHMFF on a monthly basis. This subsidy is on-budget and supplied by ministry of finance to the fund who disburses it to the participating banks on a monthly basis.

Ministry of Communications, contributed in the developing and establishment of the automated system of the Fund's workflow from manual to a fully integrated automated system, launching the electronic portal (for the first in Egypt for housing), which accelerate the application and approval process. In addition to implementing an automatic unit allocation system for units it ensures integrity and impartiality. The Central Bank of Egypt, initiated LE 20 billion stimulus package for the housing sector, lowering the banks’ cost of funds and allowing them to lend to qualifying low income households. The lending rate was 5%/ 7% on a fixed rate depending on the level of income, over 20-year loan. This program has been phased out. Construction loan of EGP10 billion at below market rate. Commercial Banks and mortgage companies, 29 bank and company have signed up for the program for a total mortgage amount of LE 27 billion as of October 2019, contributing to the expansion of the mortgage finance base, in line with the demand of low-income citizens to obtain affordable housing units. 65% of beneficiaries are first time bank users. Ministry of Finance, after ending the CBE initiative, MOF covers the differential between subsidy and market rate interest rate for low income citizens. Investigation companies, were contracted with to verify applicant’s residence and work data and the validity of the documents submitted. Private sector housing developers, produce units for low-income citizens in a PPP arrangement with GOE at a set ceiling price of $18,000 for semi-finished units and $23,000 for fully finished units. Private and Public Contracts, reached (195) contractors to build social housing units for low-income households

E-government applications were implemented to facilitate the provision of services to citizens through an automated system for recording and verifying citizen's documents. This accelerated the submission process and made allocations more transparent. SHMFF shifted from supply side to demand side subsidies which enhanced efficiency, transparency and targeting of subsidies to the lower income groups. Subsidies are set to increase with decreasing income levels, and are linked to a maximum affordable mortgage loan by a financial institution. Strengthen the governance of SHMFF: • Strengthening the internal audit unit to monitor occupancy of delivered units and launching electronic reporting system to encourage citizen’s engagement in identifying any violation. • Enhancing the complaints system: Strengthening citizen engagement through inclusion of the “feedback to Articulate Citizen Voice and Improve State Response” system in an electronic mechanism to receive and answer applicant`s complaints and inquiries more promptly SLP not exceeding 3 days for response. • Environmental unit: Revising construction method to shift more towards green buildings to improve environmental, health and safety measures during construction and introducing the principals of green building in 25,000 units initially. • Improve and facilitates different, easy, faster and free payment of mortgage loan`s installment to citizens as of December1, 2019 through: 1. Pre-paid cards: as applicants will be able to pay their monthly installment from any ATM without the need to wait in long queues in banks every month. 2. E-Wallet application: better payment tools and provide a realistic alternative to cash, fast and protected means as your card number is never actually shared with the merchant. It’s protected by a constantly changing technology. • Adding study and research tools to the initiative: conducting research and studies to determine targeted geographical distribution according to the actual demand of social housing units.