Housing SME Market Assessment in Kenya

  • Remote
  • TBD USD / Year

Habitat for Humanity

Through the Terwilliger Center for Innovation in Shelter (“TCIS”), Habitat for Humanity International (“HFHI”) catalyses change towards more efficient and inclusive housing market systems, resulting in expanded access to quality, affordable housing for low-income families. To accomplish this, TCIS facilitates the flow of investment capital to the housing sector allowing financial institutions and other housing market actors to provide the products and services that low-income households need to build and expand their shelters. One example of such efforts is the MicroBuild Fund (“MBF”), the first $100-million impact investing fund dedicated exclusively to enabling housing microfinance.

As HFHI aims to leverage the success of the MBF and is now in the process of designing a second fund, it would like to include the supply side as well by supporting MSMEs (micro, small, and medium enterprises) along the affordable housing value chain.

Specific services requested from contractor
Habitat for Humanity is looking for a consultant to conduct a diagnostic and market assessment of MSMEs in the construction/ affordable housing value chain in Kenya. It is expected that the contractor will work closely with Habitat’s technical team throughout the assignment. The overall objective of this study is to help design the structure for the second fund, which could help meet the financial and non-financial requirements of MSMEs working in the housing value chain.

The selected consultant is expected to map and identify SMEs along the affordable housing value chain and through field visits understand both their financial and technical needs, incl. technical and business advisory services that Habitat could provide in the future to promote affordable access to climate-resilient shelter for low-income households. Based on the market assessment, the consultant will prepare an initial pipeline of investable companies.

To scope the investment universe and build a pipeline of potential investment opportunities, the consultant is expected to define a preliminary ToC and identify relevant business and impact criteria to narrow the search for investable MSMEs (including affordable housing developers, which are being assumed as MSMEs in this context).

Pipeline analysis will facilitate the ability of Habitat to develop a financing and technical assistance offering that meets the needs of each country’s specific housing system as well as address the individual financing needs (in terms of instruments, tenor, ticket sizes, etc.) of the MSMEs seeking capital in the market.

The following key points need to be addressed by the research for the demand side analysis:

Definition
Definition of the affordable housing investment universe.
Breaking down the MSME monolith. Potential variables could be size, number of employees, formality, turnover, vintage, the value of assets, loan size, channel of financially serving such MSMEs (such as direct investments or through intermediaries) etc.
Primary business (type of business) within the construction/affordable housing value chain.
Define personas/archetypes of MSMEs for better understanding and empathy with the target segment.
Gender and social-economic status of the firm’s owner.
Overall critical analysis of the nuances of segments that make up the MSME universe.

Market Sizing
High-level assessment of the size of the investment universe, including the number of MSMEs in this space, target addressable market, and the current financing gap among the MSMEs.
Assessment of investment opportunities in terms of areas/ sectors/ demographic groups.

Financial Needs and Behaviour
Existing sources of finance.
Preferences over informal/formal sources of finance (probing on type of formal sources).
Financing requirements.
Eligibility for formal financial service providers.
Attitude toward formal financial service providers.
Challenges faced by MSMEs in accessing formal finance solutions.
Expectations of a financial product. It may include tenor, loan size, interest rate, processing requirements, collateral requirements, etc.
Digital readiness such as adoption of digital payments, etc.
Overall challenges and opportunities in the MSME financing space.

Business Advisory and Technical Requirements
Business development services.
Financial education, budgeting, and digital literacy.
Record keeping and inventory management.
Human resources and talent management.
Digital and technology support.
Marketing and promotion.
Supply chain management.
Networking and mentorship opportunities.
Legal and regulatory support.

The Kenya construction-focused MSMEs market assessment will be complemented by insights and data shared by Habitat’s Labs in five countries. The consultant will have access to raw data, including mainly qualitative information on the type of business/MSMEs in those markets and their financial requirements. The Labs staff will also be available for key informant interviews, and can reach out to the market/partners/MSMEs to address any information gaps identified by the consultant.

Supply-side analysis
The research firm could focus on the following areas while interviewing FIs:
Understand the profile of MSMEs served by FIs and details on their business sectors (to determine the % of MSMEs in the housing sector).
Understand the financial and non-financial products offered by FIs.
Sources of capital for on-lending to MSMEs and the characteristics of such financing facilities.
Willingness to design a dedicated product for MSMEs working in the housing sector.
Support needed to launch such products.
Willingness to offer non-financial services.

In parallel, the fund manager of MicroBuild I is sharing a survey with the fund’s current investees globally to get an understanding of their MSME/Construction focused lending activities. The survey responses will be used and analysed by the consultant to enhance the recommendations shared in the final deliverable.

Methodology
Qualitative methodology for the overall research. For the primary research, conduct:
At least 9-12 semi-structured interviews with selected MSMEs working in the housing sector (3-4 interviews with SMEs within each category of micro, small and medium)
1-2 in-depth interviews with the financial institutions in Kenya.

Deliverables
The final deliverable to Habitat shall include: final report in power point format including a general market assessment of the potential for investing in MSMEs either directly or through local financial institutions,
A detailed description of their financial and non-financial needs by size and enterprise model, as well as an initial pipeline of potentially investable companies.
A ‘Deal Book’ of ~2-3 high-potential, investable enterprises that match Habitat investment priorities, including a company snapshot, finances, investment needs, fit with Habitat transformative agenda and an initial assessment of the opportunity, as well as suggestions for the non-capital provider role that Habitat could play in supporting these enterprises or the broader construction ecosystem. Also, please provide analysis and recommendations from the insights obtained through interviews with the financial institutions.

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How to apply

Deliverables: ready by April 15, 2023.

Direct proposal/questions to Jitendra Balani [email protected] and Naeem Razwani [email protected] .

Deadline: February 23, 2023.


Closing date: 23 Feb 2023