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HDFC has been making inroads into varied spheres of development, while retaining a focus on low-income housing and related issues over the past two decades. During this year, HDFC further consolidated its operations as a wholesaler in micro-finance and weaker section housing, while advancing the reconstruction activities at Gujarat into an intensive phase. In addition, HDFC has been engaged in some specific micro-finance initiatives involving for e.g. policy frameworks and developing case studies; these have been captured in a separate section below.

Lending Operations in Weaker-Section Housing

HDFC continued to utilise the Kreditanstalt für Wiederaufbau (KfW) lines (HDFC II and HDFC III) by making loans to Non Governmental Organisation (NGO) intermediaries and state government agencies towards low-cost rural and urban EWS housing projects. Under the second line comprising DM 30 million as grant (HDFC II), HDFC has drawn the full amount from KfW (INR equivalent Rs. 67.98 crore) and all sub-projects have now reached completion. This includes loan disbursements in the amount of Rs. 56.91 crore and the balance has been released as grant funds towards rehabilitation housing projects in response to natural calamities.

The third line, also a grant of DM 30 million is split into two components – the smaller component of Euro 6 million is towards the micro-enterprise Finance Facility (MFF), whereas Euro 9.34 million have been earmarked towards the EWS housing component. The cumulative loan approvals, disbursements and related information for the housing projects under HDFC II and III is furnished in Table I.

The KfW has recently reviewed the progress under HDFC II and III and they have gathered that the borrowers were generally in control of their housing process, leading to optimal use of available resources, and good construction quality. The cost ceiling for housing construction has been increased to Rs. 60,000 per housing unit, as a consequence of which the end-borrower loan size has increased from the current level of Rs. 45,000 to Rs. 54,000 (upto 90% of cost).

MFF Lending and KfW Lines for Micro-Finance

During the year, HDFC has approved 11 income-generation projects under the Micro-enterprise Finance Facility i.e. MFF component of HDFC III. On a cumulative basis, HDFC has approved 51 livelihood projects with a disbursement of Rs. 12.16 crore. The borrowing agencies, which act as social and financial intermediaries, range from professional micro-finance institutions (MFIs) to development NGOs to self-help group (SHG) federations. Until March 31, 2003, HDFC has covered over 35,000 EWS households, so far, and HDFC has experienced near 100% recoveries under the scheme.

Under the National Renewal Fund — Self Employed Women's Association (NRF — SEWA) component comprising a special grant of DM 2.4 million from KfW towards micro-enterprise development (Sanjivani Project), HDFC has disbursed as at March 31, 2003, a cumulative amount of Rs. 4.37 crore to SEWA Bank, Ahmedabad. The SEWA Bank has utilised the funds in disbursing 2470 loans to their women members, covering a variety of livelihood activities. The bank's cumulative disbursements under this project stood at Rs. 4.15 crore, with an average loan size of Rs. 17,000.

During the year KfW conducted an appraisal of the proposed Microfinance Refinance Facility (HDFC V, fifth line). As an outcome of which, bilateral funding of Euro 10 million has been committed, which includes a loan of Euro 9 million and the balance as a grant towards technical assistance (TA) and capacity building measures. In the first round of MFI selection, out of the eight detailed appraisals carried out, four prominent Indian MFIs have been identified viz. Bharatiya Samruddhi Finance Ltd., Friends of

Women’s World Banking, DHAN Foundation and the Indian Association for Savings and Credit (IASC). HDFC may include more MFIs in the program at a later stage. The Ministry of Economic Cooperation (BMZ), Federal Republic of Germany has also approved HDFC V; and the TA and capacity building measures are expected to commence shortly.

Specific Developments in Micro-Finance

Global Compact:
The United Nations Global Compact selected a business case from HDFC which was presented at the Annual Learning Forum held at Berlin in December 2002. The case comprised HDFC’s role in the formation of the Indian Association for Savings and Credit (IASC), a section 25 company carrying out retail micro-finance operations in south India. HDFC participated in the Learning Forum meeting at which the IASC case was discussed and this also generated substantial interest in the international development community. The case has now been uploaded on the global compact web-site

RBI nominated Informal Working Groups: In order to understand and initiate appropriate action on various design and delivery issues facing the Indian micro-finance sector, the Reserve Bank of India (RBI) constituted four informal working groups. HDFC was invited to be a part of the working group on “Funding Issues of MFIs” comprising besides HDFC, the Oriental Bank of Commerce, BASIX and Sa-Dhan. The group jointly worked on this assignment and held meetings with several practitioners, MFIs, NGOs, micro-finance experts and banks in preparing a report with certain recommendations. This report was submitted to the RBI in March 2003.

Case Studies on Community Infrastructure Financing: The World Bank in its initiative to document the successful financing of community infrastructure projects, approached HDFC to prepare two case-studies that highlight such financing mechanisms. The DFID has offered to fund the costs of case-study preparation. HDFC has selected the following two cases where loan funding has also been committed, (a) Madurai Vattara Kalanjiam, a self-help group federation promoted by the DHAN Foundation which has undertaken a slum-housing project at Madurai and (b) IASC, which launched an innovative toilet-financing scheme for the palmyrah workers community at Kanyakumari.

Shelter Assistance Reserve

A broad spectrum of social causes involving over 110 development agencies and NGOs were supported under the Shelter Assistance Reserve during the year. HDFC extended grants towards several social and Social Initiatives and the overall utilisation from the reserve stood at Rs. 2.94 crore for the year 2002-03. Cited below are a few examples of such NGOs and institutions, which are committed to different social issues, reflecting the general application of the reserve.

Association for Cricket for the Blind in India

Focusing on their ‘abilities’ rather than their ‘disabilities,’ this association has been promoting cricket for the blind in India. They organise Zonal, State and National level tournaments wherein several teams from across the country participate. HDFC was approached to sponsor the 2nd World Cup Cricket for the Blind, which was played in Bangalore and Chennai in December 2002. The tournament provided an opportunity to over 100 participants to compete at an international level.

Sir Shapurji Billimoria Foundation

The Sir Shapurji Billimoria Foundation was established in 1998 with the objective of undertaking research and training for the promotion of integrated education —the concept being that mainstream schools should accommodate children of varying abilities. Since its inception, the foundation has addressed the needs of children of different capacities and redesigned teacher education. This has enabled teachers to enhance the optimal development of these children. The foundation’s research and training programmes have been supported by HDFC with financial assistance.

Family Planning Association of India (FPAI)

The FPAI is currently the country’s leading voluntary family planning organisation, supported by the government as well as international donors. It runs projects all over the country with a network of over one lac volunteers trying to reach vital health information to the most marginalised communities. HDFC teamed up with FPAI in supporting their projects dealing with promoting the knowledge of family planning and population policies and improving the health status of adolescent girls.

ChildLine India Foundation

The ChildLine India Foundation is India’s first national, 24-hour, free emergency phone outreach service for children in need of help. The Foundation has emerged as a unique example of co-operation between government and nongovernment agencies with child welfare being the key focus. Through a network of NGOs in each city the Foundation responds to the immediate as well as long-term needs of urban street children. HDFC has extended financial support to ChildLine towards its operational costs. These services have now expanded to 39 cities across the country.

Head Office :
HDFC, Ramon House, 169, Backbay Reclamation,
H T Parekh Marg, Churchgate
MUMBAI 400 020.
Tel: 56316000, 22820282 - HDFC Board line
Working Days : Monday to Friday
Working Hours : 9:30 am to 5:15 pm

Gujarat Earthquake Rehabilitation Measures

During the year, HDFC made steady progress in the post-earthquake rebuilding measures being carried out at the worst affected districts of Gujarat, by way of utilisation of the financial assistance available from KfW under the fourth line.

HDFC is operating the grant component (HDFC IV/1) of Euro 10.22 million, which envisages the reconstruction of destroyed houses and social infrastructure in rural areas, through several partner NGOs. These local agencies are responsible for fully implementing the reconstruction projects by ensuring close participation of the beneficiary households.

The earthquake reconstruction programme had commenced with the involvement of only three (key) partner NGOs. However, a favourable Euro / INR exchange rate over the past two years has resulted in surplus grant funds being available out of the KfW line. This necessitated frequent revision in the allotment of the grant funds by way of increased sanctions to the existing NGOs in similar or new projects. HDFC also identified new partner NGOs and housing projects, on the basis of certain socioeconomic and / or disaster criteria while also taking into account the capabilities of the new NGOs.

Until March 31, 2003, HDFC has released grants of Rs. 19.84 crore which has resulted in the construction of over 3000 houses across four districts. The projects have achieved a reasonable degree of self-help contribution from the owners, mostly in the form of voluntary unskilled and semi-skilled labour, salvaged building materials and cash investments for the provision of additional facilities in the core house. HDFC also procured consultancy support for the project to ensure earthquake resistant construction. The technical assistance has kept a focus on local social characteristics thereby encouraging design flexibility, innovative low-cost building methods and capacity building of the implementing NGOs in scaling up the construction activity.

Table II lists the different type of housing projects undertaken by the NGOs with average costs per unit.

One of HDFC’s main partner NGO’s, the Kutch Nav Nirman Abhiyan, a network of over twenty development organisations operating at Kutch, has carried out extensive work in the area of earthquake housing over the past thirty months.

However, this intervention is now drawing to an end. At this juncture, there is a strong-felt-need for a long term institution which would exclusively engage in innovation, planning, designing and training in all areas of the built form, and would train rural and urban entrepreneurs in construction related technologies. The shelter division of Abhiyan is therefore in the process of being hived off as a separate organization called ‘‘Hunnar Shaala’’ (House of Skills), being registered as a Section 25 company. During the year, HDFC has played an active role in advising and guiding Abhiyan in launching the Hunnar Shala.

The loan component of Euro 15.33 million (HDFC IV/2) had been approved towards refinancing of sub-loans made by HDFC in the earthquake-affected areas.During the year, HDFC availed of the first tranche of Euro 10.22 million by way of refinancing of retail home loans originating at Ahmedabad and Vadodara offices covering urban and semi-urban areas in the affected districts. The full drawal of the loan is likely to be effected by December 31, 2003.