In this article we bring about the woes of the poor living in mud huts and shacks in India and elsewhere in the world in the background of the pioneering efforts of a NGO in Gujarat - SEWA Bank: promoting Housing Finance for the slum dwellers. The laudous achievement of this NGO is aptly highlighed by CitiesAlliance - Cities Without Slums in their series of articles titled "Shelter Finance for the Poor"

"SEWA Bank was registered as a cooperative bank under the dual control of the Reserve Bank of India (RBI) and the State Government of Gujarat in May 1974. The Bank's initial capital came from the contributions of approximately 4,000 members, the vast majority of whom are very poor women belonging to the Self Employed Women's Association (SEWA), a Gujarat-based registered trade union established in 1972. The bulk of SEWA Bank's capital comes from its members' savings. For the past few years, SEWA Bank also has received financing for its housing portfolio from the Housing and Urban Development Corporation (HUDCO) and the Housing Development Finance Company (HDFC). As of January 31, SEWA Bank's total outstanding portfolio was $2,274,866, of which, $913,086 (40 percent) was housing loans. The number of active loans stood at 9,129, of which 3,677 (40 percent) were housing loans. With the exception of 2001 when financial self-sufficiency fell to 96 percent, SEWA Bank has experienced operating profits since 1998. Perhaps the most salient aspect of SEWA Bank's operations is that there isn't a strict delineation between housing and non-housing loans. In fact, most of SEWA Bank's loans can be used for housing purposes. The Parivartan scheme (an alliance between SEWA Bank, the Ahmedabad Municipal Corporation, and other local nongovernmental organizations (NGOs) also deserves particular mention as an innovative partnership model for slum-upgrading. The objective of that program is to provide basic infrastructure (road, electricity, water) to people living in the hundreds of informal settlements that dot the Ahmedabad landscape. The Ahmedabad Municipal Corporation contributes approximately 80 percent of the funds needed for the upgrading work. Beneficiary households are expected to contribute the remaining 20 percent - an amount they save with, or can borrow from SEWA Bank. SEWA Bank has used the Parivartan program to expand its client base beyond existing SEWA union members and sees it as an important part of future growth.

"With a population approaching six million, Ahmedabad is the sixth-largest city in India, and has experienced fast-paced growth during the last few decades, with its population increasing by about 22 percent between 1991 and 2001.Ahmedabad's economy has suffered from earthquakes, social unrest, and droughts, and as a result its poverty rate is above the national average. Residents there earn an average of $409 annually, and 34 percent of the population-as compared with just 21 percent for India as a whole-live below the poverty line. Given the rapid population growth, a stagnant economy, and the paucity of housing and basic services, the city has experienced the swift development of new slums, in which about two-fifths of the population now live.

"The demand for shelter financing from slum dwellers is outstripping the supply of loans. Though they are numerous and varied, housing finance programs in Ahmedabad have not had a major impact on low-income households employed in the informal sector. Most banks do offer housing loans, but most do not offer it to the informally employed poor, even though the government requires that 10 percent of all lending go toward the "weaker sections" of the economy (i.e., the poor). Loans for this group can still be tens of thousands of dollars, with loan terms approaching 20 years-not the sort of loans that are likely to be the most effective in improving the living conditions of the area's poor. As a result, the economically active poor who work in the informal sector remain underserved, having to rely on savings and informal moneylenders for financing. The bank of the Self Employed Women's Association (SEWA), created in 1974 by the members of the SEWA trade union, is the largest microfinance provider in Gujarat. SEWA Bank is also one of only two non-governmental institutions offering housing finance to economically active poor people in Gujarat. But with a current loan portfolio under $3 million, even SEWA Bank's impact has been limited, and the unmet demand for housing finance remains quite large. Given reliable estimates that more than 90 percent of Indian women work in the informal economy and 41 percent reside in communities classified as slums, the potential female housing microfinance market is conservatively estimated at one million women in Ahmedabad.

"With the motto, "A Bank of Our Own," the members of the SEWA Trade Union originally created SEWA Bank as a financial institution dedicated to self-employed women in Gujarat. As such, its immediate potential clientele includes the approximately 400,000 women who belong to the SEWA Union. It is serving economically active poor women in Ahmedabad that cannot access the formal financial sector, a market conservatively estimated at one million.

"SEWA Bank's main housing microfinance products do not significantly diverge from its microenterprise loans. The main difference consists in the fact that the client has up to 60 months to repay the loan amount, as opposed to 35 months for a microenterprise loan. SEWA Bank offers one major housing loan, the Paki Bhit (its principal housing loan). Other specific housing products such as the equitable mortgage loans for new home purchases, and infrastructure loans under the Parivartan slum-upgrading program represent only 4 percent of SEWA's housing loan portfolio. In reality, however,most of the other loans SEWA Bank offers may also be used for housing purposes.A SEWA Bank report to the Reserve Bank of India (RBI) estimates that fully half of all loans the Bank disburses are used for housing. The maximum loan amount for an unsecured Paki Bhit loan is Rs. 25,000 (approximately $532) with an average loan size of Rs. 24,823 or $528 (based on 2002 data). In principle, SEWA will lend more than Rs. 25,000 for secured Paki Bhit loans based on the value of the pledged asset; however, in practice it has not lent more than this amount. Approximately half of the Paki Bhit loans are used for basic improvements such as wall, floor, or roof repair, and half are used for room additions including kitchen or bathroom additions. SEWA Bank does not require the loan amount to completely cover the cost of an improvement. The nominal interest rate on Paki Bhit loans depends on the loan fund source. Paki Bhit unsecured loans are financed with funds from the Housing Development Finance Corporation (HUDCO) and have an interest rate of 14.5 percent, as mandated by HUDCO. Paki Bhit secured loans are financed with SEWA's own funds and carry an interest rate of 17 percent for loans of Rs. 25,000 ($532) or less and 18 percent for loans of more than Rs. 25,000. Through the Parivartan scheme, which provides for the installation of roads, electricity, and water, the Ahmedabad Municipal Corporation provides Rs. 8,000 ($170) per participating household for slum upgrading. Participating households must provide a counterpart contribution of Rs. 2,000 ($42) for a total investment of Rs. 10,000 ($212). The participating families may borrow their counterpart contribution from SEWA Bank or use SEWA Bank's facilities to save the required amount. Given the time it takes to bring a particular project from the planning phase to the construction phase, most clients are able to save the required amount instead of taking a loan. SEWA Bank has used the Parivartan program to expand its client base beyond existing SEWA Union members and sees it as an important source of future growth. SEWA also differentiates between its secured and unsecured housing loans.

"Secured loans are backed by assets, such as jewelry or a lien on the client's fixed deposits held at SEWA Bank. Unsecured loans are backed by a lien on the client's demand deposits with the Bank and guarantors. Once a loan is approved, the client must provide a guarantee. The guarantor typically comes in at the time of the signing of the loan documents. The guarantor must provide a copy of his or her identification card and a proof of income. The loan officer reviews the guarantor and may seek additional approval from the accountant or managing director. SEWA encourages and prefers women to have their name added to the property title or stamp paper.