Better Living Challenge

Value Chain and Access to Credit


Census 2011 revealed that more than 300 000 households are living in informal dwellings in the Western Cape.  Of these households, approximately 35% live in informal backyard dwellings and 65% in informal settlements.  Around 74% of the informal dwellings are located in the City of Cape Town and 10% in the Cape Winelands District. More than 95% of these households have an income below R6 400 a month and a head of household aged between 18 and 59 (based on 2011 Census data). In terms of affordability, using 2011 income and expenditure data, it is likely that more than 230 000 households spend less than R400 a month on their dwelling(s).

What finance is available to end-users in informal settlements?

Community saving and lending

Informal finance products include loans from friends and family, stokvel savings and loans, community saving schemes, informal employer loans, payment terms by informal shack builders and materials providers, and instalment payments for informal housing sales.

Formal credit lenders

The main available formal finance products are general microfinance, and housing-specific microfinance or home improvement loans offered by registered credit providers through materials retailers or kit-form manufacturers. There are significant constraints in terms of information and awareness, access, eligibility, and affordability.

Within the targeted market segment, only limited use is made of pension-backed housing finance, employee housing schemes, low-income mortgages, and partially-secured medium-term loans.


Some products support incremental housing indirectly, such as materials payment terms for contractors from retailers or manufacturers, small-scale landlord finance, enterprise and supplier development finance, and potentially also cross-subsidisation in mixed-income housing developments. Disaster relief packs by the government and NGOs, as well as upgrading programmes can serve as in-kind contributions that reduce upgrading costs for households.

Opportunities for innovative finance

  • Support for affordable material access/non-cash finance. This includes establishing materials “layby’’ facilities (or banks), and promoting more beneficial links into the builders’ rubble supply chain. A layby does not attract interest, and therefore does not fall under the National Credit Act, but rather under the Consumer Protection Act.
  • Improving the functionality of informal finance products, and linking products to knowledge and capacity-building around incremental housing. This includes stokvels, community saving schemes, peer-top teer lending, informal instalment transfers/transactions, and informal employer loans.
  • Support to contractors, small-scale landlords and developers, enterprise and supplier development funds that can indirectly help to increase affordability and quality for end users.

The BLC worked with Aunnie Patton Power founder of Intelligent Impact, an advisor to the Bertha Centre for Social Innovation and Entrepreneurship at the University of Cape Town, and Associate Fellow at the Saïd School of Business of the University of Oxford, among others to develop innovative value-chain of finance and materials.