Uzbekistan: Housing for Integrated Rural Development Investment Program (Tranche 2)

Horizontal Tabs

Lessons

A realistic schedule increases the likelihood of project success.

According to the loan agreement, the Asian Development Bank (ADB) and the government planned to disburse $92 million of the $200 million-tranche 2 loan in 2013 and the rest in 2014. However, ineligible expenditures became inevitable, as the 2013 subloans were disbursed in spring rather than the September–December 2013 schedule indicated in the periodic financing request; loan approval and effectiveness also did not occur until October 2013. To help mitigate potential adverse impacts, ADB approved in November 2014 a minor change in the multitranche financing facility (MFF) and tranche 2 loan agreement to increase ADB’s financing share for the 2014 subloans from 20% to 50%. To avoid a repeat of this experience, ADB project teams should ensure that the borrowers fully understand the provisions of project agreements before these are signed and made effective. Monitoring compliance to these agreements would help trigger timely response measures from either or both ADB and the borrowers. Instead of funding 4 years of consecutive expenditures through a 3-tranche MFF, which proved inefficient under this tranche 2 project, ADB could also consider opting for a single project financing modality.

ADB deployment of international specialists to work full-time on projects favors successful implementation.

ADB’s decision to deploy a dedicated public finance specialist to work on this project in Uzbekistan was a good practice that should be replicated. It facilitated the delivery of ADB monitoring, supervision, and coordination functions, which were quite heavy all throughout project implementation. Together with intermittent staff consultants, the specialist also assisted the government in administering the beneficiary selection process. Overall, the specialist and team of consultants helped keep the investment program on track by processing in a timely manner the required changes in the MFF and other program and project agreements.

Down-streaming housing loans to moderate− and lower−income beneficiaries, with a focus on women, is feasible with the right approaches and activities.

The project’s intended outcome was to downstream housing loans to moderate− and lower−income beneficiaries, with a focus on women. It has demonstrated that it is possible to achieve this goal by conducting an expanded and improved public information campaign that particularly targeted women and encouraged them to be involved in identifying gender-responsive measures in the housing and overall program designs. The housing provided with tranche 2 support thus had indoor kitchens, gas ovens, and piped hot and cold water, which resulted in significant time savings for women who previously had to use outdoor kitchens and fetch water for the home from outside pumps. The houses were also large enough to allow women to start home-based businesses such as sewing and baking. Shopping centers, markets, and bakeries established in the new communities created jobs, primarily for women. Moreover, during 2013–2014, 4,541 women became registered owners of new houses. With these accomplishments, the project has lived up to its effective gender mainstreaming classification and successfully achieved 10 of its 13 quantitative gender-related targets.

Background

In 2009, Uzbekistan’s government launched the Rural Housing Scheme (RHS) to jumpstart the development of the rural housing finance market. The RHS channeled rural savings into housing investments and utilized local contractors and construction materials to generate jobs and stimulate the construction industry. Building on the RHS, the government expanded access to affordable housing finance as a strategy for accelerating rural development. It subsequently requested for assistance from the Asian Development Bank (ADB), which approved a $500 million multitranche financing facility (MFF) for the Housing for Integrated Rural Development Investment Program in September 2001. While the program had 3 components, the MFF focused on providing housing loans to targeted creditworthy borrowers via participating commercial banks. From 4 tranches originally, the MFF ultimately consisted of 3 tranches.

Tranche 2, approved in October 2013 for $200 million, provided 7,642 of the 21,000 subloans targeted for the entire MFF. On average, the new homeowners contributed 41.1% of the house purchase price in down payments, with the remainder funded by a 15-year mortgage loan. The loans’ initial principal amount was $37,951 in 2013 and $41,517 in 2014. The interest rate for 2013 loans was 7% for the first 10 years and the current refinancing rate of the Central Bank of Uzbekistan (CBU) for the remaining 5 years; for the 2014 loans, it was 7% for the first 5 years and CBU’s current refinancing rate for the remaining 10 years. To make the homes more affordable, the government has exempted homeowners from paying property taxes while the loans are outstanding and will not have to pay income taxes on incomes used for mortgage loans.

Three house designs were made available: a 3-room house, with 134 square meters (m2) of floor area; a 4-room house, with 143 m2 floor area; and a 5-room house, with 182 m2 floor area. All houses were situated on 600 m2 lots provided without cost by local governments.

15,000 local government staff were also trained in rural housing and participatory rural development and investment planning; and 1,908 new microloans were provided to homebuyers, 41% of which were women. In line with an MFF agreement, the government fully financed these 2 outputs.

As it accomplished all its output targets, the project also achieved its intended outcome of down-streaming the RHS to moderate- and lower-income beneficiaries, especially women. Prior to ADB’s involvement in the RHS, less than 1% of the loans went to the targeted borrowers. Under tranche 2, the proportion of borrowers in the lowest 3 income quintiles increased to 96% in 2013 and 100% in 2014. Women received 23% and 21% of the loans in 2013 and 2014, respectively.

Overall, the project had a significant positive impact on the economy and created an estimated 161,000 new jobs yearly. It was rated successful by ADB’s Central and West Asia Department. The Qishloq Qurilish Bank and National Bank of Uzbekistan served as implementing agencies for the housing loan component; while the Ministry of Economy, the executing agency, implemented the 2 government-funded components.

Project Information

Project Name:

Housing for Integrated Rural Development Investment Program (Tranche 2)

Report Date:

July, 2017

Main Sector:

Multisector

Country:

Uzbekistan

Project/Modality:

Loan

Themes: