A New Line of Thinking from an Iconic NGO

Historically, many traditional INGOs have considered private-sector-engagement as a four-letter word.

At Habitat, the journey to supporting market-based solutions had a long evolution. The first step was a series of conversations with Habitat’s stakeholders, to take a step back and define the biggest barriers preventing people from finding affordable housing. After a series of cross-country interviews, they discovered that families had trouble getting a loan with an interest rate they could afford to pay back.

According to Patrick Kelley, the global director of Habitat for Humanity’s Terwilliger Center for Innovation in Shelter, “We recognized that private sector motivations were going to be critical to scaling impact toward our mission, and entrepreneurship was going to be a big piece of that.”

In response, Habitat partnered with the Overseas Private Investment Corporation (OPIC), the Omidyar Network, the MetLife Foundation and Triple Jump and put together the $100M Microbuild Fund, which helps micro-finance institutions around the world provide these small loans to people building “safe, decent and durable homes” at the base of the pyramid. As of last year, the fund has provided financing to house more than 270,000 people in 23 countries.

While they were building this fund, the Habitat team started noticing something: their work was constantly bringing them into contact with impactful startups providing solutions for people who needed affordable housing.

For instance: in Rwanda they worked closely with EarthEnable, a company that specializes in installing adobe floors in huts in very poor villages in Africa. In India, they encountered ReMaterials, a company that uses recycled materials to replace asbestos roofing sheets with better, stronger, greener alternatives. In Africa they worked with Burn, a company providing clean cookstoves to low-income families. But they didn’t have a formal way to support any of these companies.

“Typically, an NGO would give someone a grant or receive a grant to produce outputs for households within their target market,” said Kelley. After seeing how effective these companies were working (and growing), Habitat started thinking about doing things differently.

A Universal Human Right

More than 1.6 billion people worldwide lack access to adequate housing. 1.3 billion lack consistent electricity, and more than a billion people don’t have access to clean drinking water or sanitation.

Access to these services is not only a universal human right; it is also a basic need that must be met for nations to develop, and emerging markets to grow. Habitat recognized this problem in Mexico, where over 65 million people suffer from unsafe housing, limited access to water, and lack of access to energy. While the Mexican government has made substantial strides in improving access to basic utilities over the last 20 years, there remains an enormous market potential to provide cheaper, smarter solutions for marginalized populations that have limited access to adequate utility and housing infrastructure.

In 2016 Habitat for Humanity officially launched the Terwilliger Center for Innovation in Shelter, a new arm of the organization made possible by a legacy donation of $100M by Ron Terwilliger. The Center’s goal is to facilitate better-functioning inclusive housing markets to provide more than eight million people access to improved shelter solutions by 2020. Crucially, this includes investing in for-profit businesses addressing access to water, energy, and general housing construction technology.

Kelley, the center’s director, realizes this is a new path forward for the organization, but he believes that it’s directly tied to their mission to make housing markets work better for the poor. “We changed our way of thinking from ‘How do we do this’ to ‘What’s going to drive the success for the sector by helping companies solving the same problems Habitat is addressing?’ It was less us about us, and more about the mission.”

ShelterTech: Mexico 2017

To complete their first investment, the Terwilliger Center partnered with Village Capital to run an investment-readiness program for entrepreneurs increasing access to energy, water and affordable housing solutions for the the base of the pyramid in Mexico. The name of the program: ShelterTech: Mexico 2017.

At the end of the program, the nine participating companies used Village Capital’s signature peer-rank process to select two companies to receive $50,000 each in investment — provided by Habitat for Humanity. The two peer-selected companies were Vitaluz and Energryn. Vitaluz offers prepaid solar energy to off grid communities, whereas Energryn installs solar water systems for communities that do not have reliable access to energy.

Kelley is excited about where the Terwilliger Center is going. “Over the next decade, we hope companies we are working with are some of the major players bringing solutions for the BOP over the next ten years. It’s a long story — who is the next generation of game changers for energy, water and housing in Mexico. Good ideas and good entrepreneurs around the world should help power the next generation of affordable housing.”

Habitat for Humanity isn’t the only non-governmental organization to take this new approach. Organizations like Mercy Corps started implementing more market-based approaches to development problems in the late 2000s. Nevertheless, the approach is still novel. According to a 2016 report by impact investing group Amplify, less than one third of INGOs are actively engaged in investment, while the remaining 70% either piloting approaches or exploring options.

When I built that house in Virginia as a kid, I knew Habitat as the non-profit that had always built houses, and would always continue to build houses. It’s incredible to see how this legacy organization has evolved to take a broader approach to advance their belief that housing is a universal human right.

Ben Younkman is a Manager on Village Capital’s New Initiatives team, where he helps partner organizations leverage Village Capital’s process to achieve their own objectives. Learn more about Village Capital on our website.