Asian Development Bank's Assistance for Low-Income Housing Finance in Sri Lanka

ADB has been providing low-income housing finance to developing countries since the late 1970s. Given the potential for such financing to contribute to ADB's strategic agenda on inclusive growth, it is important that ADB-supported low income housing projects are assessed comprehensively and critically to improve development effectiveness in this area.

This report presents an impact evaluation study of a housing finance component of the Urban Development and Low-Income Housing Project in Sri Lanka. The eight-year project was completed in 2005 at a cost of $102.99 million. Some 26.1% of this comprised housing finance to help poor households improve their living conditions.

Among the objectives of the housing finance component - which provided 28,378 loans - was to increase the access of low-income households to market-based housing finance. But it was found that the majority of beneficiaries were near middle-class households, a result of setting the selection criteria too high at the 55th percentile of the income distribution in Sri Lanka. In fact, only around 1% of beneficiaries were from the lowest 10% income group. The study concludes that the weak impacts found on household welfare measures (education and health) from the loans may have been because most beneficiaries were not very poor.

The study recommends improving the analysis and design of low-income housing projects for better targeting and achieving greater welfare impacts, and gradually increasing the collection and maintenance of baseline data on selected projects amenable for impact evaluation.