Neftaly: Financing Backyard Partnership Projects in Informal Settlements

Introduction

Access to affordable housing remains one of the biggest challenges in informal settlements. Backyard partnerships—arrangements where landowners and tenants collaborate to develop housing units behind existing homes—are an increasingly popular solution. However, the success of these projects often depends on access to finance.

At Neftaly, we recognize that financing backyard housing in informal contexts is both a barrier and an opportunity. With the right strategies and support systems, communities can build safe, affordable, and sustainable housing without relying on large-scale formal developments.

What Is a Backyard Partnership Project?

A backyard partnership project involves collaboration between a landowner and one or more partners—such as family members, tenants, small-scale developers, or NGOs—to construct a secondary dwelling on the property. These units are typically used for rental income or to accommodate additional family members.

Financing these projects often requires creative, flexible, and community-driven approaches, especially where land tenure is informal and traditional loans are out of reach.

Common Financing Challenges

1. Lack of Formal Land Ownership
   • Without title deeds, homeowners cannot access formal bank loans or mortgages.
   • Financial institutions are reluctant to lend due to perceived risk.
2. Low or Irregular Income
   • Many residents in informal settlements earn daily or informal wages, making them ineligible for traditional credit.
3. Limited Access to Financial Services
   • Communities often lack access to local banks or microfinance institutions.
4. High Construction Costs
   • Building materials and labor can be expensive, especially without bulk purchasing power or technical guidance.
5. Informal Agreements
   • Without formal contracts, there’s little security for investors or tenants, which discourages financial support.

Innovative Financing Solutions

Neftaly encourages the use of alternative and inclusive financing mechanisms that work within the realities of informal settlements:

✅ Microfinance and Community Lending

• Small loans from community-based savings groups, stokvels, or rotating credit associations are more accessible and flexible.
• Microfinance institutions can offer low-interest, short-term loans tailored for housing improvements.

✅ NGO and Donor Funding

• Partnerships with NGOs can provide seed funding, building materials, or technical support.
• Donor-funded pilot programs can demonstrate success and attract larger investments.

✅ Rent-to-Own Agreements

• Tenants can contribute to construction costs with an agreement to own or co-own the unit over time.

✅ Public-Private Partnerships (PPPs)

• Collaborations between municipalities, private investors, and communities can support service upgrades and unit construction.

✅ Incremental Building Support

• Instead of building all at once, households can construct in stages, supported by small infusions of capital and technical advice.

Neftaly’s Role in Supporting Financing

Neftaly works to:

• Educate communities on budgeting, savings, and low-risk lending practices.
• Connect landowners with ethical microfinance providers and grant opportunities.
• Advocate for policy reform to support recognition of informal housing and access to government subsidies.
• Facilitate partnerships between civil society, local government, and financial institutions.
• Promote financial literacy for landlords and tenants to build long-term housing sustainability.

Key Principles for Sustainable Financing

1. Transparency: All parties should understand the terms of agreements and repayment responsibilities.
2. Affordability: Financing options must be within reach for low-income earners.
3. Security: Legal or written agreements help protect everyone’s rights and investments.
4. Inclusivity: Financing should consider women, youth, and vulnerable groups as active participants and beneficiaries.

Conclusion

Financing backyard partnerships in informal settlements is not only possible—it’s essential for inclusive urban growth. With the right support, communities can develop their own housing solutions while building financial independence and resilience. Neftaly is committed to helping residents access fair, practical, and empowering financing models that support both housing and human dignity.