Housing is generally considered the most important family asset, and low-income housing solutions are deemed decisive in reducing poverty and vulnerability of the poor. Housing problems are among the most visible indicators of poverty. Estimates for 2010 show that there are 505 million slum dwellers in Asia and 827 million worldwide. According to the United Nations Human Settlements Programme, a "do-nothing" approach will permit further increases in slum populations, with numbers reaching nearly 900 million worldwide by 2020.

Governments and donors are therefore exerting efforts to provide low-income housing finance for the poor. The Strategy 2020 of the Asian Development Bank (ADB) highlights ADB's strategic agenda in sustainable and inclusive growth. To improve the quality of life of urban inhabitants, ADB will assist its developing member countries in solving a range of social and environmental problems resulting from rapid urbanization, and will support urban growth strategies for more livable, more inclusive, and more resilient development. Discussions at UN Habitat's World Urban Forum in Rio de Janeiro included arguments to revive the interest of the development community in urban development. Housing finance, which had received less attention in the late 1990s, is getting more attention from governments and international funding institutions, including the World Bank.

This report presents an impact evaluation study of the housing finance component of the Urban Development and Low-Income Housing Project in Sri Lanka (Loan 1632). The study empirically assessed the socioeconomic impacts of the project's housing loans and, on that basis, provides lessons and recommendations to help enhance the development effectiveness of ADB's future low-income housing finance projects.