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Interview with Belinda Florez, Project Manager, MFI Alliances and Initiatives in LAC from Habitat for Humanity on scaling up low cost housing in Latin America.
Drawing on her expertise in low-cost housing product development, design and implementation, Belinda shared her thoughts on the role of MFIs as delivery channels for low cost housing.
Ms. Florez , Manager of Microfinance Initiatives and Operations of Innovation Center of Shelter and Finance in LA/C, is responsible for the design and management of alliances and initiatives with MFIs that are implementing housing microfinance, such as, CREDIVISION, FINANCIERA EDYFICAR, PRISMA y FINCA (Peru); i); FUNDECOCA (in Costa Rica); FDL (Nicaragua); ADOPEM, ADEMI, FIME and ASPIRE (in Dominican Republic); CRECER and FUBODE (in Bolivia). Moreover she facilitates and coordinates process of market researches, product design and housing microfinance pilot. A native of Colombia, Ms. Florez has a master’s degree in Organizational Leadership and a bachelor’s degree in Accounting. She previously worked with Opportunity International for 7 years, designing and implementing institutional evaluations; planning and implementing institutional changes for the Latin America partners. Moreover, Ms. Florez worked with World Vision in Colombia for 10 years, where she began as an Administrative Technician and moved into roles of increasing responsibility until she ultimately became the World Vision national Accounting and Finance Manager.
Could you explain the role that Habitat plays in low cost housing in Latin America and specifically in Costa Rica?
Habitat for Humanity in LAC (HFHLAC) supports several countries in the region not only in Costa Rica. HFH seeks to be a partner and facilitator using the process of housing as a catalyst for community transformation. Habitat for Humanity sees improved housing not only as a product, but as a process of building and sustaining hope and healthier communities for all. HFH LAC, Regional Office has been based in Costa Rica for more than 10 years.
On the other hand, there is a National Office of Habitat for Humanity in Costa Rica (HFHCR) in charge of implementing the local program in the country. This office is in a restructuration process right now to become more strategic and effective. However, HFHCR has worked as a facilitator, helping families in the application of government subsidies and credit. This national office offers construction technical assistance and mobilizes local and international volunteers to help families build their houses. . In addition, HFHCR sometimes has acted as a financial institution providing housing loans directly to low-income families. They also have alliances with other financial institutions in order facilitate the access to others financial services.
Overall, HFHCR has played three key roles: facilitator of subsidies, builders and a financial institution.
We have national organizations in more than 13 countries in the region, and they form partnerships with other organizations, such as NGOs or governments, acting also as builders, partners, and facilitators. When the HFH national organizations develop alliances with private companies, such as construction material suppliers, families can obtain discounts, better service and quality supplies. On the other hand, when they partner with the government agencies, they facilitate the construction process through subsidies or appropriate policies. Additionally, they act as a financial institution providing affordable loans to the families.
The demand for housing is huge in our region, cities are growing exponentially and we have a greater concentration of population in urban areas. This means that people from the countryside come to the city, therefore the housing problem increases on a daily basis. Consequently we want to have a much greater focus in urban areas because of this massive demand for housing solutions. We must do more, we must do it faster. We must do it with more impact. And we must work with others to expand reach and depth.
Why do you think housing is such an important product for microfinance institutions to offer their clients?
It’s important to understand that low income families cannot afford to build or buy a house outright. They build in a very incremental way, brick by brick. They will start by purchasing a small piece of land and then building very slowly, which may take 15 or 20 years. Housing Microfinance Programs through MFIs could accelerate this process. This is an important outcome of housing microfinance; it enables families to build relatively quickly and can provide safe and secure shelter for them compared to doing it alone without any financial support.
Institutions also have the opportunity to diversify their product lines, strengthen customer retention, enter new market niches, and exercise social responsibility by providing access to adequate and affordable housing without compromising sustainability.
In addition, it is important that microfinance institutions provide the housing credit accompanied by construction technical assistance because the resources of these families are very small and therefore they need to take the best advantage of these small resources. They need to reduce loss or bad use of materials; they also need to receive the best quality supplies and advice for better construction. Without this assistance they may pay over the odds for materials or build unsafe houses.
Ultimately, MFIs can provide great support for those people at the bottom of the pyramid.
Do you think that MFIs are best placed to deliver these housing products or are there other organizations that might be better suited?
I think that MFIs play a key role in driving change. The role of the MFI is to facilitate access to financial services for housing, because they have the expertise in microcredit. Therefore they are a key player in the value chain to deliver this kind of service. Furthermore, they also have access to the clients that they serve with other kinds of microfinance products. They have the capacity, the expertise and the capital to do this and they know the clients. They understand the marketplace very well and have the structure to offer these credits in a rapid, affordable and sustainable way, it is necessary to design special products for housing microfinance.
The main challenge for the MFIs is to help the loan officers and other key staff that work with families to adequately train them to offer and follow up housing credit. This is because housing credit is a little bit more complex than microcredit for other products. The loan officer needs to develop new skills and new ways to approach clients, with an understanding of basic construction technical assistance, or how they can help the family design a housing plan step by step. The housing officer also needs to have a little bit of an understanding about some legal requirements related with the construction process. For example, building permits may help reduce credit risk and unsafe housing.
Furthermore, the institution needs to have capital upfront to implement a housing microfinance program because these loans are larger and require longer-term compared to other products that an MFI might provide.
In conclusion, the problem of housing for the base of the pyramid needs active and effective participation from different actors in the housing value chain such as material suppliers, government, builders, etc. and of course microfinance institutions to add value from their area of expertise.
What do you think about the potential for more commercial funding to come into the housing market?
Lately social investors are looking at housing as a potential good investment. However it is important for the social investor to take into account that financing housing has certain differences to other investments. The term, the amount and the payments for these kinds of funds could be different to other funds. The investor needs to be aware of these differences and take them into account in their decisions of fund allocations.
In my experience working with Habitat and microfinance institutions, at this time sufficient funds are available and suitable for productive microcredit. However, when trying to invest such funds in housing loans they have problems because the terms do not fit. The investor and the MFIs need to design funds with characteristics that fit the loan to be offered to the family, and the needs of the MFIs.
What I see is that the housing product is a marginal product in most MFIs. I suspect this is because they do not have special funds to apply to these products or they don’t appreciate the importance of developing this line of product into their portfolios.
Why do you think it’s so important for MFIs and other stakeholders to come to a conference like this?
The conference is very important for these key groups in the region because housing microfinance is a new product and is a new way to serve the client. It’s not only a way to serve the client, it is more than that because housing is an important issue for those at the base of the pyramid. Improve their housing conditions means improving their heritage, quality of life; increase their chances of being eligible for credit, among others.
The principal asset for people at the base of pyramid in most cases is the house and in that perspective, the conference offers the opportunity to share experiences, to learn from others about what has happened in the housing sector and the housing finance. You can also learn about other’s mistakes and bad experiences. Even more you can extend your network internationally and get to know other people who you would usually never get the opportunity to meet. To sum up, you have the chance to share with others what you do.
Belinda will be sharing her expertise at the Scaling Up Low Cost Housing conference which is taking place in Miami, Florida between 27th – 29th August 2012.If you would like to book your place, simply quote booking code MYKRO: