Building the Homes of the Poor - One Brick at a Time: Housing Improvement Lending at Mibanco
The authors look at the impact and context of Mibanco's Micasa loan program. By the end of the end of 2002, there were 7000 active clients in Greater Lima and findings of client impact show that:
- Client satisfaction is high;
- Many projects have an income-generating component;
- Few projects are completed with a first loan and financing 'stages' of a project with multiple, shorter-term loans rather than a larger, long-term loan reduces interest and risk;
- There are many types of housing projects financed - maintenance and development - while risk of diversion/fungibility of loans seems small.
Micasa broke even in nine months and will generate a return of 7-9% and its early success relies on well trained loan officers, stable process and procedures plus an advanced management information system (MIS). The authors see that low-income housing finance follows a paradigm similar to the microfinance industry in many countries. They identify emerging experiences of housing microfinance and relate them to the traditional housing finance paradigm of large mortgage-type finance, interest rate sensitivity, expert advisors and professional labour. They note that:
- Low-income households are accustomed to a progressive build process and loans with market rates of interest can more easily be customized to household's capacity to repay;
- Households can manage portions of the technical process on their own and still achieve an acceptable level of quality;
- Households have a strong preference to make their own design decisions, primary role for outside expertise is in the design and costing phase;
- Access to capital for housing investment, simplicity, flexibility and speed of disbursal are the primary factors in household's decision to borrow;
- Interest rates are important, but secondary.