Housing Finance – Mexico

Microfinance institutions (MFIs) have commonly offered loans for socially excluded people, whether it be farming, selling products at markets or other activities. However, if the main mission behind microcredit is that of giving the tools to people to improve their own lives, then we must also accept that access to financial support for other aspects of one’s life is also much needed.

For example, in recent years, MFIs began to diversify their products and many offer financie for housing. In the case of Mexico, in rural and sub-urban areas, almost fifty per cent of people live in patrimonial poverty, where households are not able to meet the basic needs of security, hygiene or comfort. Some live in shacks, others do not have access to water, sanitation or gas and many live without doors or windows that can be shut. In such situations, where there is plenty of room for improvement, offered services and loans have to be structured clearly and designed in ways that assure immediate effect but also long duration.

The most basic type of housing finance is home improvement (crédito para mejora de vivienda asistida). Loans are given to individuals or groups of people who, for example, need to build an extra room or floor to accommodate new members of the family. Also, this kind of credit can be used to fit a shower or install flooring. In the case of APROS FINANZAS and other MFIs this kind of credit is offered to those who can prove a history of punctual and complete repayments for previously requested smaller loans.

A more complex type of loan, that can be compared to mortgages, is credit for self-made homes (crédito para auto-producción de vivienda asistida). This credit is useful for those who have land but live currently in deprived conditions. For example, Grupo MIA; is an enterprise that works together with NGOs and governmental entities to provide ways for poor people to build a house piece by piece.

Together with a university Grupo, MIA had conducted research which proved that, psychologically, people are more motivated to complete their housing projects if the roof is the first fitting to be installed. For this reason, Grupo MIA, together with institutions that can grant loans, encourage people to first build a roof, then the flooring, walls and the rest. An interesting part of such a project is that the involved organisations provide the material, together with training so that people can learn and build their own houses.

In Mexico, la Comision Nacional de Vivienda; (CONAVI), which is the national commission for housing, offers subsidies for both types of credit. There may be minor differences depending on the region or people’s circumstances, but generally, CONAVI – in collaboration with social construction companies like Grupo MIA and MFIs such as APROS FINANZAS – commit to subsidising such costs. For example, for home improvement purposes, the maximum amount that will be subsidised is 40% of 20 monthly minimum wages, which equates to MXN 36,370 (USD 2,871). For self-made home projects, CONAVI will cover 40% of the equivalent of 40 monthly minimum wages; MXN 72,741 (USD 5,742).

So, at least in the case of Mexico, the story of housing finance is one of public/private partnership, together with development-driven institutions with construction and financial backgrounds. The logistic and administrative processes that are needed to monitor and succeed in such projects are complex and heavy in bureaucracy. However, the number of people who apply for these housing finance schemes goes far beyond what novice MFIs can handle, which suggests that perhaps there is a need to realign the standard microfinance products to actual demand.

Ayako Iba

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