MIBANCO's MICASA Housing Loan for the Poor


by Waren Brown

Date: April 30, 2002
Time: 12:30 - 2:00
Location MC6-W150



Presentation Abstract
It is well documented that poor households in developing countries have limited
access to formal finance to help them build or improve their homes. Issues of
affordability, lack of legal titles, informal incomes and small loan sizes
typically exclude poor households from traditional mortgages. Moreover,
government housing programs seldom reach more than a small percentage of those
in need. The success, over the past 20 years, in innovating methodologies and
institutions to finance microenterprises raises the question of whether these
same methodologies and institutions can also fill the gap in low-income
households' access to formal housing finance.

With almost 70,000 active borrowers, Mibanco is one of the largest microfinance
institutions (MFIs) in Latin America. Although Mibanco's entry into housing
finance is recent, its experiences are of interest for a number of reasons:
  • Use of "Progressive build" lending versus traditional mortgage lending;
  • Application of "best practice" microenterprise methodology to housing finance;
  • "Minimalist" approach to construction assistance;
  • Rapid, profitable early growth.
While Micasa's early success provides strong indications of the potential of
Mibanco's approach, it also identifies some of the key issues and obstacles to
further expansion of the microfinance of housing, including:
  • Is construction assistance for all borrowers really a necessary part of a microhousing loan program? How can assistance be cost-effectively designed to serve the varied needs of different clients?
  • How do or can microfinance of housing programs interact with efforts to improve property rights for the poor?
  • How much of the potential market can housing microfinance products serve? Can sustainable progressive-build lending be designed or adapted to effectively reach the "extremely" poor? When does traditional mortgage finance become more attractive for wealthier households?
  • Where will the medium-term sources of funds needed to finance the growth of low-income housing finance portfolios come from?
This Brown Bag lunch will present the results of the recent Cities Alliance case
study on Micasa and provide an opportunity for an open discussion of these and
other issues of interest to participants.

About the presenter:
As a Director in ACCION's Research and Development Department, Warren is part
of a team is tasked with supporting our affiliates and partners in researching,
developing and piloting new products and services to better serve the financial
services needs of the working poor. Since joining ACCION in 2000, much of
Warren's work has focused on exploring and developing the microfinance of
housing within ACCION and its network. Warren has coached institutions in the
Dominican Republic and El Salvador in implementing microhousing products,
organized and facilitated the "International Seminar on the Microfinance of
Housing" for members of ACCION's network and is co-author, with Angel Garcia,
of the in-depth case study, "Micasa: Financing the Progressive Construction of
Low-Income Families' Homes at Mibanco." In 2002, Warren will guide teams
implementing or improving microhousing products in Nicaragua and El Salvador.

Prior to ACCION, Warren co-led Calmeadow's research effort in the developing field of microinsurance. He is author and co-author of more than 5 publications on the topic, including "Insurance Provision for Low-Income Communities: Parts I and II" (USAID/MBP) and "Microinsurance: The Risks, Perils and Opportunities" in the Small Enterprise Development Journal. While at Calmeadow, Warren also conducted research and published on disaster-management mechanisms for MFIs and performance monitoring systems for network organizations. Warren's microfinance experience is complemented by his 3 years as a corporate strategic consultant with the international consultancy, Monitor Company, where he worked to design strategies for several Canadian banks to target the opposite end of the market, high-net worth clients. Warren is a graduate of the Ivey School of Business at the University of Western Ontario in London, Canada.

Video for MICASA Housing Loan for the Poor Presentation: http://www.worldbank.org/wbi/B-SPAN/sub_micasa.htm