The Inter-American Development Bank (IDB), a Latin America focused microfinance institution (MFI), and Corporación Financiera de Desarrollo (Cofide), a government-run development bank created in 1992, have developed a financing facility, which would allow Peruvian MFIs to support the country’s low-income housing market. Peru’s low-income housing deficit currently stands between 1.7 million and 2.1 million units. Both IDB and Cofide have allocated USD 10 million to supporting the program, which could potentially help six to ten micro-lenders and finance thousands of home loans.
The facility will increase the flow of home improvement in Peru as well as mortgage financing to low-income families by leveraging the large distribution platform of Peru’s non-bank MFIs while increasing their participation in local mortgage markets. Together, the 36 non-bank MFIs in Peru had assets totaling PEN 9.77 billion (USD 3.13 billion) and loans of PEN 8.09 billion (USD 2.6 billion) in 2008, according to financial sector regulator Bank Superintendent (SBS) statistics.
IDB was established in 1959 and specializes in developing economic growth in Latin America. It has approved lending and grants over the past 12 months total 10 billion USD, and according to their 2007 Annual Report, IDB’s total assets total USD 69.9 billion (p 104). In March 2009, the IDB approved USD 10 million for financing the facility under the IDB’s Opportunities for the Majority program with the belief that the money will open up and enhance the low-income housing market in Peru. IDB said its resources will provide subordinated debt to strengthen the lenders’ capital positions and leverage their loan portfolio growth potential, while the senior mortgage and home improvement loans will provide medium and long-term funding for housing solutions.
IDB partnered with government-run Cofide, which matched IDB’s contribution by putting another USD 10 million towards the plan. Mortgages granted under the initiative would range from PEN 12,000 to PEN 20,000 (USD 3,800 to USD 6,400). Loans for home improvements would be lower, and loan terms will range between five and ten years.
Private sector specialist at IDB, Susan Olsen, stated that some 20 micro-lenders have signed letters of intent and together the funds are expected to have a significant effect on individuals in the C and D socio-economic groups. People in socio-economic group C are defined as earning an average PEN 1,342 (USD 430) per month, and those in socio-economic group D are defined as earning PEN 815 (USD 261) per month.
ADDITIONAL RESOURCES
Symbiotics, March 16, 2009: “USD 20mn IDB-Cofide Facility Could Help 6-10 Microlenders”
Inter-American Development Bank: “press release”
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