Micasa: Financing the Progressive Construction of Low-Income Families Homes in Peru

The case study tells a how Mibanco added a progressive-build loan product called Micasa. Within its first 12 months it had almost 3,000 active clients, an outstanding portfolio of $2.6 million, and was profitable. Study shows lessons learned:

• Loan terms and conditions for progressive-housing improvement loans more closely resemble microenterprise loans than mortgage loans;
• Construction assistance may not be necessary;
• Simplicity, flexibility, and speed of disbursal are likely the primary factors in households? decisions to borrow;
• The importance of interest rates maybe over-rated and lower interest rates for housing may not necessarily lead to abuse;
• Housing investment may be income-generating.

Profiles and techniques for demand and product design have parallels throughout Latin America and provide important lessons:

• Progressive-build lending is part of a spectrum of products that can be developed for different market segments while basic terms and conditions are similar across different markets;
• Progressive-build lending is predominantly individual rather than group-based;
• Low-income, salaried workers are a tentative but important new client base;
• Up-front savings may play a role, even in progressive-build lending;
• Poorly designed subsidy programs can stifle demand and inhibit potential private sources of housing finance;
• Multiple loans for progressive construction projects are an alternative mechanism for making loans more affordable to poorer households.

Sees outstanding issues and questions for financial service providers with existing or emerging low-income housing portfolios:

• The provision of construction assistance as an integrated part of lending to low-income households;
• Understanding the costs and benefits of providing construction assistance;
• Reaching the extremely poor with housing improvement finance;
• Managing and sustaining early growth, accessing medium-term capital, maintaining portfolio quality and administrative efficiency as fewer clients come from the existing base of microenterprise borrowers.