In El Salvador, NGOs Fill the Void Left by Commercial Banks

Hábitat para la Humanidad, in partnership with the Opportunity for the Majority Program sets up a housing finance scheme tailored for the low-income customers of El Salvador. Affordable finance and construction technical assistance is offered in a complete affordable housing solution.

07.15.2015
 
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Objectives

  • Provide access to long term housing loans for El Salvador’s low-income segment
  • Tailor housing finance products that are appropriate for the repayment capacity of the client
  • Provide technical assistance and oversight during construction projects

Summary

In El Salvador, there are systemic challenges facing low-income clients in their pursuit of acquiring housing loans. First, traditional credit scoring methodologies are not tailored to these income segments, meaning it is very difficult to reliably distinguish between a “good” and a “bad” client. Second, commercial banks are afraid to offer loans to individuals that cannot offer assets as security or to customers that have a perceived low purchasing power. Finally, the lack of long term employment makes this income segment even less attractive for commercial banks in El Salvador.

To respond to the lack of products and services made available to the BoP, the Asociacion Habitat para la Humanidad El Salvador (HPHES), a local NGO, has stepped up to fill this void. The HPHES is an affiliate of Habitat for Humanity and combines access to finance with home construction, technical assistance to ensure individuals can afford to build quality and safe new homes or home extensions. This initiative is facilitated by a loan of $5 million USD from the Inter-American Development Bank’s Opportunity for the Majority (OMJ) program. 

Results

Over the last twenty years, HPHES has financed almost 15,000 low incomes housing solutions and served about 75,000 beneficiaries in El Salvador alone.