Our first case begins with Credifamilia, Colombia's first, regulated financial institution specializing in low-income housing. Colombia's affordable housing context is unique because the government has been very active in engaging private sector developers to supply low-cost, affordable homes for the market. The government's motivation is a key feature that allows Credifamilia's model to work.
Credifamilia devotes about 40% of its product portfolio to serve low-income families earning between one or two minimum wages (about $8 - $9 a day). The most important features of the model are summarized below.
- Mortgages of $3,000 - 28,500 are offered to qualified families over 5 - 15 year tenures.
- Loan applications are handled at housing development sites to increase visibility and to reduce overhead costs on loans.
- Families earning less than four minimum wages can then then apply for government subsidies to pay for their down payment (usually 30% of home value).
- If families cannot meet the full down payment requirement with the subsidy, Credifamilia offers a 6-12 month savings scheme to help customers raise the additional funds while their home is being built.
- Credifamilia further reduces their overhead costs by using state-of-the-art IT to monitor loans. They also partner with local supermarket and pharmacies to set up a network of payment centers so customers can pay monthly installments near their homes.
Credifamilia's success is closely linked to its network of partners. Several low-income housing developers were the founders and primary shareholders of the company. This ensured a constant flow of information between Credifamilia and the developers that would match supply and demand for low-income homes. The link with the government ensures that subsidies are provided to families that could otherwise not afford the expensive down-payments. Finally, the links with their developers and local businesses reduce overhead costs associated with customer acquisition and payment collection. This allows Credifamilia to offer home loans at reasonable interest rates.
Credifamilia has created a model example of how multi-sector cooperation can reduce costs at various points in the supply chain thereby increasing affordability for low-income customers. The model is specifically suited to the Colombian context because of the way in which there are developers and governments that are committed to the affordable housing agenda. More detailed lessons and challenges can be found in the attached document by the Inter-America Development Agency.