Successful cases about housing finance are not limited to the work being done by microfinance institutions. There are a variety of other organizations that are using strategies that increase access to finance and affordable homes for low-income customers. A good example is Comfama, a Colombian employee benefits fund that seeks to provide its customers with a range of social benefits.
Comfama targets customers that do not have access to the services offered by Credifamilia (case study in previous blog post). Comfama specifically targets customers who cannot qualify for government subsidies, cannot afford up-front down payments, and who do not have credit histories to qualify for a mortgage loan. Their model works in the following ways.
- Comfama buys properties (typically no more than $23,000 per home) and safeguards them in a separately established and managed trust.
- Comfama then establishes a rent-to-own model, whereby low-income customers can enter into a 3-year rental period where a portion of the rent will be used to the eventual down payment.
- As an employee benefits fund, Comfama has access to customer salary history and can work with its partner employers to deduct rent directly from the monthly salary.
- During the 3-year rental period, customers make payments into the savings and rental scheme, thereby building a credit history.
- After the 3-year period, Comfama links its customers with its network of commercial banks that are more comfortable offering mortgages to clients with credit histories.
Comfama's role as a middle-man is critical in a couple ways. Comfama offers value to low-cost housing developers because they purchase homes right away and take on the risk while they search in their network for the next home buyer. Their role as an intermediary is also important for the low-income customer and commercial banks. Comfama functions as the necessary stepping stone for low-income customers to build up a credit score in order to have access to more conventional financing in the future. Comfama's success offers evidence that with the right participation and coordination between private sector partners, BoP customers can access affordable homes without requiring additional government subsidies.