|Case Studies in Community-Based Credit Systems for Low-Income Housing (HABITAT, 1995, 63 p.)|
For good reasons Community Participation and Housing Finance are two important activity areas of UNCHS (Habitat). Experience has demonstrated time and again that each of the areas are absolutely crucial to the provision of shelter for the poor. Taken together they can make the difference between being housed or being homeless.
Community participation in the field of housing is not confined to finance. In fact, it permeates all kinds of activities in the community involved not only in the planning and building of houses but in many other activities related to the maintenance of structures and infrastructure. In addition it has some important spin-offs in terms of learning to organise, manage and to solve problems. In this sense it becomes a valuable exercise in democracy.
Most housing finance is not done by community groups with democratically elected leaders. But a lot of other finance is. Typically, it is in the form of savings-and-credit societies or groups with similar designations and functions. On the basis of members own savings they are known all over the world as providers of small, short-term loans for all kinds of domestic needs. To expand this kind of lending to bigger, longer-term loans for housing seems obvious. However, as many case studies show, this is a very difficult step to take.
This publication aims to illustrate how some of these problems can be overcome. This is done through the selection of four cases from various parts of the world where conditions differ, but where the object is the same: Access to housing finance for the poor. The problems encountered are similar, but the solutions are not always the same. Local traditions, political climate, level of literacy, etc. are some of the many obstacles to the transition from consumer credit to housing finance.
Some of the cases also show how vital linkages among members and the all important, yet very delicate, peer pressure operate to make community-based finance successful. Similarly, the larger organisations demonstrate how linkages to formal sector institutions are extremely important for expansion of their capital base and their lending activities. The distinction between formal and informal sectors is not always useful. But in terms of housing finance the interface between them is a very useful concept to explore.
The report draws upon four case studies. One each from India, Sri Lanka, Uruguay and South Africa. The studies have not been reprinted in extenso because the aim was to highlight differences rather than similarities in problem solving.
Research on housing finance, undertaken by the UNCHS (Habitat), has over the past years focused on mobilization of finance, mortgage instruments and problems of lending for low-income housing. These research activities have led to a number of publications, including Mobilization of Financial Resources for Low-income Groups (HS/167/89E), Financing Human Settlements Development and Management in Developing Countries (HS/174/89E) and Case Studies of Innovative Housing finance Institutions (HS/301/93E).
In contrast to past research which has focused on aspects related to formal finance mechanisms, this publication presents some examples of informal financial systems. The aim is to contribute to the Centres on-going activities related to poverty alleviation as well as to the forthcoming Second United Nations Conference on Human Settlements (Habitat II). The four case studies show unequivocally that community-based finance systems can, indeed, become one of the most potent instruments in alleviating poverty.
I gratefully acknowledge the contribution of Dr. Niels O. Jorgensen in the preparation of this publication and of the case study authors: Sanat Kaul (India), Upali Vidanapathirana (Sri Lanka), Christine Glover (South Africa) and the Centro Cooperativista Uruguayo (Uruguay).
United Nations Centre for Human Settlements (Habitat)
United Nations Conference on Human Settlements (Habitat II)