|Case Studies in Community-Based Credit Systems for Low-Income Housing (HABITAT, 1995, 63 p.)|
Conventional thinking has for long considered shelter to be a basic human need which could not be equated with other consumption goods whose prices are left to market forces of demand and supply. As a consequence housing for the poor were to be provided at subsidised prices. Unfortunately, subsidies always ran out before all those eligible were housed, and those who benefited were not always the most deserving. In short, the reliance on subsidies to house the poor has failed. But what other options are there?
In many developing countries it appears that the poor have been left to their own devices. The four case studies which are representative of many other cases around the world show that community-based approach has been a workable alternative to the failed state-sponsored welfare system. This conclusion is not surprising because the responsibility for welfare of the poor by the community is an age old concept which is operative at many levels and in many spheres of life, not just in housing.
Another unfortunate result of looking at housing as being purely a social good is that it should not be subject to profit or indeed to create income. This view is responsible for much poverty-creation. Instead of housing being considered only as shelter and not also as an income-generating asset, poor people in particular have been kept out of one of the most profitable areas of investment in any society. In fact, housing is one of the most potent instruments in alleviating poverty and should be used as such. But how is this done? The first and most important problem is to raise finance because few - least of all the poor - have access to financial resources. There are many reasons for this. The most quoted one is that poor people are high risks. There is no proof of this paradigm, if anything the opposite is more likely to be true, provided the investment for which they need to borrow is economically viable. Housing is one of them.
The four case studies show unequivocally that investing in housing is indeed so viable in both social and economic terms that it brings people together for the sole purpose of raising investable funds which are not available to them through the formal sector institutions. They are building on their ability to harness a traditional community responsibility for each other and on their awareness of the viability of appropriate shelter. In so doing they not only house themselves, they also enhance their income and the income of all those involved in the housing process. And income enhancement is what poverty alleviation is all about.
These four case studies and many others point to a number of preliminary conclusions:
Community-based financial institutions offer a viable alternative to those who cannot obtain credit from formal sector institutions.
There is a long tradition and a wealth of experience in community participation of all kinds in developing countries. This fact has manifested itself in a multitude of small, informal savings and credit associations.
Some of these community groups have evolved into housing finance cooperatives, albeit with a number of problems associated with making the transition from small, short-term loans to larger, long-term ones.
The most significant problems they encounter are in the areas of security, liquidity and public sector interference. The two former problems can normally be tackled by the members themselves by peer pressure and by aligning with formal sector institutions respectively.
Public sector authorities are almost by definition sceptical, if not defensive, against community groups exerting power over their affairs such as land, physical planning, infrastructure and housing. Various approaches have been tried, some with more success than others. But much more needs to be done to improve the interface between community - based and public sector management.
In addition to the above, much more can and should be done to support community-based groups in developing countries in their quest for housing and housing finance. But even in societies where public sector financial institutions are highly developed there is a need to protect the poor from the exploitation by private sector institutions and from public sector inefficiencies.
The public sector can itself do much to support housing finance and other cooperatives:
· by providing a conducive legal framework for cooperatives
· by promoting the local capital markets and facilitating the access to them by financial cooperatives by managing the macro-aspects of the economy to make it advantageous for small investors to place their funds in housing.
· by requesting assistance for the above tasks from agencies specialised in this field.