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Housing microfinance story series: Josefa Montoya

March 15, 2010




Monthly Income, gross: **US$350
Monthly Income, net: US$128
Monthly Remittances: US$350-480
Source of income: remittances
Loan amount: US$1,000
Term of loan: 25 months
Monthly payment range: US$43-76

Josefa Montoya* lives in a village where she purchased the land where she lives about 15 years ago, shortly after returning from the United States. In 1986, Josefa, her husband, and her three-year old daughter, Elizabeth, migrated to the U.S., taking advantage of an invitation from her three siblings who were already settled in Florida. Her family’s decision to leave Nicaragua was influenced by the unstable political situation in the country at the time, and her husband’s fear of being drafted for army service.

In Florida Josefa found work in a factory that applied t-shirt decals, working there for her entire seven years. She proudly stated that she “had papers” and thus was able to work legally in the country. In 1989, she gave birth to her son, Ernesto. He was born in Florida, making him a United States citizen.

In 1993, her husband decided that the family–numbering four–would return to Nicaragua to start a life there again. After their return, Josefa and her husband eventually divorced, and she began to chart her own path as a single mother of two. She spent upwards of a decade building the home where she raised her children and now lives with her youngest son, Felipe, 14, and her youngest daughter, Miriam, 16, both students, and her grandson, Anderson, three years old.

Josefa derives a small income from making and selling nacatamales, a traditional Nicaraguan food product, in her home. She primarily depends on remittances from her two children in the U.S. to pay household expenses.

Josefa’s oldest daughter, Elizabeth, migrated to Miami shortly after the birth of her son, leaving him in the care of his grandmother. When I asked the boy if he talked to his mother often, he looked at me and his biological grandmother quizzically. “He thinks that I am his mother,” Josefa explained.

Elizabeth has been in Miami for three years, and has not returned to Nicaragua. When she first arrived in 2006, she received support from her father, Josefa’s ex-husband, who had returned to Florida after the couple’s divorce. Josefa said that Elizabeth sends an average of US$60 a week in remittances to support the family. The remittances can be sporadic, however, and sometimes in greater amounts.

Her son, Ernesto, moved to Miami two years ago. With a United States passport, it was easy for him to travel north. He quickly found work at an auto detailing and window tinting business, where he continues to work. Josefa said that he sends about the same amount as his sister, approximately US$60 a week. Ernesto returned to visit his mother about a year ago.

Aside from their regular remittances, Elizabeth and Ernesto have helped Josefa pay for unforeseen expenses, like the US$410 she needed to spend on medicine and treatments after a recent surgery. They also helped add to the capital she used to expand her house this year. These additional remittances may explain the month-to-month fluctuations in remittances evidenced by the receipts in Josefa’s case file with the Local Development Fund (FDL in Spanish), which show monthly remittances ranging from US$50 to US$949 over a five month period.

The house where she lives has been a “work in progress” since 1994, when she purchased the land from the municipality for 4,000 córdobas, the equivalent of a few hundred U.S. dollars. According to Josefa, the same lot would now sell for 8,000 córdobas. To fund the purchase, she used the proceeds from the sale of a pickup truck she had brought from the U.S.

With her savings from her time in Florida, Josefa paid to build a basic structure, its price reduced to US$2,700 by a partial subsidy from a Nicaraguan government agency. The base unit was a mere “four walls and a roof,” says Josefa. There were two rooms and an unfinished bathroom, but no utility services. The house lacked interior walls and other finishing, and had only a dirt floor. She moved into the home with her children in 1995, and spent most of the next four years saving and making small, incremental improvements to make the home more comfortable. She installed windows and interior doors, finishing for the floor and interior walls and painted the exterior of the house.

Josefa first found out about FDL about a year ago, when saw a brochure about remittance-backed housing loans in the office of Pelican, a money transfer office in Masaya. An employee at Pelican explained how the loan program worked, and she visited FDL’s closest branch to find out more. This branch did not know about the program, so she went to the branch in a nearby city, where she ultimately applied for a loan to make improvements to the kitchen and a room.

That same week, an FDL representative arrived to estimate a budget and draw up a construction plan, and a few days later she was approved for a loan of roughly US$1,000.

Her two children in the U.S. sent an additional US$600 total to supplement the loan, which she used to purchase the material to build the walls and roof of a new bedroom and kitchen, install two windows and a door, and tile the hallway that separates the two rooms and provides access to the backyard. She also used roofing material that was left from a previous phase of improvements. The loan and her children’s contribution served to pay the masons to build the rooms, which took one mason and two assistants less than two months to complete. The floors and walls remain without finishes, and the plumbing and the electric still need to be installed.

Josefa received a loan from a different institution once before in 2004 for 4,000 córdobas (approximately US$130). She expressed that she is glad that she was able to take on a larger loan with FDL, since it sped up the pace of improvements on the house. By Josefa’s estimate, it would have taken an additional five years to save US$1,000 with her current income and expenses. She relates that paying the loan has become more difficult as the córdoba has depreciated, thus increasing her monthly payment, but daughter Elizabeth helps her to make the payment at times when she has difficulty.

Key points from Josefa’s case

  • The client’s home was built using savings and the liquidation of assets from her time abroad and the remittances she received from children after her return, both strategies dependant on migration. Josefa funded the purchase of the lot with proceeds of the sale of a truck she bought in the U.S., and paid for the construction of the base unit with savings from her work in Florida. The remittances she received from her children then served as the income to underwrite her current loan to continue progressive improvements on the house.
  • While remittances are a positive force for improving household conditions, they come from family members living far away for long periods of time. The potential emotional costs of family separation should not be overlooked, as in the case of the client’s grandson, whose mother has been in another country for most of his life.
  • As with other cases, the loan allowed the client to speed up the pace of improvements. Saving the same amount would have taken years, by her estimate.
  • The loan would not have been approved without considering remittance income, since remittances represent almost 100% of the client’s income.
  • The loan will presumably positively influence the family’s housing situation once the client completes the work on the two newly-constructed rooms, since this addition will almost double the size of the house and accommodate three growing children.
  • Technical assistance during the construction provided a budget and plan for the home improvements.

Story and photos courtesy of Habitat for Humanity consultant, Brendan McBride.

*The names of the families have been changes to protect their identity.


**Gross income is the total of all income sources, whereas net income reflects the number of family members that are supported by that income. The calculation is made by subtracting from the gross income an estimate of the minimum cost of living (including food, transportation and education) for all family members.