March 15, 2010
Monthly Income, gross: **US$460
Monthly Income, net: US$293
Monthly Remittances: US$150-300
Source of income: Salary, remittances
Loan amount: US$811
Term of loan: 23 months
Monthly payment range: US$23-33
Pedro González* and his family live in an urban neighborhood built about seven years ago by a Nicaraguan NGO. According to Pedro, the project was supported in part by funding from the Dutch government.
The neighborhood of identical units has evolved according to each family’s abilities and tastes. The roads have been recently outfitted with paving stones, after the residents agreed to pay US$100 per household toward the construction of curbs.
Pedro, who just turned 50, works for the Nicaraguan government as a driver for the local social security office. He shares the home with his wife, Luisa, a housewife, and his two children, Andrea, 13, and José, 12, who are both students. Luisa has an undergraduate degree in law, and is trying to find employment in that field.
Pedro has a son, Juan, 25, from a previous marriage. Juan lived with the family in their former home, an apartment that they had rented in another neighborhood before purchasing their current house. Juan never lived in the family’s current residence, having moved to the United States in 2002 at the age of 18. He immigrated illegally, meaning a dangerous passage across the U.S.-Mexico border at a cost of US$4,500. He then joined his mother, who had paid for the trip, in Seattle.
Pedro related that his son now has legal residency, and wistfully commented that he does not want to return, since he, “loves working and getting paid better than in Nicaragua.”
Juan recently moved out of his mother’s home into his own apartment, and works primarily in a gas station. According to his father, he supplements his income with a collection of side jobs, ranging from painting, to construction, to moving, usually working seven days a week. His father says that he sends an average of US$300 a month in remittances, and often covers other costs as they arise.
Juan recently funded his father’s purchase of a US$500 motorbike, for instance, and covered some medical bills incurred by his stepmother’s father. Remittances constitute about one-third of Pedro’s income.
Pedro himself tried to immigrate to the United States 17 yrs ago, shortly after the birth of his son. He applied for and received a tourist visa, but said he was flagged as a visa violation threat and was detained in an immigration detention center in Miami for four days. He blames it on a fellow traveler who reported him after having seen the teary goodbye of his family at the Managua airport. “They took us for a big meal at the airport in Miami…and then to the detention center,” Pedro relays. He was deported back to Nicaragua, and not long after returning to his country found his current job at the social security office.
The family bought their current residence about five years ago, utilizing a mortgage from a local non-profit organization to fund the purchase. It was just a “box”, commented Pedro; the base unit did not have electricity or plumbing, and had only rough finishing. It was left to the buyer to install basic services and complete all the finishing–including stucco on the walls and floors. Pedro pays a mortgage of US$21 a month, which he considers manageable to pay. As a point of comparison, ten years ago, he paid a monthly rent of 750 córdobas (US$48 at today´s exchange rate) for a house in average condition.
The family’s first step to improve the home was to install electrical outlets and lights. Soon after, they began to stucco the interior walls, one by one, and then installed security bars on the front windows. All of these improvements were carried out over their first two years in the home using savings from Pedro’s job and remittances from Juan.
Since then, Pedro has drawn heavily on small housing loans from the Local Development Fund (FDL in Spanish) to complete further stages of improvements on the house. His first loan from FDL was for US$400 in 2006, which he combined with his yearly bonus to pay for a wall at the back of the property to secure his backyard. He then took out two loans in 2007 for US$600, and used them to extend the walls and roof of a side room that now serves as the kitchen.
Pedro envisions this side room as an eventual bedroom, once he relocates the kitchen to another spot in a future phase of improvements.
Pedro’s current loan is his fourth, approved in November of 2008 for US$811. He used the loan to pay for the materials and labor for subfloor and ceramic tiles in the new addition. This latest loan was the first time that remittances were factored into the analysis of Pedro’s ability to repay, and could thus be considered a more accurate accounting of the entirety of resources that the he had at his disposal.
Pedro remarked that the technical assistance from FDL helped him to determine what it would cost to complete the work on the addition, enabling him to make an informed decision regarding to what extent the loan could cover the scope of the job. He spoke favorably about working with FDL, saying that they treated him well and he felt that he could trust them.
One of the principal benefits of working with FDL was their comparatively low interest rates.
As a favor to one of his neighbors, Pedro had taken out a loan from a different institution to fund improvements to his neighbor’s house (a similar house to Pedro’s). The loan was approved in Pedro’s name, and the neighbor has been paying it back on time.
Pedro finds that current payments to FDL are manageable, unless other costs come up, like the medical costs that his wife recently incurred that caused them to be late on their payment to FDL. Once he pays off his current loan, he hopes to take out another loan to continue to build out the rear portion of his house.
This case presents an example of how a series of small, progressive housing loans can serve as a useful tool to continue improvements on a base unit built by a non-profit or government program.
Key points from Pedro’s case
- In this case, a faithful client of FDL had taken out three housing loans over the course of three years. Since his son was sending remittances over the course of time, it can be presumed that the remittances figured into the income mix that served to repay the loans.
- The latest loan was the first time that remittances had been factored into the analysis of the client’s household resources.
- The client admitted to paying late on the loan, but the lateness was the result of financial strain caused by unforeseen medical expenses, rather than a change in remittance income.
- The case presents an example of how a progressive housing loan can serve as a useful tool to continue improvements on a base unit built by an NGO or government program
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.