Habitat helps make markets work
Learn how Habitat uses microfinance and other financial innovations to help more people access housing solutions.
Rosa Zorrilla is a housekeeper and an entrepreneur in Peru. She has a small business selling meals cooked in the kitchen of the modest home she shares with her husband and children.
Zorrilla wanted to improve her home — and her family’s life — by creating partitions for bedrooms and expanding her kitchen. A Habitat for Humanity program helped her invest in these affordable home improvements.
With more bedrooms, Zorrilla and her family have more privacy. A larger kitchen has allowed her to expand her business and increase her income. The improvements the family has made illustrate the transformative power of improved housing and the impact it can have on lives.
What makes this story special, however, is that the materials, financing and professional services for her project came from private-sector providers. The Peru program demonstrates how Habitat’s work in the area of market development helps to address the barriers that keep people from accessing decent housing. Through programs like this one, Habitat works with local firms and entrepreneurs to expand and improve services so that low-income households like the Zorrillas can improve their shelter more effectively.
For example, the Habitat program that helped Rosa and her family, brought together EDYFICAR, the second-largest financial institution in Peru; HATUN, a network of hardware stores; DINO, a cement manufacturer; and SENCICO, a program of Peru’s Ministry of Housing, Sanitation and Construction. The Habitat program serves more than 7,000 families each month through a combination of housing microfinance and housing support services.
This type of approach responds to an important trend within international development: Instead of targeting a set number of beneficiaries (of houses, toilets, health care) over a set period, a market-based approach aims to foster a system as the primary end goal, a system that can then expand and continue services without an ongoing need for charitable subsidy.
Indeed, most low-income families like the Zorrillas already can and do use available market options to put a roof over their heads, no matter how frail or insecure that roof may be. And the amount of housing solutions purchased by low-income people through those local markets — a few bricks, a strip of tin, a few hours of a mason’s time — far outstrip philanthropic efforts to improve shelter.
The reality, though, is that those acting in the marketplace frequently don’t consider the needs of — or the opportunities in serving — low-income people. Making improvements to the market itself can be a more effective and affordable way to create better lives through better housing — for families like the Zorillas and so many more.
Making markets work for the poor
The central premise — according to the nonprofit Donor Committee for Enterprise Development — is that “the poor are dependent on market systems for their livelihoods. Therefore, changing those market systems to work more effectively and sustainably for the poor will improve their livelihoods and consequently reduce poverty. More accessible and competitive markets enable poor people to find their own way out of poverty by providing more real choices and opportunities.”
MicroBuild and the Center for Innovation in Shelter and Finance
To support and accelerate market approaches around the world, Habitat for Humanity International is focusing on two key initiatives: MicroBuild and the Center for Innovation in Shelter and Finance.
The MicroBuild Fund works by investing in local financial institutions that work alongside Habitat, providing savings and credit products that are paired with construction technical assistance to help families repair or build homes incrementally. In Tajikistan, for example, Habitat used MicroBuild to mobilize $4 million for two key local partners. As a result, Habitat expects to serve more than 8,000 families in the Central Asian country in fiscal year 2014.
Habitat’s Terwilliger Center for Innovation in Shelter engages local firms and entrepreneurs to build capacity and expand good practices for serving the affordable housing needs of low-income families. This can mean working with cement suppliers, hardware stores, microfinance institutions, small-scale technician service companies, or any sort of player in the market that can help fill gaps in the housing chain.