Research in focus: Microcredit for housing and the ‘My House My Life’ program
Microcredit practices, such as the use of credit agents, the adoption of group loan mechanisms and a focus on women, could lead to savings of Br$ 15 billion.
Objective: To identify potential for innovation in the ‘My House My Life’ program based on the inclusion of practices that are typical of microcredit experiences.
• A survey of the default data and monitoring of the ‘My House My Life’ program; this program creates mechanisms for boosting the production of new housing units and encourages families with incomes up to ten times the minimum salary to acquire them
• Interviews conducted with directors of the Caixa Econômica Federal [a state-owned savings and loan organization], the program’s largest operational agent and financier
• Case study of the ‘Entities’ modality of the program (the modality closest to microcredit experiences), in which the entities chosen by the Ministry of Cities act as intermediaries for the beneficiary families
• Current challenges facing the program categorized by axis
• There are many challenges in monitoring the beneficiaries; these challenges are similar to experiences with microcredit. There are few mechanisms capable of adequately selecting beneficiaries and placing them into an appropriate payment band. The program is primarily treated as a subsidy and donation rather than as a type of credit or financing, which is why the recent default data are highly unfavorable, with rates in excess of 20% of the portfolio. After handing over the property, there are few instruments for monitoring the payment conditions of the beneficiaries. In other words, there is no convenient credit technology that can reasonably collect data relating to the dynamics of the financial life of the beneficiaries.
• It would be interesting if this program incorporated aspects of microcredit. For example, the use of credit agents would be a credit risk-mitigating factor, which would reduce information asymmetry because of greater contact with the beneficiaries both before and during the period of the credit contract. Group loan mechanisms could be adopted to help solve the problems of uncertainty, with potential beneficial effects for combatting default. Finally, a focus on women, in terms of credit administration, tends to have positive effects on the family.
• This study shows that the principles formally provided for in the ‘My House My Life’ program (such as joint surety, focusing on women and empowering civil society) have not been put into practice. It also shows how it is possible to improve the program based on microcredit practices.
• Incorporating the innovations of microcredit could save an estimated R $ 15 billion.