The Role of Property and Shelter in Financial Inclusion

> Posted by Patrick Kelley, Director of Housing Finance and Market Development, Habitat for Humanity International
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion.
June 2012 has been on my calendar for a while. Three years ago this month, I was lured into my first home purchase with the federal homebuyer tax credit, and all my requirements as a purchaser will now soon be over.
Before committing to buying a home, I poured hours into research, comparison shopping, and badgering friends and family for advice. I was aware that prudent research and good decisions could be a springboard for the financial future of my family. A misstep could be treacherous and weigh on us for years.
Indeed, buying a home is usually the largest financial decision in our lives in the U.S. And, we are increasingly finding that housing and property play a similar role in the financial lives of the poor. Consider the following evidence:

  • In Portfolios of the Poor, housing and property represented a recurring need for “bundling,” and registered as a first- or second-highest priority in the diary countries.
  • The amount of the poor’s money that goes to housing and property is considerable. Some estimate the market for housing at the base of the pyramid to be four times that of the market for microenterprise finance.
  • Finally, housing is intrinsically linked to financial services because it acts as a destination for, and form of, savings.

Many of the actors working to help households acquire and expand their property and shelter assets may not be clothed in the typical financial inclusion fashion. But, in the spirit of expanding the financial inclusion conversation, they have much to contribute.
Take, for example, the case of CEMEX. Through their subsidiary Patrimonio Hoy, CEMEX has created a social business that allows low-income families to obtain access to services and building materials on credit through a savings scheme. The system enables families to build assets in a step-by-step and affordable way adapted to clients’ needs. Patrimonio Hoy’s services include a fixed-price guarantee for materials to protect clients’ housing projects against volatile material prices and technical assistance for the building process.
Habitat for Humanity employed a similar model in Nepal with local partners through a venture investment in an engineered bamboo factory and partnerships with savings groups and cooperatives. Like CEMEX, the goal of acquiring more durable roof and housing assets catalyzed behaviors of both savings and credit preparation. Slowly, these families are able to finance and acquire more durable shelter.
Hand in hand with housing demand is the place where a house is built or improved—land. Land rights, through freehold title or other forms of secure tenure, can be a form of savings, financial identity, and eventually serve as a form of collateral.
Landesa, an organization working for four decades on property rights, has partnered with governments in some of the world’s poorest countries to create laws, policies, and programs that provide secure land rights for the rural poor. Landesa’s experience shows that secure land rights encourage owners to invest in housing and productivity-enhancing agricultural improvements, give owners an incentive to take better care of the land, and reduce the time they must spend defending their interests, freeing them to use their time more productively.
Another good example in the property arena is Medeem, a social enterprise in Ghana that provides documentation of property rights for an affordable fee.
So, as June 27th approaches, my property purchase thankfully moves further behind me. I’m glad to be free of anxious nights spent double-checking my credit score or shopping for mortgage rates. But, I’m
thankful I had the option to buy a home and property, and recognize its significance for my family’s financial future.

Housing plays a similar role in the lives of the poor, but their options are far more limited. Bringing a mindfulness of their housing and property goals will help us break barriers to greater financial inclusion.
For more information, sign up for updates from the Financial Inclusion 2020 campaign.
Patrick Kelley serves as Director of International Housing Finance and Market Development for Habitat for Humanity International. He leads HFHI’s strategies to develop market-driven solutions to serve the base of the pyramid with shelter products, services and finance.
Image Credit: Stephen Hacker and NextBillion
Have You Read?
Sowing Sustainable Finance: Making Rural Inclusion a Priority
Removing Road Blocks to Housing Finance: New Findings from Latin America
Financial Inclusion by 2020? Five Global Trends that will Shape the Answer

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