Cooperative Housing Foundation

September 2001
An OPIC direct loan will help establish a new on-lending facility to provide loans for home improvements in Mexico, including the provision of safe and adequate housing for workers along the U.S.-Mexico border. Proceeds of the loan will go to Mexican non-profit organizations, which in turn will lend money to individual Mexicans to finance home improvements. Cooperative Housing Foundation [CHF, a non-governmental organization] will also offer educational programs for potential lenders and borrowers. (OPIC press release.)

As OPIC finance director Mary Ryan Bequai recounts it, the project presented OPIC an opportunity to achieve a number of firsts.

“It was OPIC’s first foray into microfinance – which, we knew from the high loan repayment rates, was a good investment,” she recalled. “In addition to that, OPIC had in 2001 just opened it small business program in Mexico.

“Third, it was our initial outreach to NGOs (non-governmental organizations), and they opened up an entirely new developmental focus for OPIC,” she said. “We saw this as a chance to work more strategically with government agencies like USAID (US Agency for International Development). Instead of receiving a USAID grant, CHF’s mission could be supported by an OPIC corporate loan, and further supplemented by USAID technical training and assistance. All those elements made the project innovative.”

Ultimately, however, it was a new reality on the ground in Mexico that pushed the project forward: thousands of Mexicans were moving to cities in the north of the country, such as Ciudad Juárez and Nuevo Laredo, to work in maquila plants that had opened following the passage of NAFTA. Many of them had constructed ramshackle homes and, with steady incomes, were looking to improve them.

“CHF had an immediate need in Mexico that OPIC could support,” Bequai said. “They were working with people who were employed and who owned homes – and were therefore less likely to emigrate (to the United States). In this way, OPIC could get into the business of supporting housing development in emerging markets.”

OPIC agreed to provide a $2.5 million loan to CHF in September 2001. CHF, in turn, on-lent the OPIC funds to two Mexican NGOs, called FUNHAVI and FVP.

FUNHAVI was established in Juarez at the advent of NAFTA to provide quality housing and adequate services where both were lacking as the maquiladoras streamed in, and where few institutions offered loans to factory workers. Under such dire circumstances and with limited capacity by the Mexican government to provide housing, the housing deficit in Mexican border cities had reached 280,000 homes by 2002.

FUNHAVI’s home improvement loans took advantage of homeowners’ willingness to undertake improvements themselves – saving up to 40 percent in labor costs – as well as the NGO’s agreements with local cement suppliers and hardware stores to provide reduced prices on goods required for renovations.

Supported by OPIC financing, FUNHAVI’s home loan program has been a success. With an average loan size of 12,400 pesos (approximately $1140), hundreds of Mexican families have been able to improve their quality of life with home improvement projects that typically take between 30 and 45 days.

Equally important, FUNHAVI has enabled working Mexicans to build up credit history, in turn allowing more competition to come in – and giving people in Juarez more options to obtain credit. Clients, many of whom have little credit history, receive education on the credit process from FUNHAVI, during which the agency stresses the importance of creating permanent assets through homeownership.

FVP began with housing loans, but added small business loans, which have performed well in Nuevo Laredo and Ciudad Acuña Loans are intended to support entrepreneurs with short-term credit assistance; qualified applicants must be owners of microenterprise with at least one year of operations. As with FUNHAVI, education is emphasized: small business owners with aptitude but little experience in record-keeping are taught about cash flow analysis and the responsibilities of loan repayment.

Overall, the OPIC loan has enabled FUNHAVI and FVP to consolidate their support, reach more markets and improve their financial performance: FVP has much-improved portfolio quality, and FUNHAVI has opened two satellite offices. They now offer more integrated architecture packages for customers, and coverage for materials and labor.

The OPIC loan to CHF has generated nearly $8 million in retail housing microfinance loans in Mexico: 6,023 loans have been disbursed in Nuevo Laredo, Ciudad Juarez and Chihuahua from 2002 through December 2007.

Richard Shumann, a CHF technical officer, said of OPIC’s support, “What was really important was obtaining a period of long-term funding, for seven, eight years, which gave us security to plan and to focus much more on the management of institutions and their growth, rather than looking for money to onlend.

“As a result, we had a way to provide support to new maquila communities – enabling people to improve their quality of life – with a service that was needed, by providing a good deal of people who needed it improved shelter and access to a loan.”

February 2008
The OPIC loan to CHF has enabled Mexican nonprofit organizations FUNHAVI and FVP to make 7,417 loans, totaling $9.7 million to Mexicans working and living along the US border. Based on this success, OPIC has subsequently partnered with CHF for similar projects in Liberia, Romania, Lebanon, Iraq and the West Bank.