APPROACH:
PCI's 'neighborhood approach' engages municipal and ministry level partners, local universities, private companies, and community based organizations in collaborative efforts to transform high-risk urban neighborhoods into resilient, safe, and productive communities. PCI commits to build on this approach to pioneer new, scalable strategies for urban upgrading through providing lower cost loans for housing coupled with technical assistance for incremental and new construction and retrofitting, legal services for land title, and economic empowerment. PCI and its partners commit to developing a mechanism to deliver lower cost loans for housing and the purchase of safe building sites in high risk informal urban areas in at least three distinct geographic markets. These loans will be coupled with context-specific technical assistance for incremental and new construction and retrofitting.
To develop the loan product, PCI will (i) work with international housing finance specialists to conduct additional rigorous market research on local regulations, local demand and the capacity of households to pay, and the sustainability and scalability of the product; (ii) screen candidate micro-finance institutions (MFIs) with experience and interest in administering housing loans in urban areas; (iii) identify a firm to manage the loan fund or loan guarantee facility on behalf of the initiative; and (iv) work with partners to attract a range of investors, from mission-driven impact investors to financial institutions looking for a market rate of return.
These loans will be accompanied by community mobilization initiatives, which include forming and strengthening official community committees sanctioned by local law, and engaging with youth, women, men, and the elderly to map community risks and generate strategies to address them. Furthermore, PCI and CEMEX will create 'Self-Employment Productive Centers' that train people in construction livelihoods, generate income, and furnish materials for building household and community level infrastructure.
Private investment in lower cost loans, contributions from community members, and the investment by companies like CEMEX represent a significant private contribution to upgrading high risk urban settlements. Municipal and national governments, international donors, and lenders such as the U.S. Agency for International Development (USAID),the European Union (EU), World Bank, and Inter-American Development Bank (IDB) have all identified urban vulnerability as a priority, and the preferred strategy for contributing to solutions is through matching local community and private sector efforts. Building on this, PCI and its partners will structure public-private partnerships that can provide a broader array of critical services required for resilient neighborhoods: community planning and upgrading, such as improvements to shared drainage and water and sanitation systems, better access and egress, and improved safety and security; extension of housing subsidies and other national government programs that often don't reach urban slums; disaster risk management; and support for municipal governments to improve governance and improve public spaces and land use management. As many households in informal areas don't pay taxes to the municipality for their basic services such as water, electricity, and sanitation, the upgrading process will expand the municipal tax base while providing households with the important basis for land title.
ACTION PLAN:
October - December 2014: Finalization of loan product based on updated market research; raising of initial capital for the pilot phase; finalization of qualified MFI partner in Mixco, Guatemala.
January - March 2015: Administration of loans and services in existing 17 communities participating in PCI's Barrio Mio project in Mixco, Guatemala; formation of new public-private commitments for urban upgrading with local partners to accompany lower cost housing loans.
April - June 2015: Identification of expansion municipalities with local and national government partners and private sector companies. Top candidate municipalities include those currently in discussions with PCI about applying the model (including Villa Nueva, Amatitlan, and Guatemala City). Identification of markets and development of public-private alliances in new countries with highly vulnerable urban areas. Top candidates include Tijuana, Mexico and Lusaka, Zambia, among other potential location in Mexico and Latin America
July - December 2015: Expansion of loans and services into new high risk informal urban areas; development of local capacity in each country to assume responsibility for technical services related to resiliency, disaster risk reduction, and urban upgrading.
2016-2017: Expansion of the fund, and scaling within existing and new high risk cities.
The United Nations estimates that the world's urban population is projected to increase by 2.6 billion from 2011 (3.6 billion) to 2050 (6.3 billion). Urban areas worldwide are expected to gain 1.4 billion people between 2011 and 2030 alone. As the world urbanizes, an increasing number of households are living in high risk and informal settlements that are prone to a wide array of disasters, such as floods, earthquakes, hurricanes, and outbreaks of disease. They are also vulnerable to many smaller shocks and stresses that affect their lives and livelihoods on a daily basis. High risk informal settlements in urban areas are already large, and they are growing at alarming rates in cities across Asia, Africa, and Latin America.
Inadequate housing in informal urban areas is a core cause of this growing vulnerability: houses are typically poorly constructed, often on unsafe sites, with inadequate technical skills and improper materials; they often don't have formal connections to basic services, such as electricity, water, and sanitation; many families don't have title to their land; and many communities have inadequate community level planning, such as drainage, safe and appropriate access and egress, and lighting.
Households in informal urban areas rarely have access to formal loans for housing, and they often pay interest rates as high as 90% or more and are entangled in exploitative land tenure arrangements, requiring them to spend 65% or more of their monthly income on housing costs alone. Habitat for Humanity cites a study that indicates that only two percent of traditional microfinance loans are designed to improve shelter, but up to 20% of microenterprise loan funds intended for business purposes are used for housing (Habitat for Humanity). Households, communities, municipalities, national ministries, and many private sector companies have roles to play in upgrading informal areas into safer, more productive, and resilient neighborhoods, and all of them have many clear incentives for being involved. Public-private partnerships, particularly those that include extending lower cost loans to qualified households, offer unique opportunities to engage all actors in the upgrading process in a way that everyone benefits: households access safer homes with clear land title and reduce their living costs; municipalities extend basic services and improve their tax base; private companies expand into new and profitable markets; and all partners reduce the high costs associated with informal, poorly planned and highly vulnerable areas.
SEEKING:
PCI and its partners are seeking: 1) Assistance in structuring the fund to meet the desired objectives of the partners, investors, and loan recipients; 2) A financial services firm to manage the funds for multiple housing markets; 3) Impact and institutional investors interested in creating a new market for financial services while building urban resilience; 4) Technical advice and additional resources to document and impact measurement.
OFFERING:
PCI will provide technical leadership and capacity building in disaster risk management, economic empowerment, community mobilization to reinforce protection and reduce gender based violence, health and urban food security, urban planning and increasing access to basic services, technical assistance for land management and zoning, identification of underutilized urban spaces, and construction and retrofitting of housing and schools. PCI also offers the results of its research to facilitate and inform the roles of these partners, including for the purpose of identifying incentives for participation, identification of priorities and challenges, informing decision making and policy formulation, measuring impact, and documenting lessons learned. PCI will provide management of the financial mechanism for extending lower cost loans to households, and guarantee the capacity building and effective administration of loans by MFI partners. CEMEX is willing to invest to execute the Integrated Program to Assist SelfHome Builders (PiAC) and to build capacities through a social franchise model to extend the capacity to attend low-income families.
