Mr Ruban Selvanayagam, a Brazil-based real estate and land consultant with EXITUS Construction Brazil, recently laid out a series of arguments against housing microfinance being the best solution to deal with the “wide and growing presence of slums, shanty towns and other forms of substandard housing” [1]. In general, housing microfinance initiatives comprise small and medium-sized loans provided to low-income households for housing improvements and basic housing construction.
Mr Selvanayagam argues that most slum populations, even if they have some right of occupation, have no long term legal rights and are always at a risk of eviction thus improving the condition of a slum unit does not provide an effective long-standing solution. He further says that the limited size of housing microloans does not allow beneficiaries to meet international building standards. Further, infrastructural improvements such as potable water supply and sanitation systems need to be in place for improvements in the housing condition, and regions where housing microfinance is already underway have been lacking in such improvements. Mr Selvanayagam adds that new housing construction projects for the low-income demographic are possible only in areas where land is very affordable, but these areas are usually far away from work places and generally lack basic infrastructure.
By Nisha Koul, Research Associate
Sources and Additional Resources:
[1] Habitation for the Planet, “Why housing microfinance is not a base of the pyramid solution” by Ruban Selvanayagam, http://www.habitationfortheplanet.org/blog/2011/08/why-housing-microfinance-is-not-a-base-of-the-pyramid-solution/
MicroCapital.org story, August 3, 2011, “MICROCAPITAL BRIEF: International Finance Corporation (IFC), FMO of The Netherlands to Loan $30m to Costa Rica’s National Cooperative of Educators (Coopenae) for Housing Finance, Support to Small- and Medium-Sized Enterprise (SMEs),” https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-fmo-of-the-netherlands-to-loan-30m-to-costa-rica%E2%80%99s-national-cooperative-of-educators-coopenae-for-housing-finance-support-to-sm/
MicroCapital.org story, July 16, 2011, “MICROCAPITAL BRIEF: Habitat for Humanity Receives $45m Loan from Overseas Private Investment Corporation (OPIC), to Be On-Lent to Microfinance Institutions Through Housing Finance Programs,” https://www.microcapital.org/microcapital-brief-habitat-for-humanity-receives-45m-loan-from-overseas-private-investment-corporation-opic-to-be-on-lent-to-microfinance-institutions-through-housing-finance-programs/
MicroCapital.org story, June 10, 2011, “MICROCAPITAL BRIEF: Habitat for Humanity, Microfinance Centre (MFC) for Central and Eastern Europe and the New Independent States Establish “Shelter Innovation Center” to Address Housing Needs in Europe, Central Asia,” https://www.microcapital.org/microcapital-brief-habitat-for-humanity-microfinance-centre-mfc-for-central-and-eastern-europe-and-the-new-independent-states-establish-%E2%80%9Cshelter-innovation-center%E2%80%9D-to-address-housi/
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