The housing is both a human priority and a powerful economic driver. The housing needs in Latin America and the Caribbean (LAC) are compelling, given that 37 percent of all households, or over 58 million families, need new or improved housing to meet basic minimum standards (Bouillon 2012)2. Most of these housing needs are felt by the region’s low-income majority, frequently referred to as the “base of the pyramid” (BOP)3, representing 360 million people earning less than $272 (2005 PPP) monthly per capita. Traditional housing markets have largely ignored the BOP, as formally built homes are too expensive, and mortgage financing is only available for the highest income segments of most countries’ populations. While solutions to low-income housing needs are often perceived as a responsibility of the public sector, clearly government resources alone are insufficient to meet such an immense need. Families themselves, together with the private sector, are taking center stage in developing adequate housing for the BOP. The strategic role of government is increasingly seen as providing regulatory frameworks and supportive policies that strengthen housing markets. Meanwhile, the provision of improved housing for the BOP is emerging as a vast and highly attractive market for the private sector. Companies such as housing developers, financial intermediaries, and suppliers of construction materials are moving into this market by offering an innovative array of tailored products, services, and linkages that make improved housing affordable and accessible to low-income families.
The IDB’s Opportunities for the Majority (OMJ) initiative was conceived to stimulate private sector involvement in providing valuable goods and services to the BOP – strategies that respond to compelling business opportunities while simultaneously addressing unmet needs of the region’s poor majority. Since 2007, OMJ has approved 52 projects/transactions in LAC totaling almost $350 million in financing through direct loans and partial credit guarantees. Innovations in the BOP housing market have emerged as a strategic focus of OMJ’s efforts, with 11 approved projects resulting in investments representing approximately 25 percent of OMJ’s overall portfolio. OMJ’s housing portfolio includes projects that target specific segments of the BOP, delivering well-tailored products and services through a variety of channels. The types of private sector entities undertaking these projects are predominantly financial institutions; however, many of them work in partnership with low-cost housing developers, suppliers of construction materials, NGOs, and government housing programs to deliver a more complete product. OMJ’s housing projects are currently located in Colombia, Mexico, Peru, Nicaragua, and Paraguay (see facing page). By highlighting examples from OMJ’s housing portfolio and identifying key insights and lessons arising from these initiatives, this report seeks to draw attention to LAC’s vast and largely untapped housing market at the base of the pyramid and celebrate the range of promising business models emerging within the region.