Over 800,000 Paraguayan families lack adequate housing, and that number that is growing by 15,000 every year. Low-income families (defined as households that earn less than four times the minimum wage) have almost no access to the financial products they need to improve their living conditions.

New solutions for such households are now available, thanks to an innovative partnership involving local microfinance institution Vision Banco, the international nonprofit Habitat for Humanity, the commercial bank Citibank, N.A. Paraguay and the Inter-American Development Bank’s Opportunities for the Majority initiative. Low-income families will be able to access the loans they need to repair, expand, or improve their homes. They will also receive financial literacy training to help them manage their financial responsibilities.

Housing and Banking Access: Two Persistent Issues Affecting the Poor

Paraguay’s housing deficit is not a unique situation; most low-income communities across Latin America struggle with finding safe and affordable homes. Credit is virtually non-existent for those at the bottom of the socioeconomic pyramid, so their prospects of improving their living conditions are grim.

Paraguay does have particular limitations in addressing the housing and banking challenges of its low-income residents. Its financial institutions have limited options for accessing long-term local currency lending, which further limits the capacity of local institutions to offer credit to traditionally marginalized sectors.

Financial Institutions and a Nonprofit Unite for Results

With the support of a US$ 3 million partial credit guarantee from the Opportunities for the Majority initiative of the Inter-American Development Bank, Citibank N.A. Paraguay will provide the long-term financing needed by local financial institution Vision Banco to fund a new home improvement credit line designed specifically for low-income households.

Vision Banco, a leading Paraguayan commercial bank, specializes in microfinance—75% of its loan portfolio corresponds to microcredit and loans for medium and small businesses. Habitat for Humanity, an international Christian nonprofit dedicated to building and repairing housing for the poor, has been working in Paraguay since 1998. Together, they have designed a program that provides low-income families with both the financial resources and technical expertise they need to make quality improvements to their homes.

Financial Tools for Low-Income Homeowners

While some of the recipients of these loans are already microcredit clients of Vision Banco, Habitat for Humanity will play an important role in screening and training qualified applicants. Habitat architects will work with the beneficiaries to plan and carry out the proposed construction projects, and will provide training in financial literacy to help the loan recipients understand how to manage the repayment of their loan, as well as make them aware of other financial services available to them.

In order to be eligible for these new loans, clients must have been working for the same employer for at least 3 years, be supporting at least one dependent, already own land and have a family income of no more than four times the minimum wage, and participate in mandatory financial education workshops led by Habitat for Humanity.

This project is an example of the multisectoral approach frequently used by Opportunities for the Majority, as it combines the resources of a private financial institution, a commercial bank, and an experienced nonprofit to make the project stronger and able to reach more clients than any individual partner could achieve on its own. As a result, up to 2,500 families will lead healthier, more secure lives and will have increased access to financial services.