I'm frequently asked if Prisma grants housing loans. The answer is YES. However, the most popular housing loan product is not what we are used to in the US.
In Honduras and Nicaragua, many clients take "progressive housing" loans. What in the world is a "progressive housing loan?" This just means that the borrowers build their houses a little at a time, over several years. They may start with the core house, 1 or 2 bedrooms, a living room, a small unfinished kitchen, and an outdoor bathroom. They add rooms as they can afford to or can secure loans. There really isn't a mortgage involved. Each segment of the loan can be for 1 to 3 years, and the house may take 10-20 years to complete. Essentially, the loan is more like a personal loan which in the US, we would classify as a consumer loan. As guarantee, they may have 2 co-signers with sufficient cash flow to cover the loan payments in case of moral hazard on the part of the primary borrower.
Secondly, we do have call every once in a while for a traditional mortgage to buy land, build a whole house, or both at the same time. These types of loans are treated as true first mortgages as we know them in the US. Terms are usually 5 to 10 years.
Thirdly, some borrowers who already own their homes put them up as guarantees for loans. These work like 1st mortgages as we know them in the US. We will take a 2nd mortgage if we also have the 1st mortgage.
Small and new MFIs seldom enter into these types of loans as they tie up their capital for too long. In our case, we follow prudent CAMEL guidelines and makes sure they don't exceed 20% of our total loan portfolio.
The most difficult part in acquiring a housing loan is the entire application process. During this part, applicants must be capable of paying for the loan. Progressive housing loans, on the other hand, are housing loans made even better!
Posted by: Genny Stutesman | October 31, 2011 at 06:21 AM