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Urbanization and finance in developing countries: marketization, institutionalization and internationalization of housing microfinance in Mexico

Subject Area City Planning, Spatial Planning, Transportation and Infrastructure Planning, Landscape Planning
Architecture, Building and Construction History, Construction Research, Sustainable Building Technology
Empirical Social Research
Human Geography
Term from 2017 to 2023
Project identifier Deutsche Forschungsgemeinschaft (DFG) - Project number 392428683
 
Final Report Year 2022

Final Report Abstract

Summa ry This research project anaiysed the changing role and lo•gic of the financial sector• in urbanization processes and in particular, in the production of housing, in the context of Mexico as a developing country. The project examined the processes and effects of marketization, institutionalization and internationalization of .housing microfinance ¡n Mexico. On the one hand, the project asked how these processes have evolved, how they are manifested and ¡nterrelated. On the other hand, it asked what the potential consequences of these processes are for low-income households and communities accessing housing microfinance instruments. To answer these questions, the project sought to combine two levels of analysis. A macrolevel analysis assessed the changes on the level of institutions and mechanisms linking financial markets and the financial service industry with self-help housing over the past decades. A micro-level of analysis focused on evaluating the everyday practices in which households obtained and consumed financial services as part of their büilding practices. For the macro-level nalysis, we carried out document analysis on legal and policy documents and conducted interviews with key actors from government housing institutions and from the different entities providing housing micro loans and technical assistance to families under the referred housing program. For the micro-level of analysis aimed to assess the potential effects of micro-loans for low-income families, the Covid-19 pandemic impeded us to carry out indepth ¡nterviews and ethnographic research with households in the way we• had initially planned. Therefore, we adjusted our focus to the different types of financial institutions offering micro-loans under the referred program, and to the ways in which they operated. For this analysis, we carried out semi-structured interviews with the heads of these financial entities and of .technical assistance providers, complemented by documentary analysis on their published material, participant observation of their work and a small number of unstructured interviews with households who had acquired their micro-loans combined with site inspection of their homes. The project came to the following conclusions: With regard to the first research question and level of analysis, we confirmed the hypothesis that housing microfinnce has been institutionalized in Mexico through a housing program launched by the national government in 2007 and initially named Èsta es fu Casa. Moreover, we found out that the World Bank has pushed for the institutionalization of microfinance instruments within this program, with the declared aim of expanding and strengthening housing finance markets. However, we have observed that this institutionalization is still fragile. The path followed by this housing microfinance program has been an experiment riddled with setbacks, failures, constant changes and negotiations with civil society and market actors ln particular, the negotiation with these civil society actors has led to the inclusion of finance providers operating in a non-profit basis in the relevant programs such as saving and credit cooperatives. ln addition, regulations and standards were incorporated that aimed to set limits to purely commercial motifs. This and other external conditions, such as the financial crisis and changes in the Mexican government, have weakened the institutionalization of housing 3. microfinance and have limited the profitability of micro-lending for companies working under the referred housing program.• The limited profitability for commercial providers, in turn, has prevented the housing program from becoming a channel for the massive entry of the formal financial industry into the self-construction housing sector. We therefore observe a connection between a fragile institutionalization of housing microfinance, its weak marketization within the policy frameworks, and the restricted expansion of the financial sector into self-help housing. With regard to the second research question, we found out that the type of finance and technical assistance providers and the context in which they operated played an important role in the effects of microcredit on families, communities and their housing. As mentioned earlier, the program operated with two main type of finance providers: for-profit financial institutions and non-profit institutions such as saving and credit cooperatives. These .were guided by different logics and goals and therefore, their work yielded different results and potential effects for families. For saving and credit cooperatives, which were our main focus, their goal was not to profit from loans, but to improve the living conditions of the families and communities and to create alternatives to the dominant economic relations. !n this regard, the housing micro-!oans offered by the cooperatives were connected to local alternative development projects and required the active participation bf households. The potential effects of microfinance for families acquiring loans from saving and credit cooperatives can be describéd as follows. First, with regard to the potential effects in terms of subjectivities of familiès acquiring their loans, the cooperatives did not limit themselves to simply allowing the unfolding of financialized logics among its members. On the contra•ry, they also strove to shape dissident subjectivities among •their members by using the loans not as a form of disciplining but as a way of fostering their organization to develop alternative economic projects. Second, with regard to the role of microfinance on improving the living conditions of families, we found out that saving and credit cooperatives or other types of non-profit organizations offering housing micro-loans and technical assistance to families clearly prioritized the household needs rather than profit-making interests. ln this way, they contributed to supporting families in improving their housing conditions. Third, with regard to the implications of microfinance in poverty reduction, we found out that both, for-profit and nonprofit finance providers were not actually reaching the lowest income families. Furthermore, the difference on the interest rates offered by the two types of finance providers was not very significant,•so in that sense, their ability to rninimize household indebtedness was limited. ln sum, through •the integration of both ievels of analysis, we concluded that the institutionalization of housing microfinance is so far still fragile. While it has opened the door to non-market oriented actors, it has not prompted the massive expanšion offor-profit financial actors into the self-heÌp housing and low-income sector. However, the participation of nonmarket-based actors and criteria into the program not only has played in favour of families housing and living conditions, but has also contributed in making processes offinancialization more complex and contradictory.

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