Unlocking the pyramid: Social platforms for financial inclusion in low income suburbs of Greater Buenos Aires

Unlocking the pyramid: Social platforms for financial inclusion in low income suburbs of Greater Buenos Aires

ArgentinaArgentina
Organization type: 
nonprofit/ngo/citizen sector
Project Stage:
Growth
Budget: 
$500,000 - $1 million
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

We are an Argentine NGO developing social platforms via which low income families in Greater Buenos Aires can access public works & finance

About Project

Problem: What problem is this project trying to address?

Rapid and unplanned urbanization has given rise to alarming inequalities in wealth en consequently massive infrastructure and housing deficits across Latin America. In Greater Buenos Aires (GBA) there are over 6 million people living in poverty with limited or no access to basic services (water, drainage, electricity, gas) or affordable adequate housing. This combined with a culture of distrust & disinterest among banks and companies has led to financial exclusion and social marginalization for millions of people. Public policy has failed to meet the needs of these individuals, leaving the process of urbanization in the hands of habitants.

Solution: What is the proposed solution? Please be specific!

FPVS promotes financial inclusion by developing legal and financial platforms known as Neighborhood Trust Funds. Thanks to this mechanism low income families access basic services and lines of credit for home improvements provided by commercial banks, international financers and the State. In this way the organization of the demand attracts public and private offer to invest in neighborhood infrastructure and housing projects. Compared to other lines of credit in Argentina ours offer low interest rates, extended repayment (up to 72 months) & offer tailor made solutions based on individual socioeconomic situations. We bring together public and private financers, to offer neighbors up to 4 financial products: (i) external Natural Gas Network Connection (NGNC) (ii) internal NGNC (iii) sophisticated internal NGNC (multiple connections & electrical domestics) & or (iv) home improvement loans.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

1. Trained neighbors, known as Community Developers, organize their fellow neighbors to promote the natural gas project in their blocks. 2. This community organization is consolidated via the Neighborhood Trust Fund. 3. A financial and technical plan is made based on individual housing needs, later a single proposal is made to financers on the behalf of 1000s of neighbors. 4. The diverse financial capacity of neighbors, some can pay in one go others require up to 72 months, combines together allowing the offer provided by banks to be adapted to neighbor’s needs. The financers accept the collective guarantee offered by neighbors (this includes an additional sum voluntarily paid to the bank until the works are completed and the mentioned money returned to the neighbors via the Trust Fund). 5. Households with natural gas increase their incomes by 5% per month due to reduced energy costs and home values are increased significantly. Our Observatory shows a 20% reduction in respiratory illness, 40% reduction in flus and 50% drop gastrointestinal sicknesses. Furthermore levels of comfort and family life are greatly enhanced. 6. At the same time the model empowers individuals (in particular women and youths), strengthens communities and promotes social inclusion.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

The providers of financial services cater for individuals as opposed to groups of neighbors. These solutions are currently only available for individual and private needs (consumer credit, housing & small business). Diverse actors have attempted to resolve the problems faced by marginalized communities, including the State, NGOs and community organizations. Despite these efforts there is a glaring lack of cohesion. Our model unites actors whilst offering them mutual benefit. For communities access to public services means a better quality of life and is a first step toward achieving a credit rating. For companies, banks and the State it´s a first step toward developing new mechanisms for working together.
Team

Founding Story

Our history has been about knowing and working with neighbors of marginalized neighborhoods in Greater Buenos Aires. Over the last 20 years we`ve carried out projects that aim to enhance the potential neighbors have proven they have via the construction of their homes and suburbs. We´ve stood witness to neighbor`s capacity to build their houses and invest their savings. We`ve also seen the inefficient way companies, banks and the State treat deal with these populations. We’ve valued the massive investments made by neighbors in their housing and realized that together they are a group worth millions. Despite this, the lack of infrastructure generates little incentive to continue investing. Investing in infrastructure encourages spending on housing and helps to break the cycle of poverty.
About You
Organization:
Fundación Pro Vivienda Social
About You
First Name

Alison

Last Name

Smith

About Your Organization
Organization Name

Fundación Pro Vivienda Social

Organization Country
Country where this project is creating social impact
How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

• Foundation Vidanta prize " Contributions to the Reduction of Poverty and Inequality in Latin America and the Caribbean", 2012
• Leveraging Business for Social Change Ashoka Changemakers, 2010
• Banking on Social Change: Seeking Financial Solutions, Ashoka Changemakers. 2008
• Microfinance, innovation & sustainability, Giordano dell Amore, 2009
• Development Marketplace, World Bank, 2002

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Innovation
How long have you been in operation?

Operating for more than 5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Transparency, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

We develop social platforms that connect low-income families with actors from various sectors (public sector, businesses, and banks) in order to provide access to financing and public works to improve their homes and neighborhoods.
We seek a solution to a lack of infrastructure and the housing crisis through a collective mechanism that includes everyone.

At the same time we promote connections between residents, the public sector, businesses, and commercial banks to create change over the long term in these neighborhoods.

7000 families are involved in the current initiative and 2000 more are expected to participate in the upcoming year.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

Physical and other accessibility obstacles that prevent communities from reaching financial services, The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Powerful incentives for financial service providers to move up-market.

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:
For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

The Neighborhood Trust Funds permit resources from neighbors, companies and public entities to be invested into projects that address infrastructure deficits (water, drainage, pavements, lighting and other collective services). The Gas Trust Funds show results that validate the performance of this mechanism.
It will allow banks to begin doing business with this population, to which they can offer financial services, having already carried out an experience with a reduced risk.
It will also allow neighbors to approach the banks that financed the Trust Fund and use their proven credit performance as a prerequisite to access other financial services

Could your solution work in other geographies or regions? If so, where?

Yes! Our social platform is based on a formula that requires 3 simple elements: community organization, microfinancers & commercial banks & company/state involvement. With these components we believe our model is 100% replicable in other marginalised urban areas lacking in basic services.

In Argentina there are more than 5 million families with no access to infrastructure. They rely on the State action to gain access to services; public policy has failed to cater for their needs.

Urbanisation is a process impacting other emerging nations in similar ways, accessing infrastructure is therefore a universal problem.

If your solution is dramatically successful, how will things be different in 10 years?

The broader outlook of marginalized neighborhoods will have changed. These suburbs which have been built by neighbors will begin to benefit from a better quality of life; they will have paved roads, running water, drainage, guttering, street lighting and internet. These services will have been financed by the Neighbourhood Trust Fund using state, commercial and neighbour`s funding.

These projects redirect a part of neighbor’s savings which today are used to buy individual consumer goods (freezers, stoves, televisions, cell phones etc.) toward public goods and services. Quality of life will be notably enhanced and inequality will begin to diminish. Local employment will increase and local businesses will flourish.

What will have had to have changed to make this happen?

In order for these changes to take place the relationship between companies, the State and neighbors will need to have changed. Currently there are no projects which use “mobilizing events” that involve diverse social actors to resolve the situation. Misinformation, distrust and the absence of a common objective result in neighbours constructing their own communities without credit.

Companies and the State do not invest together in poor neighborhoods. The possibility of working together to achieve common results transforms this reality dramatically. Public policies which favor this type of project are necessary. In Argentina there are examples of suitable solutions to collective problems when there is respect toward differences and willingness to work together.

What has been the impact of your solution to date?

We have set up 4 Neighborhood Trust Funds bringing together 10.000 families of which 4.500 already have natural gas.

We have promoted articulation between multinationals, federal, state and local governments, local suppliers, neighbors as well as with local and international banks.

Also more than $US5 million have been sourced from diverse investors (neighbor contributions, commercial credits and public subsidies)

Neighbors have increased their asset wealth by between 15% and 20% thanks to a rise in the value of their homes. On top of this households increased their incomes by an equivalent of 5% due to reduced energy costs.

Levels of distrust between all the actors involved have decreased

What is your projected impact over the next five years?

Via three gas Neighbourhood Trust Funds 10.000 families will be connected to the network, the same families will have the opportunity to access credits to improve their homes thereby having a positive impact on the livelihoods of 50.000 people.

200 neighbours will have been trained in our Community Education Centre. Another 100 local builders and gas installers will have been employed on the project.

40 businesses (construction companies, manufactures etc.) will enter new markets and carry out $US10 million in public works. 3
3 to 5 banks will finance the mentioned projects

What barriers might hinder the success of your project? How do you plan to overcome them?

The biggest barrier faced is distrust and the lack of coordination between actors. The collective nature of the social platform we have designed counteracts these fears and promotes articulation. Public tenders provide an ideal interaction space for actors to work together and overcome these problems.
The other challenge is to encourage neighbors to invest in their suburbs. Consumer credit is the principal destination of savings in these communities and is a difficult obstacle to overcome. The Neighborhood Trust Funds are an efficient and accessible instrument for community development which encourage new spending habits.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Incorporate at least 2 banks to fund the United Future Neighborhoods Trust Fund and carry out 3 public tenders for the Neighbors

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Adhere 1056 families, (the minimum required for the Project to be feasible) in the 6 neighbourhoods of the Neighbours in Acti

Task 2

Strengthen teams of Community Developers, gas installers and Local Builders to carry out the works.

Task 3

c. Carry out 800 internal gas connections and 300 home improvements

Now think bigger! Identify your 12-month impact milestone

To have 3 commercial financers (banks or investment funds) backing for United Future Neighborhoods Trust Fund projected for 3.50

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Consolidate alliances with local banks and investors to co-finance the United Future Neighborhoods Trust Fund

Task 2

Consolidate alliances with businesses for the construction of works, internal gas installations and the supply of constructio

Task 3

Train 100 Community Developers to promote and administer the Project

Sustainability
Tell us about your partnerships

The Neighborhood Trust Fund model is based on the alliance between diverse actors, both public and private, who articulate together whilst carrying out a specific function.
The major task of the Foundation is to assist and connect the various actors involved in the Projects. Our strategic objective is to facilitate and enhance the interaction between the interlocutors, the idea being that they will begin to articulate with higher levels of fluency and eventually do so independently.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

Yes, we are working in 2 areas now and in 2013 will start working in a third area in Greater Buenos Aires.

What type of operating environment and internal organizational factors make your innovation successful?

1- That the people who work with the residents are individuals employed by the foundation. This structure would create committed personnel who can communicate knowledge about the project.

2. That the mechanisms for credit evaluation and payment are consistent with those of the banks. This will ensure that the previously stated groups can finance the projects. Transparency will help in the auditing of project operations.

3. Coordination with the providing gas company will generate synergies that will reduce the risk for funders considering that the contributors and residents pay together for the gas bill. This mechanism will lower the credit and operating risks.

4. The mechanism for the participation for businesses will be based in open competitions. This will facilitate c

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list

The task of bringing together diverse actors (company, public sector and neighbors) to provide infrastructure requires highly qualified staff that need training. Also organizing Trust Funds requires funding in its preoperative phase.