Many Paths to a Home: Emerging Business Models for Latin America and the Caribbean's Base of the Pyramid
The lack of adequate housing is a problem throughout Latin America and the Caribbean (LAC). Almost 40 percent of families in the region live in a house beyond repair, have no title, or lack water, sewerage, electricity, adequate building materials, or space. It is estimated that by 2015, that number will increase by 10 percent. Only an investment of at least $310 billion will close the region's current housing gap, that is 7.8 percent of LAC's GDP. The demand for improved housing among the base of the pyramid (BOP) has been consistently strong and represents a relatively steady proportion of the overall income of this segment of the population. Yet the supply of innovative and tailored solutions continues to be limited. This report presents and analyzes promising business models that are enabling companies and other organizations to provide services and products to the BOP and in doing so help address the region's pressing housing deficit. The business models show that BOP families have both the willingness and the economic capacity to make a down payment and pay monthly installments for a finished housing solution. They also demonstrate that BOP families can afford to take out a loan for home construction or improvements if financial products are designed to take into account their particular circumstances, which include labor informality or low formal wages, lack of appropriate collateral, and a volatile wage-earning scheme. Most importantly, these models expose the vast opportunities for the private sector to enter and serve the BOP market. Demand at the BOP is latent and growing, and business models with the potential to serve this market segment are in need of adequate financing. This shows that the market opportunity is there for developers, suppliers of construction materials, financial institutions, and impact investors.