Project completion report of the low cost shelter project (511-0567 and 511-HG-007)

PACR covers the period 9/83-9/92. Although the HG loan was not implemented in 1983 as scheduled, due to political problems and the country's economic crisis, the grant portion began on time. The program had mixed results in achieving its quantitative targets. It achieved a Savings and Loan (S&L) portfolio of $106 million, which exceeded the target of $96 million set for 1991; however, the number of loans disbursed was only 45% of the targeted 9,500. In addition, the S&L Mutuals' market share did not reach its target of 13%, controlling only 10.9% of the savings market. HG loans were mostly in accord with set criteria. However, 20% of the families receiving loans had monthly incomes that exceeded the upper limit set by the program. Further, CACEN was forced to slow its disbursements of loans to Mutuals because of their lack of compliance with the safe ratio established in their loan agreements. The ratio between the Mutuals' loan portfolio generated under the project and their debts to CACEN has fallen well below that set in the agreements. CACEN's problems first arose when two large Mutuals in La Paz refused to join in a consolidated S&L system, and in fact, actively worked to de-stabilize CACEN. (It appears that wounds resulting from many years of a top-down approach on the part of CACEN were too deep to forget.) Another problem arose when a new Minister of Urban Affairs developed plans to expand the role of the Fondo Nacional de Vivienda (FONVI). He proposed that FONVI, created to concentrate public funds for housing and complement the financing efforts of S&Ls, totally replace CACEN. His decree precludes CACEN from continuing its loans to Mutuals. Even greater problems developed when CACEN and some of the Mutuals agreed to act as intermediaries for loans for agriculture and agroindustry. This was done without adequate analysis, and many of the loans were politically related. These loans contributed to the technical bankruptcy of CACEN and some of the Mutuals. Despite its problems, Bolivia's S&L system was strengthened in its capacity to provide financing for low-cost shelter. According to CACEN, the system has financed 95,113 housing loans for $306 million since its inception in 1950. In addition, FONVI has captured millions of dollars each year for housing finance. Nevertheless, this success should not minimize the serious problems remaining within the S&L system -- in its current state, the system is not financially self-sufficient. Lessons learned from this program are as follows. (1) Many financial programs fall prey to the illusion that finance programs for the poor are social programs not financial ones. In this program, CACEN, through its noble intentions, opened at least four Mutuals in areas that can barely support a bank, much less an institution focusing only on housing. Support of such institutions which are financially inviable adversely affects the entire system as well as the social cause. This may be the fate of Bolivia's S&L system. (2) CACEN's supervisory powers were never adequately exercised. CACEN was not able to function as both promoter and supervisor of the S&L system. USAID programs should have independent supervision. (3) Institutions managing USAID programs should be strong and technically competent. Early evaluations of CACEN revealed serious problems; however, CACEN failed to implement recommendations for improvement. Continued USAID support of CACEN should have been tied to satisfactory adherence to the recommendations. (4) Programs such as this should be monitored by USAID staff who maintain permanent residence in-country. The final 2 years were managed only with the assistance of a short-term advisor who visited Bolivia for four or five days a month. This resulted in insufficient coverage and continuity.