Research Pro posal
Proposal for Research Project on Housing Finance in Peru
(This is a proposal for research on housing finance in Peru, prepared in response to an invitation
received from the Inter-American Development Bank. The research would be carried out by a
team at the Instituto del Peru, a research center of the Universidad de San Martin de Porres in
Lima. The study would seek to describe and explain the current state of housing finance, and
identify policies that could foster its fuller development.)
I.
Motivation for the Project
Peru is a case of extreme frustration with respect to housing finance. At the end of 2008,
mortgage credit amounted to only 3.3 percent of GDP, barely half the Latin American average,
and one third the average for other emerging economies. Peru´s backwardness in this respect is
paradoxical in view of its strong economic growth performance over the last fifteen years, with
GDP rising at 5.4 % per year on average. What is more, the financial sector as a whole expanded
substantially, with total credit growing at 15.4% per year, while its microcredit sector rose at
31.2% per year. In 2008 and 2009, Microscope rated Peru the best business and normative
national environment for microcredit, a comparison that covered 55 countries this year.
Though mortgage lending began to develop rapidly at the end of the nineties, it peaked in 2005
and then declined from 14.3% to 12.8% of total credit, adding to the paradox of frustration in
the context of otherwise substantial development in the economy and in other components of
the financial system.
It is not for want of trying that mortgage lending, and housing finance in particular, have lagged
so severely. Over five decades numerous policy and institutional initiatives sought to promote
housing finance, at times with substantial success. Between 1956 and 1975 Peru led the region
in the growth of housing cooperatives and mutual savings and loan associations, backed by a
government Housing Bank. Later, the emphasis shifted to subsidized loans and government
built low-cost housing, financed in part by a payroll tax. In 199X, a ministry of Housing was
created. All these efforts, however, were offset by institutional weaknesses, fiscal vagaries and
severe macroeconomic and financial instability.
An effort to unlock the housing finance puzzle would be especially timely at this moment. Many
conditions for a breakthrough have been created recently, such as a sound and dynamic
financial sector, the creation of a large pool of long term savings in the private pension system,
and improved regulations that facilitate large scale housing construction. Additional measures
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Research Pro posal
and policies appear to be necessary, but should be grounded in a better analytical and empirical
model of housing finance. A major release of funding into low income housing would ease
social tensions as well as contribute to the expansion of domestic demand needed to cushion
Peru from the external crisis.
The motivation for this proposal is also institutional. A team at the Instituto del Peru recently
completed a history of microfinance in Peru, with partial support from the IADB. Expertise has
been created and the same team, led by a former governor of the Central Bank, is highly
motivated to continue its work on financial development.
II. A Model to Explain the Development of Housing Finance
Clues to explain the development or underdevelopment of housing finance in Peru are
provided in recent articles and books that center on land titling, housing and human
settlements, available mortgage financing and possibilities for developing a secondary
mortgage market. The principal studies on Peruvian experience include “Financiamiento de la
Vivienda,” a collection of articles published by the Central Reserve Bank of Peru which analyze
current housing policies and programs and focus especially on the unresolved obstacles to a
secondary mortgage market1.
The book, Develando el misterio: la formalización de la
propiedad en el Perú, published in 2004 by Felipe Morris, Víctor Endo and Rafael Ugaz, which
thoroughly documents government titling efforts throughout the 1990s, efforts which were
backed by the World Bank and carried out through the creation of a specialized titling agency,
the Comisión de Formalización de la Propiedad Privada (Cofopri), and also of a streamlined
public registry, the Registro Predial Urbano, along with a series of legal reforms that supported
the titling program. At the time, Cofopri was seen as a critical, breakthrough solution to the lack
of housing finance. The book also discusses the socio-economic benefits of titling for the
property holders. A more recent study published in 2003, “Producción Social del Habitat en el
Perú: Análisis y Propuestas,” summarizes the results of research prepared by a civil society
network, the Campaign Committee for the Right to Decent Housing for All. The book examines
policies on property and housing and quality of housing and makes policy recommendations for
housing finance. The most complete and direct examination of financial markets related to
housing is the study by Instituto Apoyo, “El mercado de crédito hipotecario en el Perú,”
prepared for the IADB by Hugo Eyzaguirre del Sante and Carlos Calderón Seminario. The
document describes and explains the evolution of mortgage finance in the previous 20 years,
reviewing both government programs and funding by the private financial sector, and presents
1
Moneda, Año 2009, No 140, Financiamiento de la Vivienda.
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Research Pro posal
recommendations for public policies to combat limitations on development of mortgage
finance. A historical view is provided by Alfredo Tapia’s 1970 book, “Acción de las instituciones
de crédito especializadas en el financiamiento de la vivienda en el Perú.” The study describes
the extraordinary expansion of housing finance generated by housing cooperatives and mutual
savings and loan associations during the fifties and sixties, along with the public policies that
supported those institutions and the key financial institutions at the time, the Banco de la
Vivienda and the Banco Central Hipotecario, and the Mutuales. Finally, a broader perspective
on Peru is provided in a regional document prepared by the U.N. Economic Comisión for Latin
America document, “El crédito hipotecario y el acceso a la vivienda para los hogares de
menores ingresos en América Latina.” Authors Gonzales Arrieta and Gerardo M. discuss
housing programs and the state of development of secondary mortgage markets. This study
from 2002 proposes a range of public policies adapted for different economic sectors and, like
other recent proposals, stresses the development of a secondary market that would offer
sustainability to housing finance.
In our opinion, there are two major gaps in the preceding literature. One is the lack of
systematic, statistical evaluations of the impact and interplay of different demand and supply
side factors that bear on housing finance. The second is a more realistic examination of the
demand side that takes into account that housing is not a discrete, fixed amount product but
rather a continuous and qualitative service that can be obtained in different “amounts” and at
corresponding different prices. This proposal would address both of those knowledge gaps.
The basic framework that will be used for the analysis of causation is that proposed in the 2005
IADB report Unlocking Credit, in a chapter on the development of housing finance 2. Four main
determinants of housing finance development are suggested by the report: payment capacity;
obstacles to loan recovery in the event of default; interest rate risk; and lenders` maturity risk.
These cover both demand and supply side determinants, and provide a framework for
examining institutional factors. We propose to derive or construct statistical measures for each
of these variables for the period since 1960, and then carry out a multiple regression analysis
on the time series for the four variables. The following are some considerations regarding each
variable.
a.
Payment capacity.
Alternative measures – GDP per capita and the mean urban salary - will be considered.
2
Unlocking Credit. The Quest for Deep and Stable Bank Lending, IADB, 2005, Chapter 15 on Housing Finance.
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Research Pro posal
In addition, we believe that the role of effective demand for housing finance in Peru should
take into account some special features of the Peruvian labor force and housing market. First,
the share of informal and self-employment is large in comparison with most middle income
countries in the region. Second, the growing urban population has been able to provide itself
with housing services with relative ease. If we bear in mind that housing consists of a bundle of
attributes, such as location, size and construction quality, potential for future expansion, and
the availability of urban infrastructure services, it is evident in Peru´s case that urban dwellers
have in fact provided themselves with a substantial volume of housing services out of current
income.
If long term credit had been available, many families would undoubtedly have opted to use part
of their expected future income stream to purchase larger, better-built, better located and
better serviced housing, mortgaging part of their future income streams to enjoy those
additional housing services sooner. However, when self-built housing already exists, as is the
case with most of the urban population, families also have intermediate options, such as
purchasing a limited expansion or improvement in their homes. The smaller cost involved in
that choice means that smaller, shorter term and more expensive loans become relevant
options as a partial solution to the need for housing services. That this alternative has indeed
been part of the housing finance picture in Peru is suggested by the 2008 national household
survey finding that 13. 3 percent of all families had carried out construction on their homes
during the preceding twelve months. Most of that construction (80%) had been self-financed,
but 17 % had been financed by credit from banks or other sources.
This flexibility in the ability to obtain additional “housing”, via improvements and expansions, is
likely to be especially relevant for families that face unstable and uncertain employment
prospects, and that at the same time, have opportunities for productive use of spare funds,
which is the case of microenterprise owners whose business returns often justify borrowing at
extremely high interest rates. We believe that the combination of high self-employment and
high flexibility in housing provision may have acted to substantially reduce effective demand for
housing, especially during periods of economic crisis when informal employment became a
critical means of support for unemployed modern sector workers. However, an opposite effect
may occur due to the fact that homes are often also the location of small businesses.
b.
Obstacles to loan recovery
Though the weakness of collateral and problems with loan recovery is perhaps the single most
cited explanation for the lack of mortgage finance, it is clearly a complex and hard-to-measure
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Research Pro posal
variable. The laws and the inefficient or corrupt implementation of laws both come to bear.
Nonetheless, over the preceding ten to fifteen there have been substantial developments in the
measurement of business climate and governance variables or conditions, including for
instance measures of corruption and speed of judicial procedures. We propose to construct an
index to measure the long run evolution in the degree of difficulty for mortgage lending that is
posed by such obstacles, using existing methodologies and measures already applied to Peru,
and extrapolating the index backwards on the basis of information on legal changes and the
recollections and subjective impressions of knowledgeable persons, using a procedure that is
described below in the section on methodology.
c.
Interest rate risk
For much of the last half century, Peru´s financial sector has been submitted to a mix of high
and variable inflation and abrupt changes in monetary policy. The result has been extreme
volatility in real interest rates and difficulty in predicting future rates, which together have
almost certainly been a major factor in dampening the supply of credit and especially, of long
term credit. However, interest rate risk was lower between 1960 and the early 1970s, and it
has been reduced substantially since the early nineties, in part because inflation came under
control, and in part because monetary policy became more predictable. In addition, interest
rate risk was reduced in practice by the massive dollarization of the financial sector beginning in
the late 1970s. To a large extent, dollarization became an alternative to indexation, though for
housing finance it entailed a higher level of risk than indexation due to the exchange rate risk
involved. The different elements of interest rate risk have thus changed over time, reflecting
monetary conditions, the extent of dollarization, and exchange rate fluctuations.
d.
Lender`s maturity risk
Most mortgage lending in Peru has been financed from by short term bank deposits. Banks
have ventured into mortgages to some degree, during periods of high liquidity, such as exist at
the moment, but more when specialized housing finance institutions such as cooperatives and
savings and loan associations were capturing a significant share of total deposits. For the most
part, however, long term funding has been scarce and lenders have been inhibited by the
resultant risk. Since the late 90s, however, a paradoxical situation has existed in that private
pension funds have grown substantially as a share of the financial system, but a mix of
regulatory and institutional constraints has barred major lending for housing by those funds.
The extent to which this form of risk has acted as a brake on mortgage lending is not easy to
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Research Pro posal
determine, since aside from the short term nature of most funding, the perceived risk is also
affected by perceptions regarding the willingness and capacity of the central bank to cover
liquidity risk. Nonetheless, a measure of this variable based principally on the share of long
term funding received by the financial sector will be used in the long term regression analysis.
III. Methodology
a.
1960-2009
The preceding review of probable determinants of the evolution in housing finance clearly
suggests that the causal relationships are likely to be complex and difficult to determine, and
that the statistical results need to be complemented by interviews and a historical account to
gain an understanding, not only of the measureable presence of particular variables but also of
market perceptions and expectations. Though regulations and institutions are fundamental,
much depends on the way they are applied or enforced. The statistical regression analysis is
thus intended to serve more as a discipline and a framework for interpretative judgments
about causation than as a way to arrive at direct answers.
Financial sector statistics, interest rates, exchange rates, and data on price levels will be
obtained from the Superintendency of Banks and Insurance, the Central reserve bank and
CONASEV. For all the main aggregates to be used, series are available for the entire 50 year
period that will be examined. More interpretative information will be obtained from
contemporary publications and interviews of key players, including bankers and officials.
The methodology for describing public policies for developing the national housing finance
system will draw on a range of sources and include research in data bases, analytical literature
and direct interviews. The methodology will compile information from government and
independent data bases and gather complementary information through interviews with key
actors in implementing agencies and financial institutions. The data provided by these sources
will be checked and verified through bibliographical research and interviews with independent
analysts. Investigation of each of these data sources will seek to identify structural factors that
impinge on or restrict the housing finance system.
More specifically, an issue such as titling will be developed through multiple research
techniques. Since Peru has experienced several waves of government-sponsored titling,
historical information will be gathered from the literature and interviews to determine the
parameters of the original titling programs and whether the titles were ultimately registered or
DECEMBER - 2009
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Research Pro posal
put to use as collateral for borrowing. More contemporary titling programs will be studied
through government websites and research by policy analysts. Interviews with notary publics,
public registry officials and banks will determine the value of these titles in housing finance.
An issue such as affordability of mortgages can be examined in a number of ways. Interviews
with developers of recent Mivivienda housing developments would generate data on the price
ranges they feel are appropriate for a given segment of home-buyers. Bankers selling
mortgages can define the criteria they use to determine eligibility of borrowers for mortgages
of different amounts. A simulation model, such as the one presented here [here is where you’d
bring in Nelson’s model] would create a projection that shows the capacity to pay of each
income decline in Peru and, by extrapolation, indicates the loan amount, interest rates and
repayment periods that make it feasible for a family to take out a mortgage.
This mix of methodological techniques will be used to develop a full description of public
policies and to identify and describe precisely the lacks in the housing finance market and the
obstacles, from within the market or outside it, that impede housing finance development in
Peru.
Regulatory aspects of the housing finance system would be examined through first compiling
and studying the regulations and other norms already approved for regulating the market. The
latest developments in the Basel Committee regarding securitizations and other sophisticated
financial operations would be studied to learn the framework that will set general parameters
for the operation of Peru’s capital markets. Interviews with relevant bank superintendency
officials would provide detail about how regulations have worked in practice to create an
enabling environment or to restrict the evolution of housing finance. Reading literature about
housing finance in other markets would identify regulations and mechanisms that have boosted
the market in other countries, and the research team could explore the feasibility of these tools
with market sources.
Through discussions with pension fund managers and bankers, the pros and cons of the policy
environment would be discussed and their comments would be sought on the nagging question
of why Peru’s housing finance market is limited in volume and offers very few investment
vehicles. As regards housing finance today, Peru offers mortgage bonds in tiny amounts (less
than $100 million in this decade), has no buyers for mortgage notes (“letras” or “cédulas”) and
has made only one issue of mortgage-backed securities. The market for mortgage-backed
securities may get a boost with the expected first offering the securitization agency, the
Titularizadora, of $30 million. Other instruments, such as covered bonds widely used in Europe,
are being promoted for Peru by multi-lateral institutions, but progress toward launching such
investment vehicles is not in sight.
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Research Pro posal
b.
1995-2009
In addition to the broad, long run statistical and interpretative analysis described above, the
proposal will examine the more recent evolution of housing finance in greater detail, in part
because substantial changes have taken place in institutions and in the degree of market
development during the past ten to fifteen years, and in part because the recent period it is
more relevant to the conclusions and policy proposals that will be derived from this study.
c.
Current Institutions
The current housing finance system is made up of institutions that respond to two different
types of markets or sets of home buyers: the upper and upper middle classes that purchase
finished homes and apartments, and the lower classes that build their own homes as they can,
usually over a period of years. Universal banks dominate the finance system that provides
mortgages for housing that is built to code standards and duly documented in property
registries, and their clientele is primarily the upper class. Banks provide over 95 percent of all
mortgages in Peru.
The lower classes who borrow for new housing and home improvements obtain housing
finance through publicly funded programs that offer a subsidy and are administered by private
banks. The single exception to this public-private alliance for low-income housing finance is the
Banco de Materiales (Materials Bank), a government-run bank that administers home
improvement loans.
The Fondo Mivivienda (My Home Fund), dating from 1999, has been a significant force in
promoting the availability of housing finance. The Fondo acts as a nexus for stimulating
expansion of the housing market by linking builders with the financial system and the state.
Fondo Mivivienda provides an outright donation to families plus a subsidy on the lending
interest rate and, now, a guarantee as well, to banks for mortgage lending and securities. As a
result, developers are assured of a market of home-buyers and banks do not have to take on
the full risk of lending to borrowers in the upper middle class.
Financing provided by Mivivienda has made a major contribution to expanding the availability
of housing finance in Peru in the current decade, and its importance has grown as the fund
diversified its products. Initially, Mivivienda offered one product—long-term funding
transferred to the financial system at relatively low interest rates. Home buyers were offered
an additional benefit, the so-called bonus for good borrowers, an exoneration of 20 percent of
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Research Pro posal
the monthly debt for paying on time. In the past decade, Fondo Mivivienda has channeled $926
million to aid more than 43,000 families. Its products have financed the purchase of completed
residential housing and of units under construction valued at up to approximately $30,000 in
the initial phase and, currently, in the price range between $17,000 and $61,700.
Another government program was launched in 2003 to serve low-income families. Called Techo
Propio (My Own Roof), this program provides a one-time subsidy to families that contribute 10
percent of the value of their housing solution from their own savings. The subsidy, called a
family housing bond, may be applied to the purchase of a new home or construction on a
properly registered lot or home improvements. For participants who are buying a new home,
Techo Propio includes funding to pay for an additional loan channeled through and
administered by a commercial bank. To date, Techo Propio has provided $168 million to some
35,000 families.
In 2006, these programs were modified, and four different products were offered: Mivivienda,
Mivivienda estandarizado (a standardized Mivivienda), Techo Propio y Mihogar (My Home).
These new products, however, were not well received. Through a restructuring in 2009,
Mivivienda was left with two products: new Mivivienda loans for financing homes costing
between $17,000 and $62,000, and the My Own Roof program that lends for the purchase of
homes costing up to $17,000.
Many people who build and live in low-income housing finance the gradual construction,
expansion or completion of their homes with consumer or business loans that may be obtained
through microfinance institutions, cooperatives, Cajas Municipales (municipal savings and
loans), Cajas Rurales (rural banks) and other similar financial institutions. Although some
leading microfinance institutions (such as Mibanco and the former Edpyme Edyficar recently
acquired by Banco de Crédito del Peru) have offered housing and home improvement loans for
several years, their portfolios remain small in comparison with mortgage lending by banks and
backed with government support through Mivivienda and Techo Propio.
d.
The housing finance market today
The housing finance market remains limited in volume and offers very few investment vehicles.
The significant advances made since 1990 in terms of economic stability and sound financial
policies have not produced deep or diversified capital markets. As regards housing finance
today, Peru offers mortgage bonds in tiny amounts (less than $100 million in this decade), has
no buyers for mortgage note (“letras” or “cédulas”) and has made only one issue of mortgagebacked securities. The market for mortgage-backed securities may get a boost with the
expected first offering the securitization agency, the Titularizadora, of $30 million. Other
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Research Pro posal
instruments, such as covered bonds widely used in Europe, are by promoted for Peru by multilateral institutions, but progress toward launching such investment vehicles is not in sight. Until
very recently, variable interest rates were not available in mortgage lending. As they come into
wider use, variable interest rates should make long-term lending more feasible.
Peru boasts a solvent, diversified and competitive microfinance industry that manages a
combined portfolio of $4 billion. Over the past 40 years, more than 200 microfinance
institutions have devised successful methods for lending to low-income microentrepreneurs
without requiring formal property titles or conventional guarantees. It is widely agreed that
microfinance serves clients in the income classes of C and some segments of D but rarely
reaches the very poor whose incomes place them in the lower levels of D and E. Only recently
has this vast lending platform reaching over a million clients turned from its standard shortterm loan products to offer longer term lending for housing and home improvements. Today, a
growing number of microfinance institutions and universal banks that pass through the
guaranteed funds of Mivivienda are reaching clients with loans that range from the equivalent
of $3,000 to $50,000 and repayment periods between 4 and 25 years. The potential for
increasing the client base of these products is enormous, given the capacity of microfinance
institutions to serve this clientele and the desire of universal banks to access and on-lend
Mivivienda funds to even lower income groups.
Housing finance for the poor is far scarcer than credit for the poor. The issue of housing finance
for the poor raises the question of ability to pay. In Peru, the better-off among the poor have an
ability to pay a modest mortgage, but the amounts they can pay would require tailoring
mortgages with extremely long repayment periods so long they are not yet available in Peru.
For the very poor, their only possibility of paying is with support from subsidies that cover a
significant portion of their obligation. Home loans in rural areas are virtually unknown.
The methodology for describing public policies for developing the national housing finance
system will draw on a range of sources and include research in data bases, analytical literature
and direct interviews. The methodology will compile information from government and
independent data bases and gather complementary information through interviews with key
actors in implementing agencies and financial institutions. The data provided by these sources
will be checked and verified through bibliographical research and interviews with independent
analysts. Investigation of each of these data sources will seek to identify structural factors that
impinge on or restrict the housing finance system.
More specifically, an issue such as titling will be developed through multiple research
techniques. Since Peru has experienced several waves of government-sponsored titling,
historical information will be gathered from the literature and interviews to determine the
DECEMBER - 2009
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Research Pro posal
parameters of the original titling programs and whether the titles were ultimately registered or
put to use as collateral for borrowing. More contemporary titling programs will be studied
through government websites and research by policy analysts. Interviews with notary publics,
public registry officials and banks will determine the value of these titles in housing finance.
An issue such as affordability of mortgages can be examined in a number of ways. Interviews
with developers of recent Mivivienda housing developments would generate data on the price
ranges they feel are appropriate for a given segment of home-buyers. Bankers selling
mortgages can define the criteria they use to determine eligibility of borrowers for mortgages
of different amounts. A simulation model, such as the one presented here [here is where you’d
bring in Nelson’s model] would create a projection that shows the capacity to pay of each
income decline in Peru and, by extrapolation, indicates the loan amount, interest rates and
repayment periods that make it feasible for a family to take out a mortgage.
This mix of methodological techniques will be used to develop a full description of public
policies and to identify and describe precisely the lacks in the housing finance market and the
obstacles, from within the market or outside it, that impede housing finance development in
Peru.
One example of a public policy and an outcome worthy of investigating is the high rate of loan
defaults in the Banco de Materiales. Defaults have been as high as 39 percent of the loan
portfolio in recent years. The methodology for examining this outcome would include
interviewing credit bureau analysts to learn the size of loans and income levels among the
defaults, speaking with officials of the Banco de Materiales to obtain their hands-on sense of
the problem and discussing with the present and former housing ministers to have an overview
of the cost of losses to public finance and alternatives for serving this public.
Regulatory aspects of the housing finance system would be examined through first compiling
and studying the regulations and other norms already approved for regulating the market. The
latest developments in the Basel Committee regarding securitizations and other sophisticated
financial operations would be studied to learn the framework that will set general parameters
for the operation of Peru’s capital markets. Interviews with relevant bank superintendency
officials would provide detail about how regulations have worked in practice to create an
enabling environment or to restrict the evolution of housing finance. Reading literature about
housing finance in other markets would identify regulations and mechanisms that have boosted
the market in other countries, and the research team could explore the feasibility of these tools
with market sources.
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Research Pro posal
Through discussions with pension fund managers and bankers, the pros and cons of the policy
environment would be discussed and their comments would be sought on the nagging question
of why Peru’s housing finance market is limited in volume and offers very few investment
vehicles. As regards housing finance today, Peru offers mortgage bonds in tiny amounts (less
than $100 million in this decade), has no buyers for mortgage notes (“letras” or “cédulas”) and
has made only one issue of mortgage-backed securities. The market for mortgage-backed
securities may get a boost with the expected first offering the securitization agency, the
Titularizadora, of $30 million. Other instruments, such as covered bonds widely used in Europe,
are being promoted for Peru by multi-lateral institutions, but progress toward launching such
investment vehicles is not in sight.
DECEMBER - 2009
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Research Pro posal
Appendix A. Methodology for Index of Obstacles to Loan Recovery
The legal system and the use of collateral have an enormous impact on the housing finance
market. The efficiency of a system of legal guarantees is reflected in the costs and duration of
the processes of constitution, registration and execution of mortgages, and enforcement of
legal rights stipulated in these processes.
In Peru as in other Latin American countries, most low-income families do not have legally
recognized land or property titles. This fact has not excluded them from obtaining access to
credit because the microfinance industry has developed successful methodologies for lending
without collateral. Credits are assigned based on a careful study of the borrower’s capacity and
willingness to pay. Microcredit allows thousands of families to build their houses progressively,
adding on to their homes gradually. The cost to the families is higher, but the arrangement fits
their ability to save and spend. The majority of microcredits applied to housing are consumer or
microenterprise loans that are channeled into housing construction or home improvement.
Only recently have microfinance institutions begun to offer special-purpose home and home
improvement loans.
For these reasons, creating mechanisms that will provide low-income families with collateral
that is recognized and honored in the market is crucial. The development of a simplified and
cost-effective process of land titling is the key to allowing the lower classes to use their deeds
as collateral for long term, low-cost credit to build and improve their houses and for financing
future building developments and stimulating the expansion of capital markets.
Building a strong legal system which upholds collateral requires having laws that guarantee the
legal rights of debtors and creditors. On the debtors’ side, when transparent information are
provided to potential debtors, there is a lower probability of defaults owing to nonconformity
with conditions of credits or extension of responsibilities. For creditors—the banking and
capital markets—it is necessary to assure that the legal rights afforded by collateral laws can be
enforced without impediment and in timely fashion. Guaranteeing the exercise of collateral
provisions is achieved largely through the public registry and judicial system. In Peru, the cost
and delays involved in constituting and registering mortgages have decreased over time. Even
with recent advances, the average period for mortgage execution remains high, around 31
months. Judiciary costs in Peru are low compared to other countries in the region.
In order to assess each component of the titling, registry and guarantee execution processes
and their impact on the housing finance, this research team will build an index to measure how
the legal system regarding collateral impacts the development of housing finance. This index
will combine statistics from the data bases of the land titling agency, COFOPRI (Commission for
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the Formalization of Private Property), and from the World Bank’s Doing Business studies from
2004 through 2008. The index will include data on each of its components from 1960-2009. The
information covering the earlier decades will be compiled using a methodology of data base
research and interviews. All the relevant variables will be tracked through documenting
changes in laws, availability of mortgages, variations in the property registry and provisions for
enforcement of guarantees and investor protection over time.
COFOPRI is an autonomous agency created in 1996 to cut red tape and streamline land titling
and registry of the huge human settlements on the outskirts of cities. Since its founding,
COFOPRI has titled 3.8 million housing plots. The annual percentage of increase in land titles
will be used as an indicator of improvement in access to collateral among low-income people.
The Doing Business ranking is based on a compilation of data including laws and regulations
that are reported and verified by more than 3,000 government officials, lawyers, business
consultants and other specialists in the countries that are evaluated. From the data composites
of Doing Business, we will use the following indexes:
 Getting credit index: this index includes a Legal Rights Index that measures the degree to
which collateral and bankruptcy laws facilitate lending, and, a Credit Information Index,
which measures the impact of rules affecting the scope, access, and quality of credit
information (public credit registry coverage, and private credit bureau coverage)
 Registering property index: this index examines the steps, time, and cost involved in
registering property, assuming a standardized case of an entrepreneur who wants to
purchase land and a building that is already registered and free of title dispute.
 Enforcing contracts: this component examines the efficiency of contract enforcement by
following the evolution of a sale of goods dispute and tracking the time, cost, and number
of procedures involved from the moment the plaintiff files the lawsuit until receiving
payment. This index will be applied in order to evaluate the performance of the judiciary
system in civil cases.
 Protecting investors: This indicator measures the strength of minority shareholder rights to
protect against misuse of corporate assets by directors for their personal gain. It includes
the evaluation of the following: transparency of transactions, liability for self-dealing,
shareholders’ ability to sue officers and directors for misconduct and strength of Investor
Protection Index. This ranking permits an assessment of how the legal rights of market
creditors can be affected by the legal provisions and execution practices regarding
collateral.
Data Templates
Annual data from 1960 to 2009 for the following variables:
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Research Pro posal
Dependent variables
1. Ratio of mortgage lending to total financial system credit.
2. Ratio of long term lending (mortgage plus long term bonds) to total financial system
credit.
3. Ratio of housing credit to total financial system credit (including loans by government
institutions and estimated short term bank lending used for housing.
Independent Variables
1. Payment Capacity
a. GDP per capita
b. Average real urban salary
c. Average real Lima salary
d. Ratio of self-employed and small business workers to total urban labor force.
e. Ratio of modern sector workers to total labor force.
Data Template: Payment Capacity
Year
GDP per capita
Average Real
Urban Salary
Average Real Lima
Salary
Ratio 1
Ratio 2
1960
1961
.
.
.
2008
2009
Ratio 1: Ratio of self-employed and small business workers to total urban labor force.
Ratio 2: Ratio of modern sector workers to total labor force.
2. Obstacles to Loan recovery
VARIABLE
SOURCE
PERIOD
DATA
AVAILABLE (*)
WEB PAGED
Average variation of
number of titles
COFOPRI
Yearly
1996-2009
http://www.cofopri.gob.pe/
Getting credit indicator
Doing
Business
Yearly
2004-2010
http://www.doingbusiness.org/
Registering property
indicator
Doing
Business
Yearly
2004-2010
http://www.doingbusiness.org/
Enforcing contracts
Doing
Yearly
2004-2010
http://www.doingbusiness.org/
DECEMBER - 2009
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Research Pro posal
indicator
Business
Protecting investors
indicator
Doing
Business
Yearly
2004-2010
http://www.doingbusiness.org/
For the years 1960 to 1996 and to 2004, data will be obtained from other sources.
Data Template: Collatetal Legal System Index
Year
Average variation
of number of titles
Getting credit
indicator
Registering
property indicator
Enforcing
contracts
indicator
Protecting
investors
indicator
1960
1961
.
.
.
2008
2009
3. Interest rate risk
a.
b.
c.
d.
e.
Average gross return on financial assets in financial system.
Average gross return on sol-denominated financial assets in financial system.
Average gross return on dollar-denominated financial assets in financial system.
Exchange rate
Inflation rate.
Data Template: Interest rate risk
Year
Average gross
Average gross
return on solreturn on financial
denominated
assets in financial
financial assets in
system.
financial system.
Average gross
return on dollarExchange rate
denominated
financial assets in
financial system.
Inflation rate
1960
1961
.
.
.
2008
2009
4. Lender´s maturity risk
a. Share of long term deposits in total financial system deposits.
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Research Pro posal
b. Average mortgage interest rate
c. Interest rate spread between mortgages and month interest
Data Template: Lender´s maturity risk
Year
Share of long term
deposits in total financial
system deposits.
Average mortgage
interest rate
Interest rate spread
between mortgages and
month interest
1960
1961
.
.
.
2008
2009
DECEMBER - 2009
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Appendix B
a. Research Team Curricula
b. Bibliography
DECEMBER - 2009
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Research Pro posal
Research Team Curriculum
Richard Webb
Address
Telephones
E-mail
Choquehuanca 1350, Lima 27, Peru.
+511- 440-8742; mobile: 9-9904-5004
richardcwebb@gmail.com
Education
B.A
.
M.A.
Ph.D.
St. Andrews College, Ontario, Canada. 1958.
Economics and Geography, St. Andrews University, Scotland. 1960.
Economics, Harvard University. 1974.
Principal Employment
2004-present Director, Economics Research Centre, Universidad San Martin de Porres.
2003-present President, Malaga-Webb y Asociados, development advising firm
2001-2003
Governor, Central Reserve Bank of Peru
2000-2001
Director, Carta de Navegación, Strategic Plan of Peru with World Bank, UNDP,
IDB, CAF.
1999-2003
Advisor to the Board, Cities Alliance.
1999-2001
Chairman of the Board, Banco Latino, Peru.
1996-2001
President, Malaga-Webb and Associates, Lima.
1998-2001
President and founder, Instituto Cuánto, economic and poverty research
institute.
1997
Consultant to World Bank on Reports on Poverty, Health and Education in Peru.
1996
Evaluator, World Bank Project for capital market development in Argentina
1997-98
Adviser, Superintendency of Banks of Peru.
1990-96
Senior Fellow, Brookings Institution. Co-author of official 50-year World Bank
History
1985-90
Consultant to World Bank, USAID, IDB, Ford Foundation, UN Economic
Commission for Latin America.
1980-1985
Governor, Central Reserve Bank of Peru
1975-1980
Economist, Employment and Rural Development Division, World Bank.
Books
-
The Mustard Tree: A History of Microfinance in Peru, co-authored with Lucy Conger and
Patricia Inga. Lima: Universidad San Martín de Porres, 2009.
-
Una Economía Muy Peruana, Lima: Ediciones del Congreso del Perú, 1999.
-
The World Bank. Its First Half Century, co-authored with Devesh Kapur and John P. Lewis,
(Two volumes), Brookings Institution, Washington, D.C. 1997.
-
Peru en Números, Lima: Instituto Cuanto. Published annually since 1990.
-
Income Distribution and Growth in the Less-Developed Countries, Washington, D.C.:
Brookings Institution, 1975. Co-editor with Charles Frank.
DECEMBER - 2009
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Research Pro posal
LUCY CONGER, M.A., B.A.
Av. de la Aviación 117-1401
Miraflores. Lima 18, Peru
Tel : +511-447-6146.
lucy_conger@yahoo.com
PROFILE: Experienced international development consultant and communications professional.
Conducted supervision and evaluation of development projects and design of community
organization and gender projects. Expertise in microfinance. Has worked in government and
private aid agencies, U.S. and foreign news media and universities. Fluent Spanish and
Portuguese.
International development consulting.
Lima, Peru, & Mexico City, Mexico.
1997-present
 Co-author with Richard Webb and Patricia Inga. The Mustard Tree: A History of
Microfinance in Peru. Lima, 2009.
 Clients include: CARE-Peru, MicroEnterprise Americas (an Inter-American Development
Bank magazine), National Endowment for Democracy, Banco do Nordeste do Brasil
development bank, Impact and Urban Age (IFC and World Bank publications), Ford
Foundation Report.
Financial Correspondent.
São Paulo, Brazil, and Mexico City, Mexico.
1984-96
Reuters Financial Service: Chief economy correspondent, Brazil.
Reported for: Institutional Investor, U.S. News and World Report, Jornal do Brasil, United Press
International, Mexico Service business newsletter.
International development grant officer and consultant.
Washington, D.C. and Lima, Peru.
1968-83
 Inter-American Foundation: Managed $2 million portfolio of grants to nongovernmental organizations; screened proposals for funding; oversight of project and
budget execution; design and staffing of evaluations.
 Foundation for Cooperative Housing: field research and design of community services
for low-income housing projects funded by USAID.
 U.S. Agency for International Development: wrote directory of services available to
squatter organizations in Peru’s four largest cities.
 U.S Peace Corps Volunteer: community organization in squatter settlements in Lima,
Peru.
EDUCATION
M.A. Development Economics and International Relations. George Washington University.
1981.
B.A. History. University of Pennsylvania. 1968.
DECEMBER - 2009
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Research Pro posal
PATRICIA INGA FALCON
Calle Las Amapolas 114, Urb. El Palmar,
Surco. Lima, Peru
Tel. +511-9-97203775
Email: patricia.inga@institutodelperu.org.pe
PROFESSIONAL EXPERIENCE
INSTITUTO DEL PERU (USMP)- PERU
2008-present
Researcher on microfinance and financial issues.Latest Publication: “The Mustard Tree: A History of
Microfinance in Peru,” co-author with Dr. Richard Webb and Lucy Conger. 2009.
MICROFINANZA RATING SRL. – ECUADOR
2007-2008
Internship on Social Performance Rating of Microfinance Institutions: reviewed social evaluation
methodologies for microfinance, prepared analysis of the Chilean macroeconomic situation and microfinance
sector; prepared social rating of a leading Chilean microfinance institution.
COMITATO INTERNAZIONALE PER LO SVILUPPO DEI POPOLI (CISP) -COLOMBIA
2007
Internship on microfinance with Italian NGO: research the macroeconomy of Colombia, microfinance sector
and financial services available to microenterprises. Designed a Credit Fund for Financial Institutions serving
microenterprises in East Antioquia Province.
SINFON, SILVA & SACO LAW FIRM- PERÚ
20042005
Consultant to law firm specialized in corporate law: advised on financial law, bankruptcy and reorganization
of corporations, debt refinancing and corporate and labor law.
WIESE SUDAMERIS BANK - PERÚ
20012004
General Coordinator of Operations and Chief of Legal Department. Planned and managed liquidation of
Credit Bank Corporation Orión-Perú; representative to bank superintendency and other public organizations.
Delivered liquidation process in record time for Peru (4 years). Chief of Legal Department.
CASAS DE LAS PEÑAS & SINFON LAWYERS - PERU
2001
Legal consulting on enterprise liquidation, reorganization and debt refinancing, and corporate law.
CREDIT BANK CORPORATION ORION – PERU
1998-2000
Chief, legal department for first Peruvian bank specialized in consumer and microfinance loan.
EDUCATION
M.A. in Cooperation and Development. EUROPEAN SCHOOL OF ADVANCED STUDIES IN COOPERATION AND
DEVELOPMENT. IUSS UNIVERSITY OF PAVIA, ITALY. 2008.
Post-graduate Specialization in Project and Investment Evaluation. SCHOOL
ADMINISTRATION FOR GRADUATES (ESAN) PERU. Top of class. 2002.
OF BUSINESS
Attorney at Law. PONTIFICAL CATHOLIC UNIVERSITY OF PERU. 1997.
DECEMBER - 2009
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Research Pro posal
Nelson Carlos Urbano Torres Balarezo
Pje. Durand Bernales 145 Dpto. 305 Urb. Barrio Médico – Surquillo
Lima, Peru
Tel: +511-241-1137. Mobile: +511-9-8838-7113
Mail: ntorresb@peru.com
Education
 FUNIBER – Universidad de León. Spain. (2009 – 2010)
Pursuing M.A. in Tourism Management and Consulting.
 Pontificia Universidad Católica del Perú (2003-2006)
M.A. in Social Management. 2006.
 Bolsa de Valores de Lima – CONASEV (1998)
Post-graduate specialization in Finance and Stock Exchanges.
 Universidad de Piura (1991 – 1997)
B.A. in Industrial Engineering. 1997.
Board Member
Caja Municipal de Ahorro y Crédito de Trujillo (Aug 2005 – Aug 2008)
Board Member representing COFIDE, the national development bank
Caja Municipal de Ahorro y Crédito de Ica (Jul 2004 – Dec 2004)
Board Member representing COFIDE, the national development bank
Professional Experience
INSTITUTO DEL PERÚ (Jul 2009 - present)
Finance and microfinance researcher at Economics Research Center
CORPORACIÓN FINANCIERA DE DESARROLLO (COFIDE), National Development Bank
Client relations, Development Division (2007 – 2008). Client relations, Operations Division (2007). Analyst,
Development Division (2003 – 2004)
FIDEICOMISO DE GESTIÓN CAYALTI, agricultural firm managed by COFIDE
General Director-Comproller (2004 – 2007). Crop Production Manager (2005-2007)
MINISTERIO DE EDUCACIÓN, education ministry (2001 – 2002)
Consultant to Advisory Office of the Minister
COFINANSA, financial consulting firm (2000 – 2001; 2002)
Financial consultant
TEXFINA, textile firm (1999 – 2000)
Loan and Collections Officer
EDPYME CREDINPET (1999 )
Loan Officer
DECEMBER - 2009
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Research Pro posal
Bibliography
-
Arrieta, Alejandro y Manuel Luy. Tiempo de Ejecución de Garantías y su Impacto en el
mercado crediticio. Superintendencia de Banca y Seguros. Lima, 2002.
-
Banco Central de Reserva del Perú. Financiamiento de la Vivienda. Revista Moneda N° 140.
Lima, 2009.
-
Britt Gwinner, William. Housing. In: An Opportunity for a different Peru: Prosperous,
equitable and governable. Banco Mundial. Pp. 349-357. Washington 2006.
-
Comité de Campaña por el derecho a una vivienda digna para todas y todos. Producción
Social del Habitat en el Perú. Análisis y Propuestas. Junio, 2005.
-
Conger, Lucy. Housing Microfinance: Where conventional bankers fear to tread. In:
Microenterprise Americas, 2003. pp. 55-57.
-
Conger, Lucy. A boom in Homeownership. Microenterprise Americas. Octubre, 2008.
-
Conger, Lucy. The Combo, Please: Credit, Technical Assistance and Self-Building.
Microenterprise Americas. Fall 2008.
-
Conger, Lucy. “Entitled To Prosperity.” (Land titling in Lima.) Urban Age magazine. Fall 1999.
-
Eyzaguirre del Sante Hugo y Carlos Calderón Seminario. El mercado de crédito hipotecario
en el Perú. Instituto Apoyo. Documento de trabajo N° 497, Banco interamericano de
Desarrollo. 2003. 89 pp.
-
Galindo, Alberto y E. Lora. Foundations of Housing finance in IDB (ed), Unlocking Credit, the
Quest for deep and stable banking lending. John Hopkins University Press. Baltimore, 2005.
-
Gonzales Arrieta, Gerardo M. El crédito hipotecario y el acceso a la vivienda para los
hogares de menores ingresos en América Latina. Serie Financiamiento del Desarrollo N°
122. Santiago de Chile: CEPAL, 2002. 95 pp.
-
Morris, Felipe. La formalización de la Propiedad en el Perú: Develando el misterio: La
formalización de la propiedad privada en el Perú. COFOPRI y Banco Mundial. Lima, 2004.
-
Rubio Vollert, Rodrigo. Lecciones de la política de vivienda en Chile. Revista Bitacora. Año
2006. pp. 197-206.
DECEMBER - 2009
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Research Pro posal
-
Tapia, Alfredo. Acción de las instituciones de crédito especializadas en el financiamiento de
la vivienda en el Perú. 1970.
-
Warnock, VC. And F. Warnock. Markets and Housing Finance. Journal of Housing
Economics,17. 2008. pp.239-251.
WEB PAGES
-
Asociación
de
Administradoras
www.asociacionafp.com.pe
-
Asociación de Bancos del Perú, www.asbanc.com.pe
-
Banco de Materiales, http://www.banmat.org.pe/
-
Banco Central de Reserva del Perú, http://www.bcrp.gob.pe/estadisticas.html
-
Banco Interamericano de Desarrollo, http://www.iadb.org/
-
Bolsa de valores de Lima, http://www.bvl.com.pe/
-
Cámara Peruana de la Construcción, http://www.capeco.org/
-
Comisión para la Formalización
http://www.cofopri.gob.pe/
-
Comisión Nacional Supervisora de Empresas y Valores del Perú
Privadas
de
la
de
Fondos
Propiedad
de
Informal
Pensiones:
(COFOPRI),
http://www.conasev.gob.pe/
-
Doing Business, http://www.doingbusiness.org/
-
Fondo Mivivienda, http://www.mivivienda.com.pe/portal/
-
Instituto Cuánto – Perú en números, http://www.cuanto.org/peruennumeros
-
Instituto Nacional de Estadísticas e Informática – Encuesta Nacional de Hogares,
http://www1.inei.gob.pe/srienaho/enaho197.htm
-
International Monetary Fund, http://www.imf.org/
-
Ministerio de Economía y Finanzas, http://www.mef.gob.pe/
DECEMBER - 2009
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Research Pro posal
-
Ministerio de Vivienda. Construcción y Saneamiento, http://www.vivienda.gob.pe/
-
Sistema Peruano de Información Jurídica – SPIJ, http://spij.minjus.gob.pe/
-
Superintendencia de Banca, Seguros y AFP, http://www.sbs.gob.pe/PortalSBS/
-
World Bank, http://www.worldbank.org/
DECEMBER - 2009
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