Ecuador to Boost Housing Access, Microbusinesses Lending with IDB Support

The Inter-American Development Bank approved a $300 million Conditional Credit Line for Investment Projects (CCLIP), which includes an initial individual loan of $70 million, to develop markets for housing and productive credit for microbusinesses in Ecuador.

The CCLIP will benefit people from Ecuador's Popular and Solidarity Economy, which encompasses a significant portion of the middle- and lower-middle-income population - with a specific focus on promoting sustainable solutions and enhancing financial inclusion for women, persons with disabilities, and Indigenous peoples.

The CCLIP and its first operation were approved by the IDB's Board of Executive Directors.

This initiative aligns with the government's efforts to foster economic growth and reduce poverty through cooperative and solidarity-based practices, which have proven effective in creating job opportunities and improving incomes for vulnerable sectors of society, and housing and productive microbusinesses are two strategic sectors to contribute to this effort due to their high social impact and significant economic recovery potential.

The country faces a housing deficit of 46% with a more severe impact on the vulnerable population. Estimates suggest the social housing sector contributes up to 16% of GDP in emerging economies, highlighting the direct social and economic impacts of addressing the housing sector.

On the microbusiness side, 98.3% of Ecuador's companies are micro and small businesses, employing over 40% of the country's workers. This demonstrates the significant economic impact of this sector. The country also expects more severe impacts of climate change over the next years, which brings the importance of providing sustainable and resilient solutions.

The first operation under the CCLIP will address the housing needs of the population through two components. The first one will focus on tackling the unmet demand for credit, helping CONAFIPS, the National Corporation of Popular and Solidarity Finance, lend resources to Popular and Solidarity Finance sector organizations, which will in turn provide loans to the middle and low-middle income population.

The second component includes a roadmap for strategic housing market development, the improvement of specific housing products and tools, and staff training to form full-time teams in financial institutions to manage specific housing products and instruments.

The operation has direct impacts on the private sector and has been coordinated with IDB Invest, the private sector arm of the IDB.

The CCLIP's first individual loan of $70 million has a 25-year repayment term, a 5.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).