Por: Alexander Niño Ruiz
Contrary to the conventional orthodoxy of the World Bank, lack of formalized or secured property rights is not the main reason why titles do not become loans in Colombia. My research shows that the institutional barriers that prevent poor people from leveraging their assets are rooted in the Colombian constitution, and in the lack of private financial institutions willing to lend to the poor. Low and middle income populations cannot use their houses as collateral to obtain loans aimed to finance business because the Colombian constitution mandates families to secure a share of their assets as Family Wealth. As a result, families have to protect their estate from being impounded by lenders. When the law allows the use of the house as collateral— for financing the purchase, improvement or enlargement of housing — there are few formal financial institutions lending to the poor. Despite of the importance of this for land-titling programs, it passed unnoticed by the World Bank, who approved a US$100 million loan for the Bogotá Urban Service Project in 2003. This thesis reveals the assumptions made by the Bank regarding the importance of property formalization as a mechanism to create massive equity out of the improved real estate in the informal sector. It contrasts the Bank’s assumptions with the actual process of upgrading in Bogotá. Leveraging poor people’s assets would be critical to the well-functioning of upgrading program, but these policies should rely on a mechanism other than the willingness of formal institutions to lend to the poor.
Biblioteca Virtual Banco de la República
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