Working with vulnerable, low-income families, unable to access government housing grants, PASO A PASO has provided 1,252 loans to low-income, predominantly women-headed households across Ecuador. An innovative, self-sustaining, housing finance system combines residents’ savings with micro-credit through a revolving fund to make up the deposit required to access the federal housing subsidy. Seventeen housing programmes have been supported enabling 725 homes to be built.


Project Description

Aims and Objectives

  • To enable low-income families to gain access to government housing grants.
  • To facilitate the access of low-income families to formal credit through financial institutions.
  • To ensure access to affordable, good-quality housing for the low- and very low-income population.
  • To develop a sustainable, transferable system of housing finance for low-income families.
  • To influence public housing policy.

Project context

The Housing Incentive System, initiated in 1998 by the Ecuadorian government in cooperation with the inter-American Development Bank, has provided over 34,000 grants for home construction and over 40,000 grants for home improvements. The eligibility requirements, however, have prevented the most vulnerable families from accessing these funds, requiring prior savings of ten per cent of the housing cost and a credit approval certificate that covers the total cost of the construction work. Many families have been unable to participate due to a lack of savings or access to a formal loan.

PASO a PASO has enabled many marginalised families to access the government housing grants through an innovative, self-sustaining housing finance system. Initiated in 2001, this project is one of five projects currently being carried out by CIUDAD to address a range of issues including participatory democracy, sustainable local development, education and participatory budgeting.

Founded in 1977, CIUDAD is a non-profit research organization. It promotes debate on urban and regional issues, supports the strengthening of various social and institutional actors and seeks to contribute to the development of critical thinking and alternative policymaking for local management. During the last three decades, CIUDAD has developed over 140 research studies and projects, carried out over 300 training events and signed collaboration agreements with 20 local governments.

Key features

PASO A PASO has provided over 1,252 loans to low-income households from the cities of Quito, Riobamba, Alausí and Cotacachi. Sixty-eight per cent of the loan recipients have been women-headed households, and the project has supported 17 housing programmes nationwide, including the construction of 725 homes.

The project’s innovative housing finance system combines residents’ savings and housing subsidy with micro-credit through a revolving fund. The process begins with the household’s savings and is then consolidated through the provision of small, sequential loans granted by PASO A PASO. These include credit to make up the ten per cent deposit required to access the federal housing subsidy. For most of the households participating in the project, PASO A PASO has been their first experience of credit and once these loans have been repaid, a credit history is established and they are granted access to other loans and mortgages from formal financial institutions. To date over 140 mortgages have been granted to PASO A PASO participants following the successful repayment of their initial loans.

The PASO A PASO loans are granted under market-like conditions with an interest rate of 12 per cent.  Combined with the high 98.8 per cent repayment rate, this has ensured that the approach is transferable and financially sustainable. The loans and mortgages are granted on an individual basis, but communities have been collectively responsible for ensuring their prompt repayment. The communities have actively participated in all stages of the project process, including planning; the purchase of land and materials; construction of houses; the ongoing management of the process, and monitoring and evaluation. The result has been an increased confidence and self-esteem, stronger social networks and greater political engagement.

CIUDAD actively encourages and facilitates collaborative partnerships with a range of governmental and non-governmental organisations. These partnerships have delivered improved urban infrastructure and services, increased technical assistance and the simplification of the planning permission application process.

The residents and community leaders working with PASO A PASO have actively participated in the ‘Towards the Social Contract for Housing’ network. This is a nationwide network engaging with local and national governments, developing coherent housing policy proposals and collaborating with a number of civil society organisations, NGOs and private sector companies. The network’s credibility and the development of a positive relationship with the national government has led to a government commitment not only to reinstate the national housing subsidy, which had been ended in 2005, but also to double it to US$3,600 per household.

Covering costs

A European Commission grant of just over US$404,000 was used to establish the revolving fund, and additional funds have been provided by national, regional and local governments, and by the households themselves. Further revenue funding is generated through the accumulated interest paid on the loans and through soft loans that have been provided by Spanish NGO Alternativas Sostenibles de Desarrollo (ASDE) and the Inter-American Development Bank.


The project has enabled many of the poorest households to access finance and technical expertise through which their homes and living conditions have been significantly improved. The opportunity for families to receive credit, and to repay it, has seen additional loans granted to families previously considered too high-risk. The high repayment rates have enhanced the project’s legitimacy to negotiate with municipalities concerning supply of infrastructure and additional funding. Between 2001 and 2005, over US$3.5 million has been leveraged from other sources to fund social housing.


Why is it innovative?

  • Innovative housing finance system that combines residents’ savings and national government funding with micro-credit through a revolving fund.
  • Strategy of multiple partnerships with community-based organisations (development, implementation and lobbying), micro-credit, financial institutions (micro-credit and mortgages), international agencies (revolving fund, institutional support and dissemination) and the private sector (social housing construction).
  • Creation of a network for discussion and proposals composed of UN-HABITAT, four local NGOs, two national federations and six CBOs, as well as contractors and independent professionals.
  • Leveraging of additional funding – more than five times the original amount of the revolving fund.
  • Self-sustaining system that is transferable and does not rely on government subsidy. The current fund – without government subsidy – covers 105 per cent of operating costs.


What is the environmental impact?

The building materials are selected by the community-based organisations in collaboration with the contractor and local authorities and therefore, vary from project to project. The houses built to date have typically used conventional, locally-available building materials such as concrete block, ceramic roof tiles and reinforced concrete structures.

The project ensures access to potable water, electricity and sanitation for low-income families, many of whom have not previously had access to adequate services and urban infrastructure.

All of the projects must obtain the approval of the local planning authorities prior to implementation. This has ensured compliance with urban and building regulations and contributes towards the reduction of the environmental impact caused by overcrowded conditions that exist in informal urban settlements.


Is it financially sustainable?

Despite the cancellation of the national housing subsidy in 2005, the project has continued to run and to secure additional funding. The original grant of US$407,745 obtained from the European Commission has increased to US$726,276 due to accumulated interest and additional funding from the Autonomous Community of Valencia and the City of Valencia.

Based on data from the International Labour Organisation, it is estimated that the project has generated approximately 420 direct and indirect jobs per year, which is 2,170 in total. These have included temporary and permanent construction work and indirect local jobs in the production, distribution, manufacturing of building materials, as a result of the increased demand. CIUDAD is looking to expand the project to include micro-credit for income-generating activities.

The project has increased the affordability of housing for low-income families by:

  • Increasing and facilitating access to federal housing subsidies
  • Enabling low-income families to have access to credit and build a credit history
  • Building incremental housing units that can be extended as necessary
  • Developing high-quality, low-cost housing at a 30 per cent lower cost than similar housing currently on the market. The average cost per house is US$6,945, including the cost of the land. Average monthly repayments of US$120 are typically made by families over a period of 48 months.
  • The high 98.8 per cent repayment rate has contributed to the sustainability of initiatives that allow for low-income families to have access to decent housing.


What is the social impact?

PASO A PASO involves active community participation and CIUDAD works to facilitate collaboration among a wide range of stakeholders, including residents, community-based organisations, NGOs, local and national government representatives, funding agencies and private contractors.

The project provides safe, decent housing for families who have previously lived in overcrowded housing conditions in informal settlements, often without adequate lighting, ventilation or access to secure land tenure. The project works with the most vulnerable population: 68 per cent of loans have been granted to women and priority is given to households with incomes below the poverty line. Seventy-five per cent of loans have been granted to these very low-income households.

The project has increased the skills and abilities of the participants. Three members of the PASO A PASO team carried out postgraduate studies in microfinance at a local university. Training and capacity-building workshops have been carried out with community leaders and residents and these have included financial advisory provision, community strengthening, conflict resolution and collective management. CIUDAD has also worked to build capacity amongst civil servants through workshops and the sharing of local experiences.


  • A poor savings culture existed within many of the communities. The project had to recognise this and respond through a process to make families aware of the need for savings, and the opportunities that saving could offer. Families were encouraged to save for the first down payment towards the construction work on their house, proving to themselves that they had the capacity to save.
  • Political instability within the Ministry led to the cancelling of the housing subsidy at the end of 2005. Despite this difficulty, CIUDAD continued to operate the PASO a PASO project, supporting low-income families through longer maturity loans whilst concurrently addressing the problem through lobbying, social mobilisation and strengthening of the ‘Towards the Social Contract for Housing’ network. As a result, the new government that took power in January 2007 has manifested its commitment to reinstate – and possibly increase – the housing subsidies for low-income families
  • Formal arrangements for the approval of projects are excessively bureaucratic in some Municipalities. This has been overcome through the development of partnership and agreements with municipalities to involve them in joint work.

Lessons Learned

  • Owing to the magnitude of the housing challenge in Ecuador, strategic alliances between the public, private and community sectors are essential for the development of effective and sustainable solutions.
  • The establishment of strategic alliances allows for the multiplication of resources and impact. In order to maintain these partnerships, it is important to create a space for dialogue and the exchange of experiences.
  • It is important to make the most of every existing opportunity to increase access to housing and improve the living condition of families within each context.  For example, taking advantage of government housing grant systems, financial entities that may grant micro-credit to low-income families, open-minded local authorities, corporate social responsibility, organised civil society, economic stability, etc.
  • Political instability has a negative impact on the sustainability of long-term policies on social issues. The only guarantee for their continuity is the strengthening and empowerment of civil society. Providing strong support for organised community organisations is vital.
  • Access to good quality housing not only meets housing needs but also enhances self-esteem, reduces economic and social vulnerability and helps to generate trust and accountability.
  • In order for the project to have a stronger political impact, it is necessary to further disseminate and strengthen the experience gained, increase its geographical scope and extend the range of strategic alliances.



Annual monitoring of the project has been carried out by donor agencies, as well as four special monitoring and evaluation missions carried out throughout the course of the project.



Initially developed to be carried out in Quito, the project has extended to four cities in Ecuador and contracts have recently been signed with two additional municipalities for the implementation of the approach.

CIUDAD is currently developing a project for the transfer of know-how and the adaptation of the approach to other contexts. To share the PASO a PASO experience workshops and seminars have been carried out. A number of NGOs, local governments and private sector have expressed interest in transferring the approach to other parts of Ecuador.

A similar approach has been carried out in Peru due to the exchange of experiences between CIUDAD and DESCO in Peru. The following conditions for transfer gave been identified:

  • An organised demand for housing
  • Local governments that are interested in developing solutions to the housing demand in their cities
  • Micro-finance entities willing to lend to micro-entrepreneurs and low-income families
  • NGOs that can provide technical assistance and facilitate the process
  • Private contractors willing to reduce profit margins and achieve lower costs per unit through economies of scale.

The project has taken part in events for the exchange of experiences in the Philippines and Brazil and there is a strong potential for transfer to other countries.



CBO, local community, international agency, national government, private sector