07 Jul CIMENTAFIN, ECHALE

CIMENTAFIN SAPI DE CV SOFOM ENR

Interview with Francesco Piazzesi; Founder and CEO of CIMENTAFIN 

Jen: How was CIMENTAFIN Created? 

Francesco: Cimentafin was started by Francesco Piazzesi, who in 1997 also founded ÉCHALE, a green affordable housing developer. Francesco observed that despite ÉCHALE’s affordability, their customers were still forced to deal with expensive credits to access their construction services, whilst ÉCHALE should serve as guarantor for them, and in many cases, the families were not able to access the house as they couldn’t access any financial service due to their income level or their lack of financial records as they worked in the informal sector.

To close this gap, in 2013 he created a SOFINCO (savings, credit and subsidy) to test the housing financing market, and with a satisfactory track record, in 2017 he founded Cimentafin to reach more unbanked families by attracting private impact investment.

Jen: How are your investment funds catalytic in a way that is different from other funds?

Francesco: unbanked low-income sector has access to an adequate home that fosters their development and serves as an asset to unlock financing for productive activities, enabling social mobility.

Cimentafin’s credit evaluation consists of a field analysis to verify an applicant’s income(s), as well as an evaluation of the applicant’s paying behavior during the savings program to complete the down payment, which happens before the credit authorization. This way, we can include households that don’t have a credit history or formal proof of income.

During the savings program, applicants receive financial literacy, so they learn to make better financial decisions and become less vulnerable to financial fraud or abusive loans.

The fund structures projects of several households from one territory with the same housing solution need and presents them to impact investors. This way, the proposal becomes attractive for investors in terms of the size of the debt required, the financial return, and the impact created. At the same time, Cimentafin can transfer international capital to a local context; By being in the field, we maintain close communication and guidance with our customers, which results in a default rate of around 2%.

The fund works with blended finance, including governments in the project structure to reach lower-income households, potentialize the impact of public responsible and redirect welfare policies to a development approach where citizens can choose the solution that matches their needs and is co-responsible.

Jen: How do you describe the kind of non-financial returns the fund offers?

Francesco:  From our 600 customers, for 14% it was their first credit and 71% was their first housing credit (they couldn’t access a mortgage because of their income level and because they don’t have a deed from their piece of land).

61% of our customers are women. We are in continuous improvement towards reinforcing gender perspective in our credit evaluation in order to empower women heads of households to own their home and create credit history.

More than 1,200 people have received financial literacy and have developed savings habits.

Cimentafin microcredits have enabled 2,460 people to live in a safe home with access to basic services which significantly increased their well-being.

Jen: Can you describe how you use integrated capital to do your work?

Francesco: Cimentafin attracts impact private debt from individual investors, impact investment funds and development banks in order to fund microcredits for housing with an affordable interest rate for the underserved families that are interested in acquiring a home solution, whether it is new home construction, home improvement, home expansion or home installations and furniture. In order to create a track record with the potential customers, the down payment for the home solution is made through a savings program that splits the total amount in monthly contributions that match the monthly payments of the credit they are willing to obtain. This process is accompanied by a financial literacy program. To make this process more efficient, Cimentafin partners with local saving banks, affordable housing developers and local governments.

A Mexican farmer receiving his home with his family as a result of his savings and house construction credit. Photo Credit: Echale

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Francesco: By obtaining a microcredit for housing paired with the programs of savings and financial literacy, our customers are able to become homeowners or improve their already owned house, which results in a bigger asset and credit history that unlock further financial opportunities for productive activities, preventing the decapitalization of the families caused by short term solutions such as expensive consumer loans or informal lending. Furthermore, access to affordable housing reinforces local economies as workers are willing to stay, whilst accessing a better quality of life and stability that is reflected in their work stability.

Jen: Can you share with us an example of an investment? 

Francesco: In 2021 we launched the program “Hogar Semilla” created to meet the housing needs of families interested in building on their land and that due to the nature of their income, it is impossible to access traditional sources such as Banks or Public Institutions.

Through an initial contribution (savings), potential customers can qualify for a loan with preferential rates as well as a construction of the highest quality that allows families to take the first step towards the house of their dreams.

After a track record of 162 credits, this year we are launching the second edition, now involving Municipality governments and impact investors to scale the program to 250 families and adding a system of early payment incentives to award good payment behavior.

Jen: What do you tell people who think your fund is risky?

Francesco: The risk of not investing in our fund is that more than 16,000,000 people continue living in precarious conditions in Mexico as they cannot afford an adequate home due to their low income and lack of social security.

Investment Thesis/What is your rationale for your approach to investing? 

Community development financial institution that raises impact investment to fund housing microcredits for the Mexican underserved population in need of a housing solution, through a savings and credit system that is 40% cheaper than regular financing providers, an inclusive credit evaluation process for the unbanked, and financial literacy workshops.

Geography:  In Mexico, with current credits in portfolio in the following states: Durango, Estado de México, Morelos, Quintana Roo, Tabasco, Tamaulipas and Yucatán.

Year Founded: 2017

# of Investments: 600

# of Investors: 20 (donors, funders, supporters, investors) 

Funds Raised: $3,475,000 since inception

What’s on Francesco’s Mind?

Book: Sapiens, Yuval Noah Harari.

Song: Lascia ch’io pianga Georg Friederich Händel.

Podcast: Social entrepreneurship and impact podcasts.