Post on 24-Apr-2015
description
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Low-Income Market Development
July 2010
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CEMEX, one of the world’s leading building materials companies
Annual sales of US$14.5 Billion
Presence in 50 countries
Close to 47,000 employees
Global supplier of
Ready-mix 2,016 sites
Cement 63 plants
Aggregates 391 quarries
Source: 2009 Annual Report
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Social Innovation. We seek to identify social needs and provide opportunities to develop local capabilities
Global Social Investment priorities: Housing and infrastructure Education Environmental conservation and improvement
Social programs that…
are designed in collaboration with communities
contribute, without replacing the government
go beyond legal compliance
keep a long-term perspective
help to build trust and establish partnerships
leverage our core competencies and assets
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Patrimonio Hoy. Background
A significant housing deficit of 4 million houses affecting 20 million people in Mexico
An attractive informal low-income market
– about 30-40% of demand for bagged cement – less affected by economic crisis
Little understanding of low-income building practices and barriers
“When we first started we were told to forget everything we knew about cement, and see the market with a clean slate, leaving out any prejudices that we may have had”
CEMEX Sales by sector at the outset of Patrimonio Hoy, 1993 -1996
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Exploration (’98 - ’99)
A multidisciplinary team A low-income area in Guadalajara Goal: To learn about low-income families’ way of
life in general, and about their self-construction practices
Lack of: formal savings formal credit sources technical knowledge supply of materials organization
Area: 9 m2 room Time: 4 to 5 years Investment: US$1,500
Initial Research
Main barriersAn average project
“Families were often deceived by sellers of building materials. They paid high prices, were treated poorly, often got the wrong or lower-quality materials late, and were cheated in the weight of what they received. Many were expert masons but had no skills to develop a reasonable floor plan”
A sense of resignation, frustration
“I can not manage this issue, it’s so difficult”
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An affordable and integral value proposition empowering the poor to build their house
Micro-Credit Scheme
Micro-Credit Scheme
Delivery of Materials
Delivery of Materials
Technical Advice
Technical Advice
On average, families pay <20% of the budget per cycle
80% is financed by CEMEX, no requisites
Delivery of materials by local retailers Fixed prices and one year storage
A building plan and budget developed by professionals according to families’ needs
Agreements
Technical Advice Delivery
Contributing to families’ well-being Self-construction process
Target clients: low-income families (from 2 to 4 minimum wages) who want to build, expand, or remodel their houses in urban or semi-urban marginalized areas
PromotersPromoters Program promotion by community members, mainly women responsible for inviting families
Weekly FeesWeekly Fees Weekly installments 200 MXP (US$15)
US$12.50 for materials
US$2.50 services fee
Public SchoolsPublic
Schools
Improvement of local public schools and local infrastructure
Community promoters
Program features
“We realized that selling them more cement would not fix their lives”
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An array of benefits
Tangible Building 3 times faster and at 1/3 of average costs Better quality and functionality, results in a higher market value by about 30% Access to the credit market and to a credit history (formality!) Job creation among promoters and local masons
Intangible Additional space and privacy for families Promotion of family unity and solidarity among neighbors Promotion of long-term thinking, savings, and planning skills Better learning conditions at public schools
Before… Family at work… After!
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-
50
100
150
200
250
300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Thou
sand
s
Over 100 offices in Latin America 85 throughout Mexico, also launched in:
Colombia Costa Rica Dominican Republic Nicaragua
Coverage and Results
Results (In Mexico) Over US$140 MM micro-credits granted Repayment rate above 99% More than 1.30 MM m2 built Client satisfaction of over 90% 60% say they would not have been able
to build their house without PH 30% use new space to start or develop
their own business 55% of participants hire local masons 95% of promoters female, 51% with no
previous working experience >500 local schools improved
Coverage: 280,000 families More than 1.4 million people
Coverage: 280,000 families More than 1.4 million people
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Lessons Learned
Developing a deep understanding of the segment’s needs and perceptions is crucial
A flexible management culture open to change needed
Embedding social capital in the business model is key
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Testimonials
For 8 years María Diega and her family of six lived in a single room
With PH they added seven rooms and a set of stairs in five years. They could have spent their entire lifetime to build this
For 5 years Rosa Magaña, her husband, and 2 children lived in a 10 m2 carton shed with no bathroom.
Now, they live in their own 120 m2 house and they are about to finish building another two rooms which will add 50 m2, plus a soldering workshop.
“Without PH we would be still crowded, uncomfortable, and upset. Since we are part of the program my husband and I are more united, as he stays home during the weekends to keep building our house. We see the PH team as part of our family”- Ma. Diega
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Portfolio of initiatives
Mejora tu Calle
Self-Employment Productive Centers
Following PH, CEMEX has developed other low-income housing and infrastructure initiatives
Strengthen market share and
community development
through innovative
building solutions
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6.86.6
6.1
5.1 5.1
3.9 3.8
3.12.7
2.42.1
3.33.5
6.0
0
1
2
3
4
5
6
7
Switz
erland (1
)
Germany (3
)
USA (9)
Canad
a (10)
Spain
(27)
Chile (2
9)
China (58)
Guatemala
(63)
Honduras (72)
Mexic
o (76)
Colombia (84)
Brazil (9
8)
Peru (1
13)
Nicara
gua (
125)
Note : 7 = world’s best, 1 = least developed
Source: The Global Competitiveness Report 2009-2010, World Economic Forum
Infrastructure Quality Index
Mexico’s infrastructure index is below world average, this results in a negative
impact in the country’s relative competitiveness
Average 3.8
Mejora tu Calle
13Note: Does not include Mexico’s City Delegations.
Source: State and Municipal Public Finances 2005-2008. INEGI
35,85441,640
46,65952,455
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
2005 2006 2007 2008
Municipalities’ Local Income 2005-2008
21.6%
21.6%22.8%
20.5%
Total % of Income
Annual average growth rate 2005-2008: 13.5%MXP million
Municipalities’ Local Income is generally very low in relation to total
budget
Mejora tu Calle
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Mejora tu Calle
Supporting local governments through community micro-credits for the improvement of streets and sidewalks
Promotion of concrete pavement (in contrast to asphalt) Micro-credits granted to 7,000 families More than 320,000 m2 paved in 12 municipalities Repayment rate higher to 90% Supported by IADB’s Opportunities for Majority Program (US$10M Credit,
Guarantee facility)Before… After!
video
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In this low income neighborhood paving program, the government pays for the
network services and the neighbors pay for the project through a microfinance
agreement established with CEMEX and guaranteed by the Interamerican
Development Bank
Government & Neighbors
Mejora tu calle
PROJECT ACCOUNT- Charges the beneficiaries- Pays paving to Mejora tu
calle
BENEFICIARYPays to Mejora tu calle
COLLECTION OF MONEY STRUCTURE
- Mejora tu calle- Government
GUARANTEE
0.0%
13.0%
100.0%
Mejora tu calle+
BID
Government &Beneficiary
Project of Urban Infrastructure
STREETSIDEWALK
BASE
PAVEMENT
Framework
Mejora tu Calle
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For families making less than 2 minimum wages
Production of concrete blocks (instead of clay bricks) In partnership with local governments/communities We provide the materials, equipment, training, maintenance, and supervise quality Communities contribute their labor, they get 50% of the product, the rest is sold Operating in Mexico, Panama, Costa Rica and soon in Colombia We built more than twenty six hundred rooms in Mexico (10 m2)
Self-Employment Productive Centers