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Holcim‘s low-cost housing projects –

targeting customers at the Bottom of the Pyramid

Stefanie Koch, CSR/SD Coordination


Business and Poverty Leadership Programme
Cambridge, November 14, 2006
Content

 About Holcim

 Low-cost housing

 Challenges, open questions...

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About us
Holcim is one of the world's
leading suppliers of cement and
aggregates as well as
downstream activities such as
ready-mix concrete, asphalt
and construction-related
services.
From its origins in Switzerland it
has grown into a global player
with majority and minority
interests in over 70 countries
on all continents.
Today Holcim employs some
70‘000 people.
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Holcim – global by tradition
70 Number
Serbia
of countries Croatia
China
New Caledonia
Tanzania
60 Sri Lanka

Africa Middle East


Bulgaria
Romania
Honduras

Asia Pacific
Latin America
Poland

North America
50 Kosovo
Madagascar
Mauritius
Guinea
Iran
Malaysia
40 Macedonia
Thailand
El Salvador
Dom. Republic
Indonesia
Europe

Nicaragua
30 Guatemala
French Guyana
Azerbaijan
Austria
Venezuela Ivory Coast
Spain
20 India
Nigeria
Namibia
Hungary La Réunion
Czech Republic Fiji
Greece Haiti
Slovak Republic Caribbean Islands
10 New Zealand
Philippines
Morocco
Peru
Panama
Bangladesh
Mexico Ecuador Argentina Yemen
Netherlands Canada Costa Rica Chile Singapore United Kingdom
France Egypt Germany Brazil Italy Australia Russia
Belgium South Africa Norway
Switzerland Lebanon USA Colombia Cyprus Vietnam UAE
0
1912 1920 1930 1940 1950 1960 1970 1980 1990 2005
Countries with operations of consolidated companies and those with minority interest 4
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Focus on core competencies

Quarrying and raw Clinker Cement grinding and


material preparation production distribution

Other construction materials and services


33%
 135 cement plants

 398 aggregate plants Sales 2005

 989 ready-mix concrete plants Cement


Clinker
56%
 101 Asphalt plants Aggregates Concrete 11% 5
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Balance between growth and mature markets

Mature markets

Emerging markets

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Balance between growth and mature markets

Mature markets

Net Sales in million CHF Employees


18'468 59'901

252% 29'557 103%


5'247
Emerging markets

1990 2005 1990 2005

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Sustainable development is a key element of our
vision and mission
 Sustainable development is a core
element of the vision and mission of
Holcim

 Our mission is to be the world’s most


respected and attractive company in
our industry – creating value for all
our stakeholders.

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Triple bottom line integrated in our strategy

Goal Creation of Value

Geographic Local Management


Strategy Product Focus
Diversification Global Standards

Sustainable Better Permanent Human Corporate


Mindsets Environmental Cost Marketing Resources Social
Performance Management Innovation Excellence Responsibility

Base People

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Content

 About Holcim

 Low-cost housing

 Challenges, open questions...

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... a few examples of “classic” CSR projects

School center Felix Gloor

Ortopolis, Holcim Brazil

Holcim Vietnam – clean


water, bright future
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Money spent for OH&S, donations and charity,
CSR projects and coordination
Group companies have allocated USD 43 millions to CSR* of which
USD 21 millions** go to OH&S.

Total CSR spending 2005: Total CSR spending 2004:


USD 43 million USD 29 million
6%
8%
6%
OH&S*** 6%
5% Donations and charity
4% CSR coordination 39%
CSR projects in the 15%
49% focus area education
CSR projects in the
focus area community
development
7%
CSR projects in the focus
30% area infrastructure

25%

* Data from Aggregates Industries not included


** Data missing from four Group companies, including Aggregates Industries
*** Most Group companies reported estimates 12
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New business models
Maximizing social and economical value
High
Can help in the short
run, but is not self
sustaining Sustainable livelihoods
business

Social benefits

Does not sufficiently


Low serve the community

Not-for-profit Economic benefits For-profit


corporate philanthropy commercial venues
$$$
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Low cost housing – a new business opportunity
 Shelter and housing are a basic need.
 As one of the world's leading supplier of cement, aggregates,
concrete and construction-related services there is an opportunity
to think about the poor as prospective customers.
Current projects
 Holcim Apasco's MiCasa and Provivah projects and the
prefabricated housing system Prefa PC of Holcim Costa Rica are
good practice examples exploring new business opportunities while
serving the needs of the poor.
 Tsunami response: Reconstruction projects in Thailand, Sri Lanka
and Indonesia
 A partnership project between Holcim Lanka and Ceylinco
Grameen aims at offering a solution to the housing needs of Sri
Lanka‘s poor by combining micro credit with a low-cost housing
concept
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Possible components of a project

Commercial Technical Access to Access to Capacity


component component building financial building &
 Development materials services livelihood
Evaluation of creation
of a model Distribution
the market Provision of
house with channels  Training
potential, housing micro
high quality at and
actors, credits in
the best technical
partners, partnership
possible price support
available with a suitable
resources and  Identification organization  Support to
subsidies of the (e.g. MFI local
appropriate foundations,
building government
donors) and
material
(cement, community
binders, planning
others,…)

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Low-cost housing models according to target group
Focus of the model on: Social tier 1
Commercial solution Annual income p.c.:
> $20,000
Technical solution Population in billions:
0.75 – 1.00
Access to material Purchasing power in
billions: $ 15,000 –
Financial solution 20,000

Skill/Capacity Development Social tier 2 & 3


Annual income p.c.:
> $1,500 - 20,000
Mahagedera, Population in billions:
1.50 – 1.75
Sri Lanka
Affordable housing

Purchasing power in
billions: $ 15,000 –
Holcim-Gov., 18,000

Mi Casa, Ecuador
Mexico Prefa, Costa
Rica Social tier 1
galing Mason, Annual income p.c.:
< $1,500
Philippines
Population in billions:
House-for-Life, 4.00
LCH, Java, >$2 Purchasing power in
Sri Lanka
cost housing

Indonesia billions: $ 6,000


Basis low-

<$2

Provivah, Holcim-GTZ,
Mexico Aceh, Indonesia

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Mi Casa - Holcim Apasco, Mexico
Project 1. To help people self-build to an acceptable standard
Objectives 2. To improve the availability of affordable construction material
3. To become the leader in the bag market
4. To maintain a close relationship with distributors and clients

Project
Overview Project History
history and
 Project started in 1995, bringing together wholesalers, local
main outcomes,
geographical government and credit institutions
focus and target  Launch of Mi Casa “reloaded” in 2005
group Main outcomes
 Construction or improvement of about 400,000 houses in
Mexico supported over the last six years.
Geographical focus and target group
 All over Mexico
 People with a daily income of more that USD 3 per day

Budget and  Budget: $ 4,029,000.00 / 364,286 USD (Exchange rate 11.06)


expected  Revenue: $83, 598,644.00 / 7,558,648 USD (Exchange rate 11.06)
revenue 2005
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CASAKIT - Holcim Ecuador
Project 1. To provide a housing solution for the project „Mucho Lote“ in the municipality of Guayaquil.
Objectives 2. To achieve a cost-benefit balance with impacts on social problems.
3. To develop an industrial housing solution involving low-cost concrete and other components.
4. To strengthen Holcim Ecuador’s social image.

Project
Overview Project History
history and
main outcomes,  Pilot project implemented to explore materials, workforce
geographical from January 2002 to June 2002.
focus  Final development of project on company land in July 2002.
 Creation of “Fundacion Procasa”.
 Two models of housing were developed and built as part of
this project. CasaKit 01 (40 m2) y CasaKit 02 (46 m2).
 Today only one model is produced (CasaKit 02).
Main outcomes
 686 units of CasaKit 01 were built between April 2003 to
August 2003.
 266 units of CasaKit 02 were produced until January 2005.
 206 units of CasaKit 02 are currently being produced,
handover planned for February 2006.
Geographical focus and target group
 Urbanization “Mucho Lote” in Guayaquil, property of the
municipality of Guayaquil.
 People below USD 3 per day.

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CASAKIT - Holcim Ecuador
Budget and
 Today 1.2 million USD are budgeted annually for PROCASA
expected
 Holcim is perceived to be delivering a service to the community
benefits

Main Learning
Overview learnings  It is possible to develop high quality products for people who otherwise don’t have access to
decent housing.
 The houses can be produced at the real costs of a council house (low cost housing).
 A simple way to respond to Government requirements is the creation of a foundation. An
example: PROCASA.
 It is essential to control the costs in this kind of housing.
 The product (house) needs to be adaptable to environmental requirements.

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House-for-Life project - Holcim Lanka
Project
1. To offer a housing solution to Sri Lanka‘s poor
Objectives
2. To establish a partnership with Ceylinco Grameen
3. To provide products and services to a so far unserved target group

Project
Overview Project History
history and
 November 2004, Evaluation of partnership opportunity and
main outcomes,
preliminary project definition
geographical
 Mid-December 2004, Signing of Memorandum of Understanding
focus and target
group  Dec./Jan., Tsunami delays initiation of the project
 Spring/Summer2005, Construction of first 7 houses in the context
of the project
 Nov./Dec. 2005, First evaluation of the project
Main outcomes
 First houses built
 Partnership with Ceylinco Grameen established, evaluated
 Next steps defined
Geographical focus and target group
 Communities in the South of Colombo
 Peope with in income of USD 3 per day and more

Budget and  Fund with Ceylinco Grameen established of $50,000


expected  Reinvested interest of $2,000
benefits  100% collection rate
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House-for-Life project - Holcim Lanka
Main Learning
learnings  Construction is delayed due to insufficient management of the construction by the house
owner. This is increasing housing costs. Initial training to manage the construction plan will
help.
 Shop Houses not only assist in poverty alleviation but create an opportunity to educate the
Overview lower strata of society on being independent.
 Frequent project reporting would have helped to monitor the project more efficiently.

 It is difficult for Holcim Lanka to gain funds through development agencies, however alternates
like ‘securitised housing’ partnership are promising.
 Adding incremental funds to ‘House for Life’ project will not create a significant impact to
housing situation in Sri Lanka. We need breakthrough solutions.
 Partnership with a networked, efficient and connected Micro Finance Institution will remain
critical to manage the retailing of the business.
 Catering to diverse land sizes & design needs through engineering & construction expertise is
essential.
 Sufficient resources to introduce technical advisory and project management to prevent the
escalation of costs due to delays & inefficient use of raw materials must be considered by
Holcim.

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Prefa - Holcim Costa Rica / Productos de Concreto
Project 1. Provide a high-value, engineered solution through innovation, based on cement.
Objectives 2. Develop the company brand equity and the prefabricated product image in general.
3. Increase the competitiveness in the construction sector providing environmentally friendly
products, reducing waste and speeding up construction.
4. Facilitate the access of low-income families to low-cost housing.
5. Foster employment generation.
Overview
Project Project History
history and  1965: Launch of new housing system, consisting of columns and
main outcomes, panels
geographical  1985: Introduction of pre-stressed columns and new joints
focus and target between the panels
group  Casapac: Development of a solution that can be packed and sent
on a truck, including all material and components.
 2000: New, and lighter Prefa system
 2005: Elevated houses and two story prefab houses
Main outcomes
 Offering of an industrial product of high quality plus additional
services. Industrialization of the construction process.
 Achievement of an important relation with government.
 Coverage of the whole country.
 Program targets persons with more than USD 5 per day.

Budget and
 Estimated sales for 2005: 36,000 concrete tons (4,500 houses)
expected
 Expected sales for 2006: 40,000 concrete tons (5,000 houses), $5 MM revenue
revenue
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Prefa - Holcim Costa Rica / Productos de Concreto
Main Learning
learnings  The housing deficit created a new market where the shortest construction time, the lowest
costs, the lowest level of skills required and, the lowest level of waste, were the key success
factors.
 Proactive communication helped to handle initial negative perceptions regarding the
appearance of the material, that was so far primarily used in farms.
Overview
 Extensive research and development was needed to improve the quality of the product in order
to meet the customers’ expectations.
 The new Seismic Code recommendations in design and construction phases needed to be
implemented.
 Durability and flexibility of the solution are the most important advantages of the system in
comparison with other options available on the market.
 Engagement in a process to get a clear understanding of customers’ needs and wants have
changed the product dramatically and ensured the success of the project.
 A permanent R&D program was crucial for product development.
 Long-term goals must be set and the organization must provide an internal structure able to
support the strategy.

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Galing Mason, country-wide training program for masons,
Holcim Philippines
Project Objectives 1. To enhance knowledge and skills, and to promote the image of masons
2. To promote concrete technology and appropriate use of concrete products
3. To engage in partnerships with the government, the construction industry and NGOs to promote
and transfer masonry skills and to contribute to improving infrastructure

Partners TEDSA (government agency)


 Design/approval of curriculum, program implementation
 Assessment and certification of skills
Construction industry
 Assist in curriculum development and establishment of
criteria for awards
 Program implementation
Project recipients
 Selection of project sites/provision of resources

 Holcim ‘galing Mason Training: Basic and advanced masonry skills training.The 7-day training program
Capacity building
is open to uncertified masons, offering skills training, competition, assessment, and skills certification.
and livelihood
Masons received tools and subsidy while they participate in the construction of houses, schools, and
creation
other community facilities.
 Holcim ‘galing Mason Olympics: local regional to world masonry competitions. A showcase of local
masons’ skills through various levels of competition.
Type of training  Holcim ‘galing Mason Award: Annual search for outstanding mason. Participants are nominated and
activities awarded based on their skills and level of dignity they have acquired and shared with family,
community, and society in their everyday life as a mason.

Accompanying  Contributions to community development through construction of houses, schools or other


CSR activities community facilities as integral part of the training program.
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Housing Program “Ciudad Bolívar”, Holcim Colombia

Project 1. Housing improvements for 78 houses


Objectives 2. Construction of 22 new houses (in collaboration with Idipron – public entity aiming at working with
vulneable population)
3. Training of masons, inhabitants and beneficiary families with regard to issues such as housing,
urban norms, and architecture

Overview Project histroy


 En desarollo de su política de responsibilidad social y
History and main teniendo como marco para el meejoramiento de la calidad
results de vida de la población que habita en las zonas de
influencia de las actividades de la empresa, Holcim
subscribío un convenio de cooperación interinstitutional
con la Caja de la Vivienda Popular en el mes de julio del
año 2005, con una duración inicial de 12 meses.
Main results
 Desarollo de un conjunto de acciones de carácter técnico,
social, administrativo y financiero para lograr que und
conjuncto de 100 familias puedan llevar a cabo procesos
de mejoramiento de sus viviendas o de construcción de
unidades habitationales en sitio proprio.
Geographic focus and target group
 El proyecto enfoque sobre tres Unidades de Planeación
Zonal – UPZ – de Localidad de Ciudad Bolívar en la cual
se encuentra la planta de producción de agregados
“Manos”.

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Summary low-cost housing models Holcim Group
Project The housing deficit that is existing in all LATAM countries offers an opportunity to become
Rationale leader in the low-cost housing market sector while living up to social responsibilities and
tapping a yet unaddressed market segment with a high potential

Perceived
Opportunities Challenges
challenges /  Exploring new markets with the opportunity  Expansion of basic housing solutions
opportunities to tap a yet unserved market segment and  Land issues in rural areas
the possibility of increasing the share in the  Financing services offered to clients
low-cost housing segment  Collaboration with providers of subsidies
 Building of reputation  Local technical skills
 Pioneer role in low-cost housing in  Program monitoring
combination with microfinance  Up scaling of programs
 Increasing customer base

Market Although there is a big market potential in relation to the population with less than USD 2
Component Market potential per day, most programs focus on people with USD 5 per day because it is more
practicable and financing is less of a problem. This approach, however, requires
accompanying measures to improve the situation of the population at the bottom of the
pyramid
Partners Holcim Costa Rica and Holcim Apasco run their Prefa and Mi Casa program without any
partners, while Holcim Indonesia partners with GTZ, Holcim Lanka with the National
Building Research Organization and Ceylinco Grameen. For ProVivah Holcim Aspaco
partners with the ProVivah Fund.
Available  Subsidies are available to low-income families in Costa Rica and Mexico. In Mexico,
subsidies however, government programs are not sufficient to tackle the existing housing deficit.
 No subsidies are available in Indonesia and Sri Lanka-

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Summary low-cost housing models Holcim Group
Technical
Type of solution The different initiatives offer either:
Component
offered  a pre-fabricated housing solution or
 incremental Do-It-Yourself (DIY)-building in the traditional way with technical advice
provided via the program.

Building
material used  The different programs use a wide variety of building material including: cement,
aggregates, wood, steel, fiber-cement panels, aluminium, copper-PVC, tiles, pre-cast
sewage, compressed earth blocks, concrete frames and others
 Most materials are sourced locally, in the case of Indonesia from local SMEs

Access to  The distribution of the final product has a wide range from direct sales by the program unit
Distribution of
building
solution in the company for the urban areas and distributors in rural areas in Costa Rica and
material
distribution by specialized Mi Casa distributors in Mexico to distribution via the program
partners like in Sri Lanka.
 The more successful program have a special unit that is also involved in distribution of the
final products.

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Summary low-cost housing models Holcim Group
Financial  The programs of Holcim Lanka and Holcim Indonesia offer financial services (micro
Availability of
services credits) as a key element of their solution.
credit services  Holcim Costa Rica offers credit services only to contractors, information about financial
services offered by other organizations is provided to the end-customer.
 Mi Casa offers credit options via distributors and is evaluating other options in collaboration
Credit partners with an MFI.

Holcim Lanka partners with Ceylinco Grameen, a well-known and successful MFI.

Mode of
collaboration  In the case of Sri Lanka, close partnership with Ceylinco Grameen, regulated by a MoU.
 Credit options in other countries offered through collaboration with distributors.

Capacity Type of
building and training  Promotional and technical brochures and booklets (Costa Rica)
livelihood activities  Extensive technical advise on self-building (Mexico)
creation  Conduction of mostly extensive training programs for different audiences, including end-
users (Costa Rica)
 Running of an extensive training program for masons (Philippines)

Accompanying
 Self-construction training to end-users, training programs on site
CSR activities
 Provision of blue-prints of community facilities to be constructed
 Support for income-generating activities

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Main learning/findings
Technical solution
 The low-cost housing market requires a solution that offers the shortest construction time, the lowest price, lowest
cost, lowest level of construction skills required and the lowest level of waste and at the same time a high quality.
 It is essential to offer solutions that allow incremental building.
 Prefabricated building parts seem to be efficient for many low-cost housing programs.
 Durability, flexibility and adaptability to local circumstances are other crucial success factors.
Overview
Internal organisation and stakeholder involvement
 The company internal structure must be able to the support the strategy and implementation of a low-cost housing
program.
 A special unit needs to be established to ensure the implementation of the low-cost housing program.
 Financing, which is the main entry barrier for clients in this market segment, needs to be an integral element of any
low-cost housing program.
 Low-cost housing programs will vary from country to country and must be based on a thorough understanding of
the clients cultural and social values.
 Stakeholders’ (in particular house builders’) involvement in the design of the low-cost housing solution ensures the
meeting of needs.
 Partnerships with NGOs and community organizations, in order to build trust, and with professional organizations,
in order to facilitate program implementation, are crucial.
Capacity building and livelihood creation
Training self-builder and clients in construction skills is essential in order to keep the prices for the final product down
and the quality high.

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Content

 About Holcim

 Low-cost housing

 Challenges, open questions...

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Discussion
 Questions?

 What do you think how companies can scale-up projects


in order to reach a considerable impact?
 How to combine the market-driven with the community-
driven approach?
 People at the very bottom of the pyramid can‘t benefit
from low-cost housing solutions. What can be done to
move them up higher in the pyramid?
 How do you suggest to measure the success of BOP-
projects?

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