Local funds allow informal-settlement residents to shape development

An event at Habitat III explored how innovative forms of community finance could be used to improve informal settlements and provide much needed adaptation to climate change.

The slogan on a woman T-shirt in Kitwe, Zambia - emblazoned with 'Addresssing water and sanitation challenges through city-wide partnerships' - highlights the community-led approach (Photo: Diana Mitlin/IIED)

There are 900 million informal settlements residents now – and an anticipated 2 billion by 2030, just 14 years away. This means there is an urgent need for investment finance – both to address long-standing deficiencies in basic services, and to cope with the added demands of climate change and particularly the additional risks of flooding. But how is that going to happen?

This question of raising the needed additional finance was a key theme of the recent Habitat III conference, and was explored in an IIED side event organised with partners. Part of the answer could lie in community finance.

What is community finance?

Across towns and cities in the global South, people are trying to save. The network of Shack/Slum Dwellers International (SDI) supports 8,455 savings groups. These enable women to accumulate very small amounts of daily savings into more substantial funds.

Sarah Nandudu (from Jinja, Uganda) explained: "Banks have high rates of charges for servicing your loans, so we cannot afford it. So we come together to save our money as a group. That way we can have a better rate of interest. It also brings together people of the settlement together, so that we can act together when we have problems like floods or disease."

We do the savings to improve our lives.

Janet Abu, an informal settlement resident from Ghana, added: "We do the savings to improve our lives. To improve our homes where we raise our children. To improve our businesses."

Adding value

Community savings can also bring in new funding as community organisations can partner local governments, donors and banks to implement development programmes.

In Ghana, a project designed to show the local authority the potential of community-led development has led to new secure homes for 50 families. In Jinja, community toilet blocks have been constructed in collaboration with the local authority.

Community toilet blocks in Jinja, like this one, have been built in partnership with local authorities (Photo: Diana Mitlin/IIED)High levels of local ownership mean both that investments are maintained, and that ideas are shared through networks of residents from informal settlements spanning different settlements and even cities.

Extensive infrastructure investment is required to address needs across informal settlements in the global South. In addition, there is now a need for additional investment to address the problems arising from climate change. Much of the 'heavy lifting' of urban adaptation will be done by the people who live in these settlements. Yet most money goes towards large-scale infrastructure protection, such as improved drainage schemes in formal settlements.

Partnership building

While these needs are recognised, most donors and governments look at city-wide infrastructure and give insufficient attention to the local level.

Janet explained her frustration: "Slums do not need this [additional infrastructure investments in formal areas]. We need a proper road so businesses can get to the city. We need a drainage channel to wash away the dirt and fight diseases like cholera and dysentery. We need streetlights for security so that women and children do not get raped."

To meet these local needs, strong partnerships need to be built, particularly between local government and organised groups of residents.

Janet said: "In Ghana, if you want water in your house, you have to talk to governments about building a water pipe. In the slum you don't have drainage. We have to put our dirty water everywhere, and it is not safe. 

"When the government works with us to fix these problems, they know that the communities will support the government. We are the ones who know what the problem is – if the toilet is not working or there is no drain. Then we take this to the municipal assemblies to work together. And they will say that the community has done well."

Local funds

These partnerships lead to new ways of working – and funding.

Funds co-capitalised by both SDI networks and local and national government agencies have been particularly significant for developing scalable models for improving informal settlements.

Initiatives in Cape Town and Stellenbosch (South Africa), Namibia, Harare (Zimbabwe), Kampala (Uganda) and Nairobi County (Kenya) have been exploring the potential of such collaboration, bringing together contributions from local residents, government and international development assistance agencies to provide the capital for investments.

These funds also help to establish the legitimacy of these citizen organisations, facilitating access to land. One SDI member from Sierra Leone at the event argued that this process secured improvements and prevented evictions. Innovative finance enabled development.

As he said: "Take the slum from the people, not the people from the slum".

Take the slum from the people, not the people from the slum.

And as Janet concluded, by contributing to the funds, low-income people are showing the governments that they could pay for improvements over time. Such innovative financial arrangements enable the communities to secure sanitation, to dig drains, and to improve houses. 

Social justice and the 'right to the city'

The modern world is a world dominated by finance. When bank failure threatened, governments stepped in to bail them out. There is little such investment for the 900 million living in informal settlements.

Yet the work of these communities provides a powerful illustration of what can be achieved if resources are channelled to the local level. Finance is key to realising the potential of urbanisation. Partnerships and other financial collaboration help citizen organisations to hold their governments to account for where they invest and the costs of improvements. Community finance helps low-income people realise their citizenship, and contributes directly to inclusive cities.

We know that when low-income, disadvantaged urban residents begin to save, and this applies particularly to women, they can catalyse a process of change that addresses their own needs – creating inclusive finance.

For too long, these organised citizens have been overlooked by both public and private formal financial agencies, which tend to exclude low-income residents. Such exclusion takes place through location, or through entrance barriers, investment preferences and their terms and conditions of lending.

If international agencies realise their rhetoric and provide access to climate finance to the communities who are at risk, then additional local improvements with made neighbourhoods safer and stronger.

There was much talk about implementing the 'New Urban Agenda' at Habitat III, this session considered ongoing work to realise it.

Diana Mitlin (diana.mitlin@iied.org) is principal researcher in the Human Settlements research group at IIED.

The 'Show me the money! Financial and political strategies to address eviction and climate‐induced relocation' event was organised in partnership with County Government of Kiambu, Kenya; Federation of the Urban and Rural Poor (FEDUP), South Africa; Lagos State Urban Renewal Agency, Nigeria; Muungano wa Wanavijiji, Kenya; National Treasury, South Africa; Nigerian Slum Dwellers Federation; Shack/Slum Dwellers International, South Africa; and University of Manchester, UK. Speakers were Sarah Nandudu (National Slum Dwellers Federation of Uganda), Janet Adu (Ghana Federation of the Urban Poor), and Dr Andrew Norton (IIED).