Local funds for local development

Journal (whole)
, 352 pages
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Published: April 2018
Environment and Urbanization
Product code:10861IIED

Public investment is essential for urban development, especially for extending and improving infrastructure and public services. But there are a billion people living in informal settlements without adequate infrastructure or essential services. From where can the necessary capital be secured? And how can financial systems be designed to support community- and local government-led urban development? A new and more ambitious finance agenda is needed if no-one is to be left behind.

Community-managed funds drawn from savings groups have long had importance for helping low-income groups cope with stresses and shocks. But these have grown in scale and scope and in their capacity to develop productive partnerships with local governments. This issue includes the first detailed accounts of the financial systems underpinning community managed funds in Cambodia, India, Kenya, Nepal, the Philippines and Sri Lanka. Savings groups affiliated with the Asian Coalition for Housing Rights are active in 497 cities; savings groups that form federations that are members of Slum/Shack Dwellers International (SDI) are now active in hundreds of cities in 32 countries. In India alone, the Indian Alliance has provided lower-cost access to good-quality sanitation for more than 163,000 households and supported tens of thousands of households to get better quality housing or improved tenure. Many slum dweller federations have developed their own national urban poor funds to provide services, upgrade homes and leverage support and resources from local governments. These financial processes are designed to draw in even the poorest groups, meeting their needs, making them part of a larger process that supports them.

Too little attention is also given to strengthening local government finance. Papers report on how land-based financing and municipal bonds can strengthen local governments – and the many (mostly political) obstacles to using these. For example, Dakar (Senegal) and Kampala (Uganda) cannot issue municipal bonds due to national regulatory frameworks. A paper on participatory budgeting reflects on how it began as a strategy to radically democratize politics but also came to serve ‘good governance’ and managerial and state modernization. Other papers are on public transit-led land development for housing, on local government negotiations with higher levels of government (in China) and on partnerships between community organizations, local governments and commercial banks.

This issue of Environment and Urbanization therefore calls for development agencies and central governments to assess their financial systems and processes and seek opportunities to strengthen local governments and community organisations as a foundation for achieving global aspirations for sustainable development and poverty eradication.