Enabling private investment in informal settlements: exploring the potential of community finance
Around 1 billion people live in informal settlements across the global South. This demonstrates a need to rethink how urban development is structured, in order to create an investment environment that delivers more inclusive and prosperous cities.
Many low-income communities have come together to create savings schemes at city and national level. These community finance organisations can help to overcome the barriers to private-sector involvement in the development of informal settlements.
Community finance provides the human and organisational capacity to address the perceived risks that deter lending, capital investment and large-scale delivery of infrastructure programmes that may benefit residents of low-income communities.
This paper brings together evidence of successful public-private-community collaborations to (i) extend formal financial services to support housing and livelihood initiatives in informal settlements; (ii) leverage investment in low-income housing by blending the land holdings of communities, private development capital and state subsidies; and (iii) facilitating infrastructure investment by bridging information gaps and coordinating meaningful engagement by affected communities.
By facilitating local participation in planning and delivering urban development, community finance can help to balance social and private returns in cities across the global South.