Transforming aid for urban areas

There is a new way to finance community-driven development, working with local funds set up and managed by grassroots organisations. This can work well at scale with local governments to meet basic needs and reduce urban poverty. David Satterthwaite explains why it’s time external agencies took note of this. 

Blog by
4 September 2018

David Satterthwaite is senior fellow in IIED's Human Settlements research group

A daily savings book: local savings groups collect small payments from slum dwellers which can be leveraged to support slum upgrading projects (Photo: SDI, Creative Commons via Flickr)

Aid is not working well in most urban areas in low- and most middle-income nations. Nor are most urban governments. Nor are the global agendas, including the Sustainable Development Goals. Provision for water and sanitation is actually getting worse in many urban areas.

But what is working well across many African and Asian nations are local funds that support community organisations – especially where these are formed by savings groups led by women living in informal settlements and the slum/shack dweller federations these groups form. 

Why the international financial framework is flawed…

What we need is an international financial framework that supports such community organisations and federations, allows them to make decisions and set priorities – and makes funding management accountable to them.

Funds they have set up support them to act – and help them change their relationships with local governments – and to work as co-producers of cities and towns. Bilateral and multilateral aid agencies and international and local NGOs legitimise their work on the basis that it is addressing unmet needs (water, sanitation, health care….).

But these agencies set priorities. They choose what to fund (and what not to fund). With local funds, it is the people with unmet needs that set priorities, take action and ensure funding is well spent.  

…and local funds work

Setting up such local funds is what was demanded 30 years ago by the Argentine urban specialist, Jorge E Hardoy. Hardoy advocated for local funds that directly support grassroots organisations and are accountable to them. How this could happen was detailed in the book Squatter Citizen published in 1989.

Very little has changed in terms of what communities need. But what has changed dramatically is the growth of representative grassroots organisations that form federations – now active in over 30 nations.

Many have developed their own local funds – for instance the Twahangana Fund set up by the Namibia Shack Dwellers Federation and the Gungano fund set up by the Zimbabwe Homeless People’s Federation. They are all members of Slum/Shack Dwellers International

Global urban agendas overlook the power of local

What has also become apparent is that the conventional ‘urban’ agendas pushed by the UN, including Habitat III’s New Urban Agenda, are far too focused on national government. Too little attention is given to urban government – and almost none to community organisations and federations.

Amazingly, the New Urban Agenda (PDF) that is meant to guide governments’ urban policies for the next 20 years does not mention mayors or local democratic processes. 

At least global discussions recognise the right of these grassroots organisations and federations to be there – as seen in their contributions to discussions in the World Urban Forum in February 2018 and previous global forums.

Representatives from these federations bring many fresh insights to these discussions. They are praised and applauded when they make presentations at public events. All participants feel better for hearing their stories and insights.

But how many professionals leave these forums with a commitment to support them? Or if they do want to support them, how many allow the grassroots organisations to make choices and set their priorities? 

Local funds: going global

But there is a new way to finance these organisations’ priorities – through the funds that they have set up and manage, such as the Urban Poor Fund in Cambodia and the Funds in Zimbabwe and Namibia mentioned above. 

Community-designed and managed funds in Cambodia, Nepal, the Philippines, Sri Lanka and Thailand have 11,690 local savings groups working in 6,689 settlements in 497 cities. Grassroots federations in India have provided lower-cost access to good quality sanitation for more than 163,000 households, supported the construction of affordable housing for 44,397 households and improved tenure security for 42,068 households.

The Akiba Mashinani Trust, in Kenya, supports the savings schemes and housing programmes of the Kenyan federation of slum dwellers (Muungano wa Wanavijiji). It has provided project loans and grant capital worth US$1.7 million in recent years to savings groups, in addition to consumption and livelihood loans.

So now external funders have local finance institutions managed by grassroots organisations that they can fund. That provide accountability and transparency to their members as well as to external funders. That can do much of the local management that external agencies find difficult. That work well with local governments to meet basic needs and reduce urban poverty.

It is time for external agencies to take note and act.

This blog draws on the editorial in the April 2018 issue of the international journal, Environment and Urbanization on Finance for community-led local, city and national development.

Share: