Habitat

March 2007 • Vol. 13, No. 1

Debate
In this
issue:
Slums.....................................6
Gender and
microfinance......................... 8
The German example............11
Nobel laureate..................... 14
Kumari Selja ........................15
Pakistan field dispatch..........20

Financing for
A look at Global Migration the
Problems

urban poor
U N I T E D N A T I O N S H U M A N S E T T L E M E N T S P R O G R A M M E
 Habitat Debate March 2007
A Message from the Executive Director
T he year 2007 marks a historic cross-
roads in human history because it is
the year in which, for the first time, half
of humanity will be living in towns and
cities.
We are at the dawn of the new urban
era. And our research shows that by 2030,
this figure will rise to two-thirds. We thus
live at a time of unprecedented, rapid, ir-
reversible urbanisation. The cities growing
fastest are those of the developing world.
And the fastest growing neighbourhoods
are the slums. Indeed, 2007 will also be
the year in which the global number of
slum dwellers is forecast to reach the 1 bil-
lion mark.
It is patently clear to all of us in the
United Nations system as a whole, that
if we fail to achieve the Millennium
Development Goals in towns and cities,
we will simply fail to achieve them at all.
But it comes down to a question of
reaching as many people as possible. A
cornerstone of UN-HABITAT’s new
Medium-term Strategic and Institutional
Plan is partnerships. We have no choice
but to catalyze new partnerships between
government and the private sector.
This is the only way to finance infra-
structure and housing at the required
scale – the scale needed to stabilize the
rate of slum formation, and subsequently
reduce and ultimately reverse the number
of people living in life-threatening slum
conditions.
Yet there is every likelihood that in the
coming 20 years, conventional sources of
funds will simply be unavailable for in-
vestment at the scale required to meet the
projected demand for urban infrastruc-
ture and housing.
Many countries around the world con-
tinue to face deficits in public budgets
and weak financial sectors. Local govern-
ments have started to seek finance in na-
tional and global markets, but this is only
in its initial phase.
New mortgage providers have emerged,
including commercial financial institu-
tions and mortgage companies. But only
middle and upper income households
have access to such finance, while the
poor are generally excluded.
Although social housing is becoming
less important in Europe and in countries
with economies in transition, the need to
provide shelter that is affordable to low-
income households still exists, including
in developing countries.
The majority of urban poor households
can only afford to build incrementally in
stages, as and when financial resources be-
come available. In response, microfinance
institutions have started lending for low-
income shelter development and have be-
come very important in the last decade.
Guarantee schemes can, by providing
credit enhancement, go far in broadening
the appeal of microfinance institutions to
lenders. Another important trend in the
last decade is community funds, which
are often linked to housing cooperatives
as well as rotating savings and credit so-
cieties. Community-based financing of
housing and services has been used for
both settlement upgrading and for build-
ing new housing on serviced sites. These
funds have many advantages for low in-
come households because of the success of
small loans and the increasing urbaniza-
tion of poverty.
Constraints to mobilizing financial re-
sources for investment in shelter develop-
ment are both financial and non-financial
in nature. Non-financial constraints in-
clude land legislation that makes it diffi-
cult to use real estate as effective collateral,
as well as inappropriate national and lo-
cal regulatory frameworks governing land
use, occupancy and ownership.
Finance is only one dimension of secur-
ing sustainable solutions that can fill the
gap between the two extremes of current
processes: inadequate, affordable shelter;
and unaffordable adequate shelter.
Experience in both developed and de-
veloping countries shows that such efforts
contribute effectively to the objective of
reducing poverty by creating jobs, attract-
ing investments, improving health and
raising economic productivity. Such ef-
forts typically include:
n Good urban management, planning
and governance to ensure that all cit-
izens, particularly women, the young
and the elderly, have a strong voice in
decisions that affect their lives;
n Efficient land markets and property
administration that prevent land spec-
ulation and urban sprawl and provide
sufficient affordable land for the urban
poor;
n Enforceable zoning and land use reg-
ulations that facilitate compact and
mixed-use urban development and re-
duce the ecological footprint of cities;
n Affordable and environmentally sound
infrastructure including transport, en-
ergy, water and sanitation;
n Financial markets and systems that can
provide affordable housing credit and
long-term municipal finance.
As the only United Nations body vest-
ed with responsibility for promoting the
sustainable development of the built en-
vironment, UN-HABITAT needs all the
support it can garner for its new reform
plan.
Part of the overall reform of the United
Nations, this plan covering the years
2008-2013, provides a new shared vision.
It is forged in the collaboration of all par-
ties, from Governments to Local author-
ities and other Habitat Agenda partners,
to the beneficiaries themselves.
UN-HABITAT sees a way forward in
five key areas of focus: advocacy, monitor-
ing and partnerships; participatory urban
planning, management and governance;
affordable land and housing; environmen-
tally-sound and affordable basic infrastruc-
ture and services; and, most importantly,
strengthening human settlements finance
systems.
Anna Tibaijuka
Executive Director
 Habitat Debate March 2007 

Contents

A MESSAGE FROM THE EXECUTIVE DIRECTOR ............................................2

OVERVIEW Financing for the urban poor..............................................4, 5

Cover Photo FORUM Three things we should know about slums.......................6

Slum area in Bukit Duri, Jarkata, Indonesia
Photo © Suzi Mutter 2005 Employer-provided housing finance....................................7

Editor Gender and microfinance .........................................................8

Roman Rollnick
Promoting inclusive and effective local economic
Editorial Assistance development .................................................................................9
Tom Osanjo
Microfinance for the world’s poorest people..................10
Design & Layout
Irene Juma SPECIAL REPORT Financing for urban development in the
Asia-Pacific...............................................................................12,13
Editorial Board
Vincent Kitio OPINION Home-financing in Africa........................................................11
Lucia Kiwala
Anantha Krishnan Economic growth, rapid urbanisation and
Eduardo López Moreno poverty............................................................................................14
Jane Nyakairu
Edlam Yemeru
Mariam Yunusa Nobel laureate says ..................................................................15

Published by CASE STUDies The municipal finance system in Germany.....................16

UN-HABITAT
P.O. Box 30030, GPO Financing in action - the Jamii Bora Trust Kenya...........17
Nairobi 00100, KENYA;
Tel: (254-20) 762 1234 BEST PRACTICES ....................................................................18,19
Fax: (254-20) 762 4266/7,
762 3477, 762 4246
Telex: 22996 UNHABKE FIELD REPORT Building back better in Pakistan...........................................20
E-mail:
infohabitat.debate@unhabitat.org NEW Publications ...................................................................21
Website: http://www.unhabitat.org/
NEWS & Events ..............................................................22,23

ISSN 1020-3613

Opinions expressed in signed articles are those of the authors and do not necessarily
reflect the official views and policies of the United Nations Human Settlements
Programme (UN‑HABITAT). All material in this publication may be freely quoted or
reprinted, provided the authors and Habitat Debate are credited.
 OVERVIEW Habitat Debate March 2007

Financing for the urban poor

The way housing and urban infrastructure are financed is a topic of renewed debate and a source of
creative innovation, write Chris Williams, Political Advisor, and Nicholas You, Special Advisor on Policy
and Strategic Planning, both in the Office of the Executive Director at UN-HABITAT. Here they examine
financing in Africa, Asia and Latin America, where the demand for shelter and basic services far outstrips
supply, and where most urban populations live in slums.

I n an era of neo-liberal econom-

ics predicated on market-led
growth, interest in financing reflects
Commitments on shelter finance,
Habitat Agenda, 1996
vestment, fostered rent-seeking op-
portunities and offered a source of
cheap labour to industry, upscale
recognition of the limits of public Paragraph 47 of the Habitat Agenda residential neighbourhoods and the
expenditure. It also reflects the fail- central business districts.
commits member states to:
ure of public planning and deliv- The combination of structur-
ery systems to keep pace with rapid “… strengthening existing financial al adjustment, rapid urbanization,
urbanization. It further reflects the mechanisms and, where appropriate, weak municipal planning and ser-
initiatives of non-State actors to in- vices, and distinct slum economies
developing innovative approaches for
crease the supply of housing and has created conditions for radical
infrastructure in the absence of ade- financing the implementation of the Habitat changes in the formal private sector
quate public intervention. Agenda, which will mobilize additional – and hence, a new source of finance
The shift in emphasis from pub- for housing and urban infrastruc-
resources from various sources of finance –
lic to private sources of finance rais- ture. The banking sector and private
es questions about the role of the public, private, multilateral and bilateral utility companies are two important
State in housing and urban devel- – at the international, regional, national examples of finance. The flip side of
opment and, by extension, about structural adjustment has been that
and local levels, and which will promote the
the future policies of international banks have grown in number with
development cooperation agencies efficient, effective and accountable allocation the advent of market liberalization,
and financial institutions. and management of resources, recognizing that privatization and related financial
In the 1970s, most member sector reforms.
local institutions involved in micro-credit may
States in the developing world ex- While many banks have confined
perienced in the 1970s an econom- hold the most potential for housing the poor.” lending to traditional, higher-in-
ic and political crisis that led many come markets, others have diversi-
to implement structural adjustment fied lending to reach rapidly growing
policies in the next decade. Governments shelter, water and sanitation; urbanization urban populations, building upon prec-
devalued their currencies to promote ex- without economic growth and public ser- edents set in slums by entrepreneurs and
ports, eliminated price supports, aligned vices resulted in the urbanization of pover- urban poor organizations. Innovation of
their economies with global markets, cut ty and slums. Municipal authorities barely this kind has been accelerated by compe-
public expenditures on social services, capable of meeting their payrolls, were tition among banks for traditional, high-
privatized state-owned enterprises, and vulnerable to corruption, unable to col- er-income markets, the lucrative business
liberalized financial markets. lect revenues, or plan, let alone finance the of microfinance, and downward pressure
National housing corporations in many burgeoning housing and service needs. on interest rates. Primary mortgage in-
countries either collapsed or scaled back The demand for services in the absence stitutions have also emerged especially in
operations. Public expenditure on hous- of public supply created two types of in- countries with established domestic capital
ing dropped, as did public investment in novation and corresponding sources of fi- markets that can subscribe to debt instru-
urban infrastructure. By the 1990s, pub- nance: Private entrepreneurs who saw in ments as a source of long-term financing
lic finance for housing and urban infra- slums a business opportunity and urban so essential for housing finance.
structure was all but eliminated, save ad poor organizations keen to improve their For private service providers, structural
hoc programmes of development coopera- living and working conditions. The entre- adjustment has had unanticipated conse-
tion agencies and NGOs designed to min- preneurs built shacks without services for quences in countries with rapidly expand-
imize the social consequences of structural rent, or provided unofficial services (wa- ing urban populations. Privatized utility
adjustment. ter, credit, sanitation, electricity, security, companies see in slums a large, untapped
The advent of rapid urbanization coin- etc.). Rates were calibrated on capacity to market—a population of slum dwellers
cided with economic crisis and structural pay, small unit provision, high unit cost, who pay more per unit cost of service than
adjustment. First in Latin America, then and on high volume. higher income households. By working
in South and Southeast Asia, and more The organized poor mobilized sav- with entrepreneurs and urban poor orga-
recently in Africa, rural-urban migration ings and acted collectively or individual- nizations, private utilities are developing
combined with population growth to in- ly to secure land, build homes, and gain innovative systems to extend their services
crease the size of cities. Urbanization with- access to services. Microfinance institu- to slum dwellers and the urban poor.
out requisite economic growth resulted in tions emerged to offer credit to entrepre- The shift from public to private sourc-
urban unemployment; urbanization with- neurs and the organized poor. Rather than es of finance for housing and urban infra-
out public services resulted in inadequate rely on public finance, slums generated in- structure in cities of Africa, Asia and Latin
 Habitat Debate March 2007 OVERVIEW 

Paragraph 48 of the Habitat Agenda commits member states to:

(a) [Stimulating] national and local economies through promoting economic development, social development
and environmental protection that will attract domestic and international financial resources and private
investment, generate employment and increase revenues, providing a stronger financial base to support
adequate shelter and sustainable human settlements development.
(b) [Strengthening] fiscal and financial management capacity at all levels, so as to fully develop the sources of
revenue.
(c) [Enhancing] public revenue through the use, as appropriate, of fiscal instruments that are conducive to
environmentally sound practices in order to promote direct support for sustainable human settlements
development.
(d) [Strengthening] regulatory and legal frameworks to enable markets to work, overcome market failure and
facilitate independent initiative and creativity, as well as to promote socially and environmentally responsible
corporate investment and reinvestment in, and in partnership with, local communities and to encourage a
wide range of other partnerships to finance shelter and human settlements development.
(e) [Promoting] equal access to credit for all people.
(f ) [Adopting], where appropriate, transparent, timely, predictable and performance based mechanisms for the
allocation of resources among different levels of government and various actors.
(g) [Fostering] the accessibility of the market for those who are less organized and informed or otherwise
excluded from participation by providing subsidies, where appropriate, and promoting appropriate credit
mechanisms and other instruments to address their needs.

America would suggest that governments
no longer have a significant role to play
in financing human settlements devel-
opment. On the contrary, the role of the
State has never been more pertinent. Only
government policy, public investment and
municipal planning can ensure financial
sector reforms that translate into private
investment in affordable housing and ba-
sic services.
Government legislation on pension
funds, for example, can create a source of
long-term capital and trigger institutional
investment in debt instruments to finance
municipal infrastructure and/or mort-
gage facilities. Targeted public investment
is also crucial. It is estimated that 30 per-
cent of the cost of home construction is
made up of expenditure in water and san-
itation. By dedicating public expenditure
to infrastructure, the State can spur mas-
sive private investment in housing—a vol-
ume of shelter hundreds of times greater
than could be constructed by government
funds. Municipal planning is a pre-requi-
site for mainstreaming private investment,
particularly approaches to planning that
build upon, rather than exclude the dyna-
mism of the slum economy and the inte-
gral role it plays in urban development.
The change in the way affordable hous-
ing and urban infrastructure is financed at
country level has significant implications
for development cooperation. Official de-
velopment assistance will never finance the
massive housing and service deficit in cit-
ies in Africa, Asia and Latin America, nor
should it.
The accumulated savings and purchasing
power of urban poor and the capital housed
in pension funds and among private inves-
tors as well as dedicated public investment
constitute sources of finance that make offi-
cial development aid pale by comparison.
The future of development cooperation
is to channel funds in ways that accelerate
the actions of local actors to harness these
sources of finance. This includes a combi-
nation of targeted technical assistance and
credit enhancements, equity investments,
and bridging finance that preferably can
build local capacity and leverage multiple
sources of finance.
It also involves creative partnerships be-
tween multilateral and bilateral develop-
ment agencies and international finance
institutions geared toward fast-tracking in-
vestment for infrastructure.
More fundamentally, development co-
operation will require coming to terms
with the social and economic consequenc-
es of rapid urbanization and addressing ur-
ban poverty by drawing on the potential of
innovations in financing.
Newly completed houses, self-build housing project Jinja, Uganda 2005. Photo: © Suzi Mutter
 FORUM Habitat Debate March 2007
Three things we should know about slums
Slums are economically useful, a reflection of the urban social divide, and a bedrock of human resilience.
And writes Daniel Biau, Director of UN-HABITAT’s Regional and Technical Cooperation Division, they
are not a market failure, but a market success…
A ccording to UN-HABITAT, slums
represent one-third of the world's ur-
ban population. This ratio is not going
down in spite of all political declarations
and official commitments. Why? Why do
slums exist? Are they a planning mistake?
Do they reflect the inefficiency or mal-
functioning of land markets?
Let’s think for a second why we have so
many slums and shanty towns. Of course,
we know: slums are the best way found by
many countries to provide cheap housing to
the urban poor. And cheap housing means
a cheap labour force, low-income workers.
Slums are the physical expression and con-
dition of urban poverty: in many countries
they are necessary to ensure profitable eco-
nomic growth!
Before being a problem, slums are there-
fore a solution at a particular stage of eco-
nomic development. They were a solution
in Victorian London as they are a solution in
Mumbai today. Slums are not a market fail-
ure, they are a market success. This is the first
thing we should know about slums: they are
economically useful, sometimes extremely use‑
ful, because they offer low-cost housing options
to the poor.
But all informal settlements are not equal-
ly squalid. In Latin America, Southeast Asia,
Sub-Saharan Africa, and the Indian sub-con-
tinent, slums are very different, particularly
in terms of overcrowding.
Some are built on public land, some on
private land, some are squatter settlements,
and others provide rental housing options.
Some areas are extremely dense (3 people
or more sharing a small bedroom and more
than 1,000 persons per ha). For instance in
South Asia, 150 million people live in over-
crowded units. In West Africa on the other
hand, most slums have relatively low densi-
ties (less than 500 persons per ha).
The degree of shelter deprivation is di-
rectly correlated to the degree of urban in-
equities. Thus the worst slums are found in
the most inequitable cities. These are cities
where the poor pay more than the rich for
land and urban services, where land is mo-
nopolized by the upper classes, the cities that
are physically divided into poor areas and
gated communities.
The existence of slums is always a re-
flection of urban poverty but the intensity
of shelter deprivation is usually a reflection
of urban inequity. For example, Nairobi is
richer than Kinshasa but more than 50 per-
cent of its population lives in slums - the
same percentage as in Kinshasa. Nairobi’s
slums are worse than those of Kinshasa, be-
cause Nairobi is more inequitable than the
Congolese capital. Nairobi’s poor slum
dwellers are squeezed into only 5 percent of
the total city area. The largest slum, Kibera
occupies less than 1 percent of the city area
and accommodates 20 percent of the city
population. Its density reaches 3,000 per-
sons per ha. This is the second thing we
should know about slums: they are a manifes‑
tation of social injustice, a reflection of a social
divide which excludes the poor from the bene‑
fits of urban life.
But the urban poor are not only victims,
they are also actors. In fact slums and in-
formal settlements demonstrate everyday
how the urban poor fight for survival, how
they innovate, how they find resources and
energy, how they create their own employ-
ment opportunities and transform their
environment.
In some cities they form com-
munity groups to defend their interests.
Slum-dwellers may be the most dynam-
ic “entrepreneurs” of our time – the real
“Private Sector” about which we talk so
much. Good at survival strategies, slum peo-
ple rarely reach the accumulation and devel-
opment stage. They need support, or at least
they need to be left alone, away from public
harassment.
Slum life shows that the concentration
of people in cities is in itself a positive de-
velopment factor, simply because concentra-
tion means more exchange, more markets,
more opportunities, and more risks. This is
the third thing we should know about slums:
they are a manifestation of human resilience,
a reflection of social dynamics, of fantastic hu‑
man energy. Sometimes they are places of
solidarity, often they are places of urban vi-
olence, always they are places of urban life,
of multiple struggles for survival and human
dignity.
From these three points, we can derive a
few basic principles for the reduction of ur-
ban poverty. Firstly, the absolute necessity
to adopt a holistic approach to address urban
development challenges. This means bring-
ing together policy makers from economy
and finance ministries with housing and lo-
cal government departments, to ensure that
the key contribution of urbanisation to eco-
nomic development is well understood, that
resources are properly mobilized and allocat-
ed, that employment policies are associated
with slum upgrading policies. In a word this
means advocacy campaigns to strengthen or
create enough political will at all levels.
Much remains to be done. Only a few
governments have a comprehensive slum up-
grading strategy, national targets are rarely es-
tablished and the Millennium Development
Goals are largely ignored. We should pop-
ularize success stories demonstrating that
good policies bring economic and social
advantages.
The second principle is affirmative ac‑
tion to secure the urban poor access to
land, housing, credit and basic services.
This means identifying urban inequities
in these areas and correcting them. The
poor should pay less, not more, than the
wealthy for the comparative benefits of
city life. Inequity should be replaced by
solidarity, the divided city by the inclusive
city. Of course political will is required
but technical solutions are available, they
have been tested, they work.
The third principle – participatory and
transparent governance – is the means to de-
liver on any dimension of urban development,
on the three components of sustainable de-
velopment (economic, social and ecological).
Efficiency in municipal finance (resource mo-
bilization and allocation) constitutes one of
the best indicators of good urban governance.
Since the Istanbul City Summit of 1996 this
third principle is widely accepted in the inter-
national arena. But it needs to be implemented
more systematically at country level.
Indeed, a number of governments have
adopted reasonable and effective urban poli-
cies in the last 10 years. South Africa, Brazil,
Mexico, Egypt, and China come to mind.
In the meantime, international assistance to
urban development has remained stagnant, but
this has had little impact on these large middle-
income economies which can work on their
own. The urban crisis is now concentrating on
the Least Developed Countries which are ur-
banizing rapidly without sufficient institution-
al resources. These countries should be the top
priority of the UN system.

Employer provided housing finance
The widespread proliferation of slums affecting many developing country cities is not a new phenomenon
in economic and social history. The late 19th and early 20th century saw great social change in the
U.K. and Continental Europe caused by unbearable living conditions, especially among the industrial
workforce. Guenter Karl, a UN-HABITAT expert, and Margaret Gachuru, a lecturer at the University of
Nairobi, say a major factor that contributed to the better housing was the role played by employers.
E mployer-provided housing played
a major role in accommodating the
work force in European cities as a result
of the industrial revolution. It was aimed
at improving the productivity of employ-
ees because employers realized that well
housed employees were healthier, better
rested and more disciplined – all of which
enhanced labour productivity.
Employers also provided housing that
was predominantly rental, hence, rent
was deducted from salaries. The availabil-
ity of land close to factories was an add-
ed opportunity for workers to live nearby.
In addition, some governments provid-
ed increased fiscal incentives by allowing
high rates of depreciation on housing in-
vestments which made housing produc-
tion even more attractive and profitable
to companies.
In the post-war period, companies
provided low-interest, long-term hous-
ing loans for workers to buy or build their
own homes, or to buy the homes they
were renting, an approach often referred
to as employer-assisted housing.
Governments in Western Europe also
invented a whole range of housing pol-
icies focusing on income tax relief for
prospective home owners, for housing co-
operatives, and subsidies for developers
of social housing. Although these poli-
cies seem to have responded to the hous-
ing crisis in Western Europe since the mid
1970s, their success was also a function of
increased incomes.
In the United States, employer-assisted
housing became a well-known practice at
the beginning of the 1990s when relative-
Housing in Sheikh, Somalia . Photo: © UN-Habitat
Habitat Debate March 2007
ly high economic growth in some regions
resulted in a shortage of labor owing to
a general shortage of housing combined
with high housing costs. Employers decid-
ed to provide assistance to their employees
by helping homeowners with down-pay-
ments and closing costs. Employers also
partnered with housing finance com-
panies as guarantors which essentially
reduced mortgage costs. For renters, sup-
port was provided in the form of initial
deposits or a monthly fixed contribution
towards rent payment.
Efforts towards employer-assisted
housing resulted in the Housing America’s
Workforce Act 2005. It provides incen-
tives to increase private sector investment
in housing through tax credits to employ-
ers who contributed towards employee’s
home purchase, as well as rental assis-
tance. Housing assistance is also regarded
as a non-taxable benefit, similar to health,
dental and life insurance.
In developing countries, housing fi-
nance is severely constrained because
of prevailing or perceived high default
risk. These risks limit lending to high-in-
come groups and also increase mortgage
costs considerably. With financial lib-
eralization, housing finance institutions
are increasingly resorting to the employ-
er-employee contractual relationship, and
using security of tenure as a form of risk
reduction as well as a source of guarantee
for loans. Lenders view the relationship
between employer and employee as the
collateral to ensure loan repayment.
This approach still occurring on an
ad hoc basis could have a better impact
FORUM 
if approached in a more comprehensive
and systematic manner. The government
should support the mainstreaming of this
approach by developing specific tax in-
centives for the employer.
The concept can also be applied to
slums. In Kenya, for instance, in the
Kibera slum, approximately 20-30 per-
cent of the slum dwellers have regular
formal sector employment. Such an ap-
proach could provide an alternative sup-
ply of housing, reduce the rate of growth
and overcrowding in slums, while provid-
ing low-income earners with an opportu-
nity to own a tangible asset.
This can only be achieved if the gov-
ernment takes up that important task of
adopting appropriate housing policies
and legislation, and fiscal measures to en-
courage employers to help their employ-
ees finance their housing.
Lessons from developed countries in-
dicate the important role played by em-
ployer provided and employer assisted
housing. These lessons can prove to be
significant in the growth of affordable
housing finance in developing countries.
Its wider application, that is, in order to
reach the low-income groups including
slum dwellers is only possible if govern-
ment adopts a more holistic approach to
housing and urban development, rather
than the current piece-meal application of
sectoral policies that fail to reconcile busi-
ness and economic development with the
welfare and productivity of people, and
their housing needs in particular.
 FORUM Habitat Debate March 2007
Gender and microfinance: one step forward, two
steps back?
Microfinance is widely regarded as a ‘magic bullet’ capable of resolving an array of development problems
including poverty, gender inequality as well as financing development from the bottom-up, writes Kavita
Datta, a lecturer in the Department of Geography, Queen Mary, University of London. Yet, while a focus
on women has often been interpreted as illustrating the capacity of microfinance programmes to promote
women’s empowerment, it is important not to conflate the two.
S uch is the popularity of microfinance,
that 2005 was named the UN Year of
Microfinance, while the founder of the
Grameen Bank, Professor Mohammed
Yunus, was awarded the Nobel Prize in
2006. Perhaps unsurprisingly then, a di-
verse range of organisations are involved in
these programmes including international
financial institutions, bi-lateral donor agen-
cies, national governments, civil society,
banks and other financial organisations.
In turn, women have emerged as key
targets of microfinance programmes.
In their 2002 report for UNIFEM,
Empowering women through microfinance,
Susy Cheston, Senior Vice President of
Policy and Research for Opportunity
International and Executive Director
Emeritus of the Women’s’ Opportunity
Fund, and Lisa Kuhn, Program Analyst
for Opportunity International, note that
women’s access to microfinance has in-
creased substantially over the last ten years.
As such, women account for nearly 14.2
million (or 74 percent) of the 19.3 million
poor people being served by microfinance
institutions. Yet, while a focus on women
has often been interpreted as illustrating
the capacity of microfinance programmes
to promote gender equality and wom-
en’s empowerment, it is important not
to conflate the two, says Susan Johnson
in an article in the European Journal of
Development Research in 2005. Even while
microfinance programmes target women
explicitly, they do so for a variety of rea-
sons reflecting quite diverse understand-
ings of gender and resulting in a variety
of gender outcomes, including potentially
the disempowerment of women.
Linda Mayoux, in her work, Women’s
empowerment through sustainable micro‑
finance: rethinking ‘best practice’ (2005),
identifies three different approaches to mi-
crofinance even while acknowledging that
there are considerable over-laps between
them. They are the financial self-sustain-
ability, poverty alleviation and feminist
empowerment paradigms.
Taking these in turn, the financial sus-
tainability model is essentially premised
The aim of microfinance to
extend financial services to
the poor means that a focus
on women is justified on the
grounds that it can reduce
their vulnerability to poverty.
upon a liberal perspective that gender in-
equalities are harmful for economic growth
and development. Proponents argue that
increasing women’s access to financial re-
sources has two inter-related positive im-
pacts: it enhances women’s productivity
and the overall economic development of
communities and countries in the Global
South. The efficiency and sustainability of
programmes which target women also un-
derwrite the interest in extending financial
services to them. Research indicates that
schemes which target women have poten-
tially higher repayment rates.
As such, one could argue that this ap-
proach essentially focuses on women due
to an interest in economic growth, finan-
cial sustainability and efficiency, and is
driven by what women can do for micro-
finance and development rather than the
other way around.
The poverty alleviation approach is based
upon a consensus that meanings, experienc-
es and processes of poverty are fundamentally
gendered. The 1995 UN Human Development
Report estimated that 70 percent of the world’s
1.3 billion poor were women and led to the
coining of the phrase the feminisation of poverty.
Widely popularised by subsequent internation-
al women’s conferences, the prevalence of pov-
erty among women informs the Millennium
Development Goals which centred upon the
need to eradicate poverty.
While more recent research has identi-
fied key deficiencies in the feminisation of
poverty thesis, the aim of microfinance to
extend financial services to the poor means
that a focus on women is justified on the
grounds that it can reduce their vulnerabil-
ity to poverty. At the same time, women’s
greater investment in the household which
is partly attributable to a ‘feminisation
of responsibility and obligation’ (Sylvia
Chant 2006) also means that targeting
women has potentially beneficial impacts
upon their dependents and households.
Arguably, the focus on women here is
also related to wider concerns about pov-
erty rather than women or gender relations
per se. As Ms. Johnson argues, gender rela-
tions determine the effects that loans have
on women, some of which may work in
favour of women while others may not.
Furthermore, neo-liberal restructuring
means that women’s responsibilities and
duties within and beyond the household
have intensified, adversely affecting their
health.
Finally, and perhaps most significantly,
the feminist empowerment paradigm ex-
plicitly views microfinance as an effective
entry point to achieving gender equality
and women’s empowerment. This view-
point is supported by the Convention on
the Elimination of Discrimination Against
Women (CEDAW) and the Beijing
Platform for Action (BPFA). It is also
firmly rooted in initiatives located in the
Global South including the Self Employed
Women’s Association in India with pro-
grammes attempting to address both mac-
ro- and micro-level obstacles to gender
empowerment.
But the challenge remains of how eco-
nomic empowerment can be linked to
wider social and political empowerment,
and whether ironically, increasingly wom-
en’s access to economic resources endan-
gers their existing networks while also
taking them away from other social and
political activities.
As such, significant challenges remain
in realising the potential of microfinance
to promote greater gender equality and
empowerment. There must be a renewed
initiative to move away from simply tar-
geting women to explicitly focusing on
gender roles, relations and empowerment
which must be the starting point of all
interventions.

Promoting inclusive and effective local economic
development - A strategic planning approach
The prosperity and welfare of cities depend on their ability to exploit sustainable economic development
and to minimise the problems associated with global economic integration and urban growth. This makes
strategic thinking and planning for Local Economic Development (LED) crucial write UN-HABITAT
Human Settlements Officer Gulelat Kebede and William Trousdale, President of EcoPlan International
in Canada.
S ound economic development strategies
constitute one of the key pillars of sus-
tainable local development.
One reason for the recent gains in pop-
ularity of Local Economic Development
is the fact that it is evolving past the tra-
ditional economic development model that
focused almost exclusively on promotion,
attracting investment and strengthening of
physical infrastructure.
It is emerging as a new model that in-
tegrates economic, social and environmen-
tal objectives; a system where all types of
community capital (human, social, cultur-
al physical, economic, and natural) are in-
cluded and strengthened. It is a process
that integrates the soft infrastructure, such
as local business and entrepreneurial sup-
port, leadership, partnerships, networks,
capacity building and innovation with the
hard infrastructure – buildings, commu-
nications and transportation. It takes into
account the role of natural capital that sup-
ports economic activity – resources, ecosys-
tem services (e.g., clean water, flood control
from wetlands and forests) and other envi-
ronmental values.
It places a stronger focus on the ba-
sic conditions required for development,
the comparative advantages of an area,
and the economic needs of local citizens
and businesses. Key aspects include a thor-
ough understanding of the economic fab-
ric of a local area and the key forces for its
improvement.
LED is now defined as a participatory
process in which local people work togeth-
er to stimulate local commercial activity,
Figure 1: ‘Objective’ Based vs. Traditional Approach to LED
Habitat Debate March 2007
resulting in a resilient and sustainable econ-
omy. It helps create jobs and improve the
quality of life for everyone, including the
poor and marginalized. Local economic de-
velopment encourages the public, private
and civil-society sectors to establish part-
nerships and collaboratively find local solu-
tions to common economic problems.
Its strategies embrace local values for
poverty reduction, basic human needs, lo-
cal jobs, social and environmental integra-
tion; it utilizes economic drivers forged in
value-added resource use, local skills train-
ing, retention of income, regional cooper-
ation; and it considers development in the
role of structural change, and the quality of
development.
Traditional approaches that are not stra-
tegic generally rely on identifying problems
and then choosing solutions that address
those problems. When issues are used to
elucidate ‘community objectives’ as a key
step driving the new development, two es-
sential outcomes result: more creative al-
ternatives are developed that have a greater
chance of consensus-based, broadly sup-
ported and workable solutions; and sus-
tainable, systemic and long-lasting change
is achieved, as opposed to quick fixes.
The engagement of stakeholders is es-
sential to develop community objectives. A
process centred on properly defined com-
munity objectives ensures that the activities
taken under the aegis of LED are founded
on community values.
For LED to succeed, there are a num-
ber of conditions which need to be met.
Local commitment, especially that of the
FORUM 
political leadership is critical. Bringing in
the right people and resources requires a lo-
cal champion. Appropriate tools for infor-
mation gathering, assessment and analysis
should be carefully selected and calibrated
to ensure that important aspects of the local
economy are covered, and understood.
In the context of many developing
countries, for example, the role of the in-
formal economy is so crucial, its inclusion
is a must. Like all planning exercises, stra-
tegic planning is worthless unless translat-
ed to implementation. The LED process is
meant to be action oriented. Often there
is “hanging-fruit” to be reaped with less
challenging or controversial interventions,
and these could provide a stepping stone to
move to the more complex and demanding
ones as well as providing the necessary vis-
ible results to keep stakeholders and citi-
zens engaged.
There are significant economic develop-
ment opportunities to be gained by cutting
red tape, removing barriers to business and
the informal sector and creating account-
able and transparent governance structure,
and generally by addressing market and
government failures.
Creating this business-enabling envi-
ronment is as important for local entrepre-
neurs as it is for outside investors. The LED
strategic planning from this perspective is
both a framework and catalyst for action.
Ultimately, the measure of success in LED
revolves around focus, innovation, and im-
plementation, and its impact on the lives
of the citizens, including the poor and the
marginalized.
10 FORUM Habitat Debate March 2007

Microfinance for the world’s poorest people

The world’s urban population is expected to increase dramatically by over 800 million households
between 2005 and 2030. In effect, this implies an average daily increase of 100,000 households in urban
areas. This article was prepared on the basis of UN-HABITAT’s 2005 Global Report on Human Settlements
entitled ‘Financing Urban Shelter’.

C ities around the world, especially

those in developing countries where
the bulk of urban growth will occur in
coming decades, are faced with the un-
precedented challenge of providing ade-
quate shelter for their inhabitants.
Shelter has become a commodity for
increasing numbers of low income ur-
ban households, especially those in urban
areas of developing countries. Yet these
households, which rely mainly on income
from the informal economy, cannot bor-
row money easily from the formal financial
sector. This remains a key obstacle to the
improvement of shelter conditions and ul-
timately poverty reduction in urban areas.
Low income households are not an at-
tractive clientele for formal sector institu-
tions that provide shelter finance primarily
because they have limited assets and can
only build their homes in stages.
Indeed, an estimated 70 percent of
housing investment in developing coun-
tries occurs through such progressive build-
ing. Yet, incremental shelter investment is
not favoured by formal finance institutions
due to the risks associated with the build-
ing processes.
The formal financial institutions do not
make a profit out of low income house-
holds, which in turn do not have the collat-
eral required to get a loan. Thus, a majority
of low income households finance their
shelter investments through their own sav-
ings or informal credit from various sources
(relatives, friends, money lenders).
The realisation that hundreds of millions of
low income urban households remain largely
excluded from borrowing, has therefore led to
the exploration of innovative finance mecha-
nisms. In particular, shelter microfinance and
community funds have grown considerably
in recent decades, through multiple explora-
tions and innovations predominantly in Asia
and Latin America.
Shelter microfinance programmes pro-
vide small-scale lending to individuals for
housing investments (constructions, im-
provements and extensions). Community
funds are provided by institutions to groups
or community organisations for collective
housing construction or development of
land, infrastructure or services.
Both approaches are better designed to
help poor urban households address their
shelter needs because they involve small-
scale lending suitable to incremental shelter
investment strategies common among low
income households.
There is also a growing trend of combin-
ing loan provision through shelter micro-
finance and community fund programmes
with more comprehensive neighbour-
hood improvement and poverty reduction
initiatives such as settlement upgrading
(infrastructure and services), land develop-
ment and enterprise lending. Community
funds are particularly appropriate for slum
upgrading.
However, in their efforts to target low
income households, both approaches are
faced with two particular challenges. The
first involves the risk of excluding the poor-
est households from being able to get loans.
Shelter microfinance programmes often
target the higher income urban poor such
as those with formal employment or diver-
sified livelihood strategies. In the case of
community fund mechanisms, the poor-
est households, most of which rely on daily
savings, may not be able to contribute to-
wards group or community savings, there-
by facing exclusion.
Tenants without secure tenure rights
and women are also at risk of being de-
nied loans through community funds.
Moreover, community funds require rela-
tively stable communities which may not
be the case for the poorest neighbourhoods
of many urban areas.
Institutions involved in shelter micro-
finance, for their part, also have difficulty
in securing sufficient loan capital, there-
by curbing their outreach. Longer loan re-
payment terms create greater term risk for
shelter microfinance providers. Shelter mi-
crofinance agencies also find it difficult to
set low interest rates and small loan sizes
that weigh the borrower’s demands against
their own financial needs. Similarly, com-
munity fund programmes often struggle to
secure subsidies from state funds, NGOs
and international development agencies,
without which they are unable to maintain
low interest rates.
Despite this, shelter microfinance and
community funds strategies flourish and
more agencies are becoming involved, in-
cluding municipal and central government
agencies as well as private sector agencies
not previously engaged.
There is an urgent need to increase the
scale of operations of shelter microfinance
and community fund operations. Scale
and sustainability can be realised through
concerted efforts of financial institutions,
governments and donors. It is particularly
important that governments encourage the
expansion of microfinance and communi-
ty fund lending for shelter investments by
creating the necessary legal and regulatory
environment.

Poverty reduction strategy papers

While the dire shortage of affordable housing has been recognized internationally as a deep and pervasive problem, strat-
egies to address this have not been thoroughly addressed in existing mechanisms, such as poverty reduction strategy pa-
pers (PRSPs).These are documents that the International Monetary Fund (IMF) and the World Bank require from national
governments detailing their plans to reduce poverty in order to qualify for debt relief under the Heavily Indebted Poor
Countries (HIPC) initiative. Out of the 54 countries with PRSPs or interim PRSPs, many of them address housing, but with
varying degrees of commitment or specificity with regard to resource requirements. Many of the PRSPs discuss housing
as a problem and some have conducted surveys to identify housing needs more exactly. Some countries propose build-
ing a few hundred or few thousand units, while others propose public–private partnerships and land reform measures.
However, it is disappointing that many do not include clear measurable goals or budget information.

Home-financing in Africa
One of Africa’s biggest challenges is home delivery. But except for South Africa, Ghana and a handful of
East African countries, Cas Coovadia, Managing Director of the Banking Association of South Africa,
says the home-financing sector in the rest of Africa remains in its infancy. In an article first published in
The Banker, he highlights the good examples set by those countries leading the way.
T he African continent, particularly
sub-Saharan Africa, is characterised
by the enormous differentiation in the
economies of South Africa and the rest
of the continent. This is also evident in
the housing market and developments
in housing finance and delivery.
The housing market is very well de-
veloped in South Africa, despite severe
challenges in the low-income housing
market.
However, the market is not well de-
veloped in most other parts of Africa,
with the exception of Ghana where
there is a developing mortgage mar-
ket. Other parts of Africa are still de-
veloping policies and mechanisms for
housing delivery, with a virtually non-
existent mortgage market.
The South African government is
also very active in housing delivery and
has developed a mass of policies to en-
able particularly low-income housing
delivery.
South Africa
The mortgage market in South Africa
is dominated by the banking sector,
which is responsible for more than 90
percent of mortgage lending. Mortgage
advances in South Africa grew by 29.6
percent year-on-year in September
2006. The total of mortgage advanc-
es as at September 2006 was R640.4bn
($91.5bn). The critical challenge for
South Africa is the existence of a dual
market.
The bulk of the mortgage advances
are in a very well developed middle to
upper income market. A significant part
of the population is in the lower-income
market, and this sector experiences chal-
lenges in housing delivery.
The critical challenge is for those in
the monthly income category between
R1,500 and R7,900. There are issues
of affordability, supply and product in
this market. Construction costs have in-
creased significantly in South Africa, as
in most parts of the world, and this is ex-
acerbated by severe holding costs for de-
velopers as a result of delays at municipal
level in the processing of registrations
and provision of bulk infrastructure.
Habitat Debate March 2007
OPINION
The affordability issue is critical in a
context of rising interest rates. A house-
hold earning R3,500 per month only
has a cushion of about R120 after basic
household costs. A 2 percent increase in
rates would make the mortgage payment
unaffordable. The prohibitive holding
costs have resulted in developers exiting
the low-income housing market, thus
leading to a lack of supply.
The country needs about 160,000
houses in the low-income market per
year to make an impact on the back-
log, but is constructing about 19,000
per year.
These are some of the challenges that
South Africa faces.
However, there is a very healthy en-
gagement between government, its
agencies and the banking sector to try
to address these challenges. The South
African government has been exem-
plary in its efforts to raise the issue of
low-income housing to the top of the
agenda in the country. The government
has instituted a capital subsidy scheme
that has benefited 2.9 million benefi-
ciaries since 1994.
Subsidy-linked housing delivery has
reached about 2.2 million people since
1994. The government is also engag-
ing the banking sector to develop risk
mitigation and sharing mechanisms to
enable the sector to lend to lower in-
come people. The banking sector and
government are also engaging the con-
struction sector to begin to address the
supply issues. And the banking sector
is engaging municipal government to
address the capacity constraints in that
level of government on land registra-
tion, bulk infrastructure and other rel-
evant matters.
The banking sector has been active
in the area of low-income housing. It
has done mortgage lending of about
R17bn in the 2005 calendar year to
the R1,500- R7,500 per month income
category.
The South African government es-
tablished a wholesale financing facili-
ty called the National Housing Finance
Corporation in 1996. Its mandate is
to provide wholesale finance to retail
11
housing intermediaries servicing the
low-income market. The coporation
has approved R2.3bn in finance and has
disbursed about R1.9bn since its incep-
tion. This has resulted in 1.1 million
people getting access to shelter.
The South African government
also established an initiative called the
People’s Housing Process. It brings peo-
ple together in groups and enhances
the government subsidy by organising
people to contribute “sweat equity” by
building their own homes.
There are significant developments
in inner city housing development in
South Africa. The government has in-
troduced an Urban Development Zone
tax incentive scheme. About 100 com-
panies have registered to access it, with
a total investment in inner city regener-
ation, particularly in housing, of about
R1.5bn.
East Africa
A current initiative in East Africa is
an example of the positive results of re-
gional cooperation on the continent.
Kenya, Uganda and Tanzania have co-
operated to undertake a major housing
project to address a shortfall of about
3.8 million units in the region.
The 20-year project will eventual-
ly lead to the development of about
28 million units. The East African
Development Bank (EADB) is expect-
ed to raise $120m in the next two years
for the project. It will expect the three
countries to raise $20m each in the next
two years for seed capital. The balance
will be raised from the private sector in
the region and offshore investors will be
invited to subscribe to half of the cap-
ital needs.
The East African Development Bank
estimates the region will need to invest
some $12bn over the next 20 years to
keep pace with demand. The project is
a good start to meeting this need and
will go some way towards addressing
the severe problems of informal settle-
ments in the region.
12 SPECIAL REPORT Habitat Debate March 2007

Financing for urban development in the Asia-Pacific

World Development Indicators show that East Asia and the Pacific, and the South Asia sub-regions
account for 864 and 1,064 million people, respectively, living on less than $2 a day. This article is derived
from a special paper prepared for first Asia-Pacific Ministerial Conference on Housing and Urban
Development (APMCHUD) 13-16 December, 2006, in New Delhi by experts of UN-HABITAT’s Human
Settlements Financing Division.

A large proportion of the popula-

tion in Asian countries is vulnera-
ble to internal and external economic
shocks such as the Asian financial crisis
of 1997. In addition, widening income
inequalities are likely to create social un-
rest, which need to be addressed with-
out delay.
Based on lessons from 1997 and
buoyed by the sustained econom-
ic growth, many governments in the re-
gion are building social safety nets, and
undertaking massive urban investments.
Similarly, the private sector is making an
attempt to create business solutions that
provide affordable services to the urban
poor. The conditions for improving the
quality of life for the majority of the poor
by the 2020 Millennium Development
Goals deadline set by world leaders are
positive, if urgent action is taken.
Civil Society more demanding
Today many believe it is their right to
demand a better quality of life. Given the
structure of the economies of the coun-
tries in the region and integration with
world markets, Asian cities will have to
be competitive on a global scale both in
terms of quality and cost efficiency of ur-
ban management. There is also signifi-
cant pressure to create Asian world class
cities. This augurs well for creating sus-
tainable urban centres.
Community mobilisation
Community and civil society move-
ments in the region are relatively strong,
and slowly gaining ground as a result of
efforts by NGOs such as Slum Dwellers
International and the Asian Coalition of
Human Rights. The community-led de-
velopment processes are being promot-
ed by many countries such as Thailand,
the Philippines, Sri Lanka, India,
Pakistan, Nepal, Cambodia, Indonesia,
etc. However, in many other countries,
community movements and community-
led development processes are weak. This
must change.
The region is also very strong in co-
operative movements as well as having a
savings culture. Many governments have
encouraged community mobilisation,
savings and cooperative movements. The
Philippines, Thailand, Cambodia, Sri
Lanka, India, and Indonesia, to cite some,
have developed pro-poor urban develop-
ment strategies. This is a vital strength for
many countries in the region.
Bankability of Cities
Since the early 1990s, political decen-
tralisation has gradually gained ground in
the Asia-Pacific, and is relatively strong
in China, The Philippines, Indonesia and
India. However, with few exceptions,
many of the cities in the region manifest
the paradox of rich citizens and poor city
governments. City governments do not
have the financial strength to meet the
requirements of even moderate invest-
ments in services.
The institutional arrangements for ser-
vice delivery are also fragmented – most
of the local services are provided by na-
tional level or parastatal utilities - depriv-
ing the city governments a role in service
delivery. Slum prevention requires that
cities are equipped to plan and finance
land development and service delivery
that is affordable and efficient.
Despite this, many cities in China are
creating world class infrastructure to pro-
mote economic growth. Similarly, coun-
tries such as India, The Philippines and
Indonesia have supported local gov-
ernment reforms related to better ac-
countability, creditworthiness and own
revenues. They are also introducing in-
centive funds to promote reforms, stream-
lining of inter-governmental transfers,
encouraging market based investments,
and, creating of municipal bond mar-
kets. Many countries also initiated e-gov-
ernance reforms to improve the quality of
governance – thus helping to create value
for money in public finance and helping
to improve quality of service delivery.
Housing Finance Systems
Housing remains one of the most
pressing issues in the Asia-Pacific. A lack
of infrastructure and long commuting
distances exacerbate the problems. Public
transport systems remain one of least de-
veloped infrastructure systems in many

Enhanced fiscal capacity of local governments is the capacity to do development work at a large scale. It is essential that
cities are made to work for all citizens –equitably and efficiently. There are several actions important in the immediate
phase that include:

n Fiscal decentralisation aimed at improving own revenue base of cities;

n Promoting land based revenue measures such as impact fees and valorisation charges to finance major infrastruc-
ture such as public transport;
n Empowering cities to undertake land development with a pro-poor focus;
n Enhancing the quantity and predictability of inter-governmental transfers, with special attention on output based
aid and incentives for reform;
n Promoting credit rating of local governments;
n Rule and market based municipal borrowing frameworks; and
n Promoting efficiency in public expenditure.
Source: UN-HABITAT
 Habitat Debate March 2007 SPECIAL REPORT 13

of the cities in the developing countries
leading to very high commuting costs.
In Asia, according to UN-HABITAT’s
State of the World’s Cities 2006—7 re-
port, 73 per cent, of urban dwellers live
in non-permanent housing. Over half
of the world’s inadequate housing units
are located in Asia-Pacific – at roughly
500 million units. The housing sector is
also severely constrained by lack of ade-
quate and appropriate housing finance
systems. In fact, an Asian Development
Bank study says Asia’s mortgage sector is
the least developed in the world. In Asia,
many countries’ mortgage financing per
year is less than 2 per cent of GDP com-
pared to 88 per cent in the UK.
Despite this gloomy picture, the re-
gion also has excellent innovations in
terms of shelter finance practices includ-
ing through shelter microfinance and
community funds.
Other Financial Services
The financial sector in the region is
comparatively well developed and in-
tegrated intra-region wise and globally.
Many countries have liberalized the fi-
nancial markets. The financial sector in
countries such as China, South Korea,
Malaysia, Singapore, India and Indonesia
are thriving. The stock markets in many
of the countries are large and well devel-
oped. The region is also experiencing sig-
nificant growth of the Islamic banking
system.
On the downside, many countries in
the region have nascent and weak finan-
cial markets. The participation of finan-
cial markets in financing housing and
urban infrastructure has been limited
in many of the developing countries of
the region. Similarly, the majority of the
low-income households are also exclud-
ed from the formal financial services in-
dustry – although efforts are being made
to develop systems that provide finan-
cial services for the poor. And, the State
remains the main provider of shelter fi-
nance in several Asian countries, such as
The Philippines and Bangladesh.
For the last 30 years, and thanks in no
small measure to Muhammad Yunus, the
Bangladeshi banker and Nobel laureate,
Bangladesh leads the way in creating fi-
nancial products for the poor. The pen-
etration of microfinance into the shelter
finance sector is significant in many of
the developing countries of the region.
Significant efforts are underway to in-
tegrate the informal (including microfi-
nance) markets with formal ones in many
of the countries in the region.
Innovations in capital markets – both
formal and informal – present tremen-
dous opportunities for introducing fi-
nancial instruments for sustainable
urbanization.
Urban development
Very few countries (with the exception
of developed and emerging economies in
the region) have housing and urban sec-
tor policies for adequate, affordable shel-
ter, including related infrastructure. Land
ownership and titling is complex and ex-
pensive. There are limited subsidies avail-
able for housing and infrastructure. The
urban sector does not feature highly in
many of the national programmes and
strategies. There is need for a better fo-
cus on housing and urban development
in several countries of the region.
Donor support
In general, bi-lateral donors (from
within and outside the region) and multi-
lateral banks have supported urban devel-
opment in many developing countries of
the region substantially during last three
decades. Yet, aid flows to countries ac-
count for small proportion of their GDP.
The Asia 2015 Conference strongly sup-
ported the increasing development as-
sistance flows. The conference also
recognised the need for strong technical
assistance in deepening development in
Asia. Future aid is likely to flow to lowest
income countries in the region.
Recommendations
There is a tremendous scope for cross-
learning across the countries of the
region. However, many developing coun-
tries in the region are also extremely im-
poverished. Unless and until structural
and fundamental changes in financing are
initiated and sustained, the Millennium
Development Goals will remain a dream
in many of these countries. It is not just
a question of initiating few measures, but
also a matter of implementing decisions
and sustaining them over a long period
of time.
History has demonstrated that
the success of slum upgrading initia-
tives is greatest when community-driv-
en. Community movements are gaining
ground in the Asia-Pacific region. The en-
ergy of the communities needs to be har-
nessed to undertake slum upgrading and
slum prevention. It is also necessary to
promote business solutions that provide
services to households at the bottom of
the pyramid.
Given the innovations and improved
economic growth in the region, there is
significant scope for deepening of the
housing finance markets and financial
services industry, especially for low-to-
middle income households in many of
the developing countries of the region.

Key innovations:

n Promoting affordable housing through provision of service delivery, competitive market development, private sec-
tor involvement and cost reduction measures;
n Improved land use planning as well as provision of affordable and adequate public transport systems;
n Introduction of smart subsidies for the needy;
n Establishment of special purpose vehicles for intermediating market based housing finance and for improving the
management of housing stock;
n Introduction of credit bureaus, foreclosure laws, etc;
n Establishment of mortgage insurance, credit guarantee facilities and securitisation mechanisms;
n Facilitating long term funds for housing and infrastructure;
n Deepening of life and non-life insurance products; and
n Promoting universal access to comprehensive financial services.
Source: UN-HABITAT
14 Habitat Debate March 2007
OPINION

Economic growth, rapid urbanisation and poverty

In today’s fast developing and urbanising world, cities are integral contributors to economic growth.
But says Kumari Selja, India’s Minister of State for Housing and Urban poverty Alleviation, we are
also witnessing the negative consequences of this urbanisation such as slum growth, housing and civic
infrastructure shortfalls. Here in a summary of remarks to the first Asia-Pacific Ministerial Conference on
Housing and Urban Development she warns of the consequences of rising poverty.

T he Asia-Pacific region is ex-

periencing the triple dy-
namics of economic growth,
First, the traditional sys-
tem of Master Planning of cit-
ies based on the Western model
rapid urbanisation and poverty. of segregation of residential uses
It accounts for 34 percent of the from commercial and institu-
global urban population and is tional uses has led to social ex-
also home to over 40 percent of clusion and unequal growth.
the slum populations. There has been little planning in
Some major challenges of ur- this system for the informal sec-
banization and economic growth tor including vendors, hawkers,
in this region are the growing ur- construction workers and other
ban-urban divide, deteriorat- vulnerable groups in cities. The
ing inner cities, unplanned and Master Plans must be made in-
haphazard settlements, insuffi- clusive with provision of ade-
cient urban infrastructure and quate space for housing the poor
basic services. The list also in- and informal sector activities.
cludes land and housing shortag- The author, Kumari Selja, with Mrs. Tibaijuka, and President Abdul Kalam of Second, urban growth,
es, environmental degradation, India at the first Asia-Pacific Ministerial Conference on Housing and Urban mounting poverty, population
Development in Delhi in December 2006. Photo: © UN-Habitat/N.Kihara
mounting poverty, unemploy- concentration, and unplanned
ment and social exclusion. spatial activities have exacerbated
These problems have to be confronted Renewal Mission to address the problems the complexities of urban administration.
by effective planning, appropriate strate- of slums and civic amenities in an inte- There is lack of institutional and mana-
gies, action plans and a paradigm of good grated manner and has allocated US$12.5 gerial capacities in implementing poverty
governance. This will include strategic vi- billion for institutional financing. alleviation and slum upgrading in urban
sion, consensus orientation, the rule of Considering that reforms in cities are civic bodies. City Governments should be
law, participation, equity, efficiency, effec- critical for sustainable urban develop- enabled to have the capacities and skills
tiveness, transparency and accountability. ment, the Mission aims to bring about to administer service outsourcing, public-
India with its initiatives and economic mandatory reforms both at State and city private partnerships for infrastructure de-
reforms has been able to achieve a growth levels to improve urban governance. velopment, effective services delivery and
rate of 8 percent per annum in the last few The repeal of the Urban Land Ceiling poverty alleviation programmes.
years and is now aiming a growth rate of 9 Act, the Rationalization of Stamp Duty, Lastly, we must accept inclusion of the
per cent in the next five years. Amendment to Rent Control Act, Property poor as the core in all urban policies and
India has 286 million people living Tax Reforms, Disclosure laws, and GIS programmes. My Ministry has been em-
in over 5,000 cities and towns. Over 40 mapping are some of the major reforms. phasizing the need for inclusive zoning,
percent of them live in 60 metropolitan We now have Seven Basic Services to the inclusive planning and inclusive cities and
urban agglomerations. There are 61.7 Poor – Land Tenure, Affordable Shelter, municipalities. I would urge this region to
million urban people living in slums and Water, Sanitation, Education, Health and make inclusion the dominant paradigm in
squatter settlements today. It is projected Social. The Mission is a fast-track, de- all our programmes.
that the urban population of the country mand-driven, participatory urban plan- India would be glad to support a
will grow to 468 million by 2020. This ning and implementation mechanism. “Forum for Inclusive Cities”, which could
will have a serious impact on housing, The central Government will give at- be a think tank – a bank of best practic-
civic infrastructure, basic amenities and tention to planning for sustainable cities es in inclusive civic development and an
employment. and devising macro-economic policies so agent of change for pro-poor governance
Conscious of the issues of slums and that resources can flow to the housing and and service delivery in cities.
poverty, the United Progressive Alliance civic infrastructure sectors. Government The new Asia-Pacific conference is
(UPA) Government in India through the will also provide a more supportive en- unique because it provides a platform for
National Common Minimum Programme vironment to Street Vendors through a advancing the Habitat Agenda. It ena-
(NCMP) has committed itself to a com- comprehensive policy and a model Act. bles Asia-Pacific countries to speak with
prehensive approach to urban renewal However, there are three areas where one voice during regional and interna-
with emphasis on social housing, inclusive critical intervention is required for pro- tional meetings like World Urban Forum,
city growth, slum upgrading and devel- moting sustainable human settlements the UN¬-HABITAT Governing Council
opment. The Government has launched and sustainable cities in the Asia-Pacific and meetings of the Commission on
the Jawaharlal Nehru National Urban region: Sustainable Development.

A Nobel Laureate explains...
The Norwegian Nobel Committee awarded the 2005 Nobel Peace Prize to Muhammad Yunus and his
Grameen Bank citing their efforts to create economic and social development from below. Lasting peace
cannot be achieved unless large population groups find ways in which to break out of poverty, it said. One
way to do this is through micro-financing. This excerpt of his acceptance speech is reproduced with the
kind permission of the Nobel Foundation.
B y giving us this prize, the Norwegian
Nobel Committee has given impor-
tant support to the proposition that peace
is inextricably linked to poverty. Poverty is
a threat to peace.
The World’s income distribution gives
a very telling story. Ninety-four percent of
the world income goes to 40 percent of the
population while sixty percent of people
live on only 6 per cent of world income.
Half of the world population lives on two
dollars a day. Over one billion people live
on less than a dollar a day. This is no for-
mula for peace.
The new millennium began with a
great global dream. World leaders gathered
at the United Nations in 2000 and adopt-
ed, among others, a historic goal to reduce
poverty by half by 2015. Never in human
history had such a bold goal been adopted
by the entire world in one voice, one that
specified time and size.
Poverty is the denial of all human
rights
Peace should be understood in a human
way − in a broad social, political and eco-
nomic way. Peace is threatened by unjust
economic, social and political order, ab-
sence of democracy, environmental degra-
dation and absence of human rights.
Poverty is the absence of all human rights.
The frustrations, hostility and anger gener-
ated by abject poverty cannot sustain peace
in any society. For building stable peace we
must find ways to provide opportunities for
people to live decent lives.
The creation of opportunities for the ma-
jority of people − the poor − is at the heart of
the work that we have dedicated ourselves to
during the past 30 years.
Grameen Bank
I became involved because poverty was all
around me, and I could not turn away from
it. In 1974, I found it difficult to teach ele-
gant theories of economics in the university
classroom, in the backdrop of a terrible fam-
ine in Bangladesh. Suddenly, I felt the empti-
ness of those theories in the face of crushing
hunger and poverty. I wanted to do some-
thing immediate to help people around me,
even if it was just one human being, to get
Habitat Debate March 2007
OPINION
Beggars Can Turn to Business
''In Bangladesh 80 percent of the poor
families have already been reached with
microcredit. We are hoping that by 2010,
100 per cent of the poor families will be
reached. Three years ago we started an
exclusive programme focusing on the beggars.
None of Grameen Bank’s rules apply to them.
Loans are interest-free; they can pay whatever
amount they wish, whenever they wish. We
gave them the idea to carry small merchandise
such as snacks, toys or household items, when
they went from house to house for begging.
The idea worked. There are now 85,000
beggars in the program. About 5,000 of them
have already stopped begging completely.
Typical loan to a beggar is $12. We encourage
and support every conceivable intervention to
help the poor fight out of poverty. We always
advocate microcredit in addition to all other
interventions, arguing that microcredit makes
those interventions work better."
– M. Yunus
through another day with a little more ease.
That brought me face to face with poor peo-
ple’s struggle to find the tiniest amounts of
money to support their efforts to eke out a
living. I was shocked to discover a woman in
the village, borrowing less than a dollar from
the money-lender, on the condition that he
would have the exclusive right to buy all she
produces at the price he decides. This, to me,
was a way of recruiting slave labor.
I decided to make a list of the victims of
this money-lending “business” in the village
next door to our campus.
When my list was done, it had the names
of 42 victims who borrowed a total amount
of US $27. I offered US $27 from my own
pocket to get these victims out of the clutch-
es of those money-lenders. The excitement
that was created among the people by this
small action got me further involved in it. If
I could make so many people so happy with
such a tiny amount of money, why not do
more of it?
15
That is what I have been trying to do
ever since. The first thing I did was to try to
persuade the bank located in the campus to
lend money to the poor. But that did not
work. The bank said that the poor were not
creditworthy. After all my efforts, over sev-
eral months, failed I offered to become a
guarantor for the loans to the poor. I was
stunned by the result. The poor paid back
their loans, on time, every time! But still
I kept confronting difficulties in expand-
ing the programme through the existing
banks. That was when I decided to create a
separate bank for the poor, and in 1983, I
finally succeeded in doing that. I named it
Grameen Bank or Village bank.
Today, Grameen Bank gives loans to
nearly 7 million poor people, 97 percent
of whom are women, in 73,000 villages
in Bangladesh. Grameen Bank gives col-
lateral-free income generating, housing,
student and micro-enterprise loans to the
poor families and offers a host of attractive
savings, pension funds and insurance prod-
ucts for its members. Since it introduced
them in 1984, housing loans have been
used to construct 640,000 houses. The le-
gal ownership of these houses belongs to
the women themselves. We focused on
women because we found giving loans to
women always brought more benefits to the
family.
In a cumulative way the bank has giv-
en out loans totaling about US $6 bil-
lion. The repayment rate is 99%. Grameen
Bank routinely makes profit. Financially, it
is self-reliant and has not taken donor mon-
ey since 1995. Deposits and own resourc-
es of Grameen Bank today amount to 143
percent of all outstanding loans. According
to Grameen Bank’s internal survey, 58 per-
cent of our borrowers have crossed the pov-
erty line.
Grameen Bank was born as a tiny home-
grown project run with the help of several of
my students, all local girls and boys. Three of
these students are still with me in Grameen
Bank, after all these years, as its topmost ex-
ecutives. This idea, which began in Jobra,
a small village in Bangladesh, has spread
around the world and there are now Grameen
type programmes in almost every country.
-- © THE NOBEL FOUNDATION 2006
16 CASE STUDY Habitat Debate March 2007
The municipal finance system in Germany
Looking at ways to improve municipal finance systems and governance in cooperation with partner
countries is difficult enough. Christian Schlosser of UN-HABITAT’s Human Settlements Financing
Division looks at lessons from Germany.
M unicipal finance is a key factor for
infrastructure and housing provi-
sion. While national governments set the
general policy framework with economic
and fiscal policies and regulations of the
financial sector, the primary responsibility
of local governments is to invest in road,
water and sewer infrastructure and land
management. Consequently, the ability of
municipalities to raise revenue and man-
age resources is central for enabling hous-
ing investment and service delivery.
Reflecting their long political his-
tory, German municipalities have a
strong constitutional status within the
three-tier administrative system of the
Federal Republic. Vis-a-vis the Federal
States and the Federal Government
they have the right to take on the re-
sponsibility for organizing their own
local affairs.
The home guarantee rule defines
a foundation of financial self-gover-
nance, which includes the right for local
authorities to set their own budgets and
to control a local, business-based tax
source. Yet Local Authorities, bound
by federal and state laws, are not com-
pletely independent in running their
own affairs. The Federal states exert fi-
nancial oversight over municipalities to
ensure their actions are in line with the
rules of local government legislation.
With jurisdiction over water sup-
ply and sewage, waste disposal, local
roads maintenance, local welfare and
health services as well as construction
and maintenance of primary and sec-
ondary schools, municipalities are the
public entity with the highest level of
investments. Although their share at
all government expenditure was only
22 percent or 153 billion euros in
2005, representing 7 percent of GDP,
they undertake nearly two-thirds of all
public capital investments. In total,
Local Governments invested 19 billion
euros with 14 billion euros spent on
construction.
A look at the most important sourc-
es of revenue highlights the strong inte-
gration of German municipalities into
the national public finance system. Due
to a high level of revenue sharing and
redistribution between different levels
and units of government, local revenue
comes from a variety of sources.
Overall, Local Authorities received
151 billion euros in 2005, represent-
ing 24 percent of the total income of
all three government levels. Out of to-
tal tax revenue of 54 billion euros, the
biggest source is local business tax with
23 billion, followed by 18 billion euros
from a 15 percent share of the nation-
al income tax (states and federal gov-
ernment 42.5 percent each). Their 2.2
percent share of the nationally collect-
ed VAT equals 3 billion euros. The local
property tax – being much less prom-
inent compared to many other coun-
tries – contributed 9 billion euros. Fees
and rates, with two-thirds from water
and solid waste disposal, returned 16
billion euros, and commercial activities
9 billion.
The most important single source,
however, are grants from higher gov-
ernment levels with 49 billion euros.
Most important elements are formu-
la grants under the municipal finan-
cial equalization scheme, amounting to
21 billion euros and state investment
grants contributing 8 billion.
In addition to tax-revenue shar-
ing mechanisms, there are arrange-
ments that mitigate fiscal inequalities
between jurisdictions. Through “ver-
tical financial equalization”, the state
and federal levels provide grants to
municipalities based on their finan-
cial capacity in previous years. In ad-
dition, horizontal transfers equalize tax
differentials between different munici-
palities to reduce the income disparity
within each state.
Besides general transfers there are
established mechanisms for designat-
ed grants from higher levels of gov-
ernments for local infrastructure and
urban renewal. For instance, under
the Municipal Transportation Finance
Act Local Authorities receive up to
75 percent support for transport in-
frastructure. The Urban Development
Programme, a joint federal-state pro-
gramme in existence since 1971, sup-
ports municipal urban renewal projects
(currently about 1.3 billion euros per
year. An important complementary el-
ement for financing local infrastructure
is legal provision enabling municipali-
ties to recoup significant parts of these
expenditures from property owners.
Usually up to 90 percent of the costs
can be recovered.
However, although the German mu-
nicipal finance system enabled steady
and predictable resources for local gov-
ernments, there are also several critical
challenges. In particular, municipalities
voice concern about the rising num-
ber of unfunded mandates imposed on
them by higher spheres of government.
In the face of rising debt and manda-
tory spending for social services, par-
ticularly in East and North German
municipalities, investment levels have
declined substantially in recent years.
Representatives of cities and towns
also criticize the constraints of the in-
terlinked public finance system and
difficulties in implementing changes.
Challenges also arise from the financ-
ing required to maintain infrastructure
and public buildings, the estimated
backlog of which is close to 700 billion
euros. Finally, there are also fiscal chal-
lenges resulting from German reuni-
fication. In 2005, grants contributed
74 percent of all local revenues in East
Germany while in West Germany this
amounted to only 52 percent.
Overall, the German experience
shows that even in wealthier coun-
tries with a high degree of devolution
of powers, municipalities are still in
need of dedicated transfers and assis-
tance for infrastructure provision and
urban renewal from higher spheres of
government.
Applying such models could be ben-
eficial in countries where municipalities
have a weak financial base. Such mech-
anisms would also overcome inequali-
ties resulting from uneven economic
development in different geographi-
cal areas. However, attention should be
given to models that do not discour-
age local initiative and maintain local
autonomy.
 Habitat Debate March 2007 CASE STUDY 17

Financing in action - the Jamii Bora Trust Kenya

The Jamii Bora Trust is a registered charitable Trust established in 1999 at the initiative of 50 street beggar
families in Nairobi, Kenya. In this article, the entrepreneur and social investor, Kibi Kariithi explains
how it works as a microfiance organization and how by the end of June last year, it also had drawn 120,000
members with operations in 61 branches.

M any members are beggars or ex-

street beggars, so no-one is too poor
to join Jamii Bora. Some members are on
members can borrow for their housing or
children’s school fees on similar repayment
conditions.
$3,750,000. Half of the cost of infrastruc-
ture will be charged to the residential area
and half to the commercial and industrial
their way out of poverty, a few would even To help members realise their dream of area. The members will receive loans from
say they are not poor any more. They are better homes the trust purchased 293 acres Jamii Bora with 8.5%-10% interest for a
now the mentors of those who are still very of prime land in Kisaju, Kajiado District 10-15 year repayment. Thus members will
poor. Mentor members help a lot by be- south of Nairobi for a new, planned settle- be able to live in a modern 3-room house at
ing an example. They are living proof that ment, known as Kaputei Town. The town a cost of only $32 per month – the first of
however poor you are, you can get out of being planned is expected to house some its kind in Kenya. The members in Kaputei
poverty if you are determined enough. 2,000 families. town will be organised in neighbourhood
Claris Adhiambo, a Nairobi beggar for Kaputei will be a green town rich with management associations to develop and
many years, is a proud member of Jamii trees for beauty, wind protection and in- maintain their neighbourhood facilities and
Bora. She started her first steps out of the come earning from wood sales. Constructed open spaces, parks and play grounds.
streets frying fish and chips for workers who wetlands will recycle wastewater and beauti- The town will have a Town Management
needed an inexpensive lunch. Although her fy the town at the same time. Jamii Bora will Board with representatives of all neighbour-
income was roughly the same as what she construct the three model homes for on-site hood associations and reporting to Jamii
made as beggar, she regained her dignity and demonstration. Bora Trust. The Trust will cover its cost for
self-confidence. As her business grew, she was The total cost of the 2,000 hous- maintenance through monthly fees and
able to take larger loans. Today Claris has a es is $3,750,000 and the infrastructure charges of USD 6 from the homeowners.
wholesale business selling fish in Nairobi’s
Gikomba which serves many shops, hotels
and restaurants. She has inspired others to
join the trust and get out of poverty.
Another exemplary mentor is Beatrice
Ngendo, a single grandmother who lives
with her 12 grandchildren in Mathare Valley,
the second largest slum in Nairobi. Her chil-
dren and their spouses have died from AIDS.
Now the grandchildren only have her to care
for them. She joined the Jamii Bora in 2000
and today operates three successful business-
es – a grocery store, butchery, a restaurant
and a stone house which allows her to rent
out rooms. Her grand children are in school
and the oldest has just graduated as a qual-
ified nurse and has joined the staff in Jamii
Bora’s out patient clinic in Mathare.
Jamii Bora Finance, the main arm of the
trust, offers members savings accounts and
the right to borrow double their savings. It
offers loans for micro business, school fees,
and housing. The loans, ranging from two
to 1,000 dollars, are offered to members The
borrower pays 0.5% flat interest per week.
The loan must be repaid within 50 weeks.
The borrower decides the number of
weeks they wish to keep the loan and many
borrowers choose to repay the loan in 3-5
months, some will clear their loans in just a
few weeks. It also offers larger business loans
USD 1,000 and 10,000. Interest is paid
at 0.5% per week on a declining loan bal-
ance. The loan must be repaid within two
years. After one successful business loan, Employment no matter how humble is always better than begging.
Photo: Hiroshi Sato© UN-Habitat
 18 Best Practices Habitat Debate March 2007
The Community Led-Infrastructure Facility (CLIFF)
The Community-led Infrastructure Financing Facility
(CLIFF) is an urban poor fund designed to act as a catalyst in
slum upgrading through providing strategic support for com-
munity-initiated housing and infrastructure projects that have
the potential for scaling up. The overall goal is to reduce urban
poverty by increasing the access of poor urban communities to
commercial and public-sector finance for medium- to large-scale
infrastructure and housing initiatives. The facility is funded by
Department for International Development (DfID) of the United
Kingdom, Swedish International Development Aid (SIDA), and
Homeless International and co-ordinated internationally by the
latter. CLIFF offers a number of financial products including:
n Technical Assistance Grants - to cover costs such as profes-
sionals’ fees that are required to support communities in
implementing projects.
n Capital grants - to enable projects to begin and continue at
a pace unhindered by the timings of project cost recoveries.
As projects are completed loans are repaid and the capital is
recycled at the local level as loan finance to other projects.
n Knowledge Grants - to allow the learning from projects to
be shared with as many people as possible to help achieve
change beyond the project.
n Management Grants - to cover the related management costs
of the organisations implementing CLIFF.
The first initiative is in India with the Society for the
Promotion of Area Resource Centres (SPARC), the National
Slum Dwellers Federation (NSDF) and Mahila Milan. In 2006,
thirteen projects in India and five projects in Kenya were recipi-
ents of CLIFF loan finance.
These projects are expected to result in over 5,000 new safe
and secure homes and mean that an additional 1 million peo-
ple will have access to decent sanitation. Five banks are now
involved in providing £4.4 million in finance and municipal
guarantees for CLIFF supported projects and over 130,000
square metres of land have been allocated to the urban poor
from private and public sources. Government subsidies and
contracts worth nearly £5 million have also been mobilised so
both commercial and public agencies are beginning to become
effective partners of the urban poor.
Washing utensils in dangerously dirty water, Bangladesh, Photo © Suzi Mutter 2005
Municipal Development Fund, Tamil Nadu, India
The Tamil Nadu Urban Development Fund (TNUDF) was
launched in 1988 financed entirely by the public sector to re-
duce the massive backlog of infrastructure investment and im-
prove the delivery of basic urban services. However, it evolved
from a municipal trust fund to one established and managed
by the public and private sectors. In 1996, with the aim of
achieving managerial efficiency and attracting private capi-
tal for urban infrastructure, it was converted into an autono-
mous financial intermediary. Established as a trust fund with
private equity participation, it was the first public–private part-
nership in India that provided long-term municipal financing
for infrastructure without guarantees. Instead of merely chan-
nelling public funds, its purpose is to attract financing from
the private sector. It also manages a separate grant fund owned
by the state government to finance poverty alleviation projects.
The is making an important contribution to capital investment
needs for large, lumpy and non-revenue generating projects.
For many small local governments that are unable to access the
markets directly, the fund provides a pooling mechanism and
indirect access to the market, together with enhanced credit.
The fund is quite creative, launching new financial products
to tap the capital market for special purposes, such as the wa-
ter and sanitation
Government Financed Homeownership in Singapore
One of the most far-reaching systems of state intervention
in housing provision through direct construction is the case of
Singapore where 96 per cent of the households are living in
homeownership apartments. Following the transition to self
governance in 1959, the new government was committed to
improving housing, and it began during the early 1960s on a
relatively small scale by providing basic rental units for the poor
who were living in congested urban shop houses and as squat-
ters. The flats, built by the Housing and Development Board,
were let out at monthly rentals of between US$20–$40 and
were within the paying ability of 75 per cent of the working
population. In 1964, homeownership was introduced and flats
were sold on 99-year leases. Once the state allowed would-be
homeowners to use their savings in the Central Provident Fund
to help finance their purchase, the scheme took off. The fund
is a state-managed, tax-exempted compulsory social security
fund for all citizens to which employees and employers con-
tribute. The prices of the flats are subsidized so that they re-
main within the affordability of the majority population. By
2001/2002, an estimated 85 per cent of the 3.3 million popu-
lation in Singapore were living in Housing and Development
Board dwellings (96 percent of which are owned by their occu-
pants and 4 percent of which are rented).
Alternatives to relocation in Thailand
The experience of Thai urban poor groups has been that com-
munities cannot afford the costs of land purchase if they also
need to construct housing, even with the subsidized interest
rate that the Community Organization Development Institute
provides. During the mid-1990s prior to the financial crisis in
Thailand, groups did buy land. The first communities threat-
ened with eviction were eager to purchase land and resettle. In
these first housing schemes funded by the Urban Community
Development Office in Thailand (1992–1996), some 54 per
cent had previously been renting land and the remainder had
been squatters. The high prices meant they could only afford

plots outside the city centre. Even before the financial crisis,
some families struggled to secure their livelihood in these ar-
eas. Unable to find alternative sources of income, they contin-
ued with their existing work and managed either high transport
costs or renting minimal accommodation closer to their previ-
ous inner-city locations. Other savings groups learned about
these experiences through the community networks that had
been established.They realized that relocation was a difficult
strategy and that families would have been better remaining
in their existing locations. Now networks actively discourage
households from relocating. As the financial crisis came to an
end, the community networks developed alternatives. Rather
than lend money for relocation, they would work with commu-
nities threatened with eviction to strengthen their capacity to
negotiate with their landowners.The costs are lower and the lo-
cation is better with regard to income-earning opportunities.
Launching a housing microfinance product: Mibanco,
Peru
With 70,000 active borrowers, Mibanco in Peru is one of
the largest microfinance institutions in Latin America. The
organization started as an (NGO), but became a commercial
bank in 1998. The conversion into a deposit-taking institution
gave Mibanco the funding necessary to expand from micro-en-
terprise lending into other areas. During mid 2000, Mibanco
added a housing product, Micasa, in the form of a loan for im-
provement, expansion, subdivision, or rebuilding or replace-
ment of existing housing.
After 12 months of operation, Micasa had 3,000 clients,
with portfolio at risk greater than 30 days of 0.6 percent and
a return on loan portfolio of 7 to 9 percent. Loan size ranged
from US$250–$4000, and averaged US$916. Interest rates
were 50 to 70 per cent per annum. These rates are less than
those Mibanco charges on micro-enterprise loans. Loan peri-
ods were as much as up to 36 months; but most households
preferred loans of 6 to 12 months, and the average loan peri-
od was 11 months. Mibanco uses its analysis of repayment po-
tential and household assets to guarantee most loans. Mortgage
liens are sometimes taken, but only on larger loans (those above
US$4000) if the client already has clear legal title. In total,
mortgage liens secure only 7 percent of Mibanco’s home loans.
The housing loan product has strong profitability and demand,
and Mibanco expects such loans to represent half of its portfo-
lio over the coming years.
Shelter for the poorest and most
vulnerable in Chile
Hogar de Cristo is a non-governmental, non-
profit, Church institution. Its mission is to pro-
vide appropriate shelter to the poorest among
the poor, especially the helpless aged, the home-
less, the terminally ill and others who lack any
form of support, like abandoned children and
youth. It also seeks to generate awareness of the
extent of the problems of the poor to encourage
relief campaigns. Founded in Chile over 50 years
ago, and featuring many programmes to help
the poor, Viviendas Hogar de Cristo (VHC) has
grown into a major provider of wooden sectional
housing to the poor. Its Ecuadorian branch pro-
duces 100 dwellings daily from bamboo, which Kambi Moto, Haruma- Building Programme, Haruma 6, Kanya, Photo: © Suzi Mutter 2005
it grows in its own plantations. Seventy-seven
Habitat Debate March 2007 Best Practices 19
per cent of its beneficiaries have incomes of less than US$20
per month. About half are widows or female single parents.
The overall costs of the house are US$450; but there is a gov-
ernment subsidy of US$144 (US$4 per month for three years).
The client has to pay US$186 through payments of US$4–$5
per month. If they pay at the VHC office, the client can simul-
taneously receive medical attention and lunch for themselves
and their youngest children, subsidized by the government.
They can pay with their social welfare of US$11 per month
or with other income. Some are supported by VHC’s charita-
ble funds. Currently, VHC has 16,000 clients, of whom 80 per
cent pay every month; some even pay several months in ad-
vance. Only 1 to 2 per cent of clients are regarded as perma-
nent defaulters.
Remittances from the United States to Mexico
Cemex of Mexico is the world’s third largest cement produc-
er. Since 2002, Mexican residents in the US can buy cement
and other building materials directly in eight Cemex branches
in the US (a subsidiary called Construmex) and have the ma-
terials delivered directly to a chosen address in Mexico. Since it
began this service (early 2002 to October 2004), US$3 million
have been taken in construction sales. The company estimates
that the building materials needed for a two-bedroom house
costs about US$6,700.
Adding value: The uTshani Fund, South Africa
The uTshani Fund of the South African Homeless People’s
Federation was set up in 1994. From 1995 to 1999, the uTshani
Fund received substantial grant funding, including 10 million
rand (US$1.5 million) from the South Africa Department of
Housing and many millions more from European donors who
supported the federation’s strategy. It lent this money to fed-
eration members who used it to start building houses while
waiting for subsidy approval. During this period the uTshani
Fund facilitated the construction of almost 15,000 houses, all
of them larger and of better quality than comparable develop-
er-built products.
In just eight years, the uTshani process has created assets
worth seven times the value of the original investment. In con-
trast to much privately developed state housing in South Africa,
a federation house is worth considerably more than the resourc-
es put into it.
20 FIELD REPORT Habitat Debate March 2007

Field dispatch – Building back better in Pakistan

When it comes to using funds donated wisely in a crisis, Anna M. Pont, Programme Coordinator,
UN-HABITAT- Pakistan, explains how the survivors of an earthquake were able to play a pivotal role
in rebuilding their lives and homes. She plays a lead role for housing in the Inter Agency Standing
Committee Operations Group and has coordinated fundraising for housing within the framework of the
Earthquake Reconstruction and Rehabilitation Authority-UN Early Recovery Plan.

Z ahid Amin, the Administrator of

the Municipal Corporation in
Muzaffarabad, has seen better days. He
is signing birth certificates. Yesterday he
had the daunting task of signing death
certificates. He indicates the greater pile
of files next to his cup of tea. Among
them is also the death certificate of his
wife. I offer my condolences and observe
the people in the tent. They are mostly
men and elderly women clutching piec-
es of paper – the only evidence left of the
property they once had. They are wait-
ing for information, for assistance. Zahid
Amin’s eyes brim with emotion, “I have
nothing to tell them. There will be finan-
cial assistance, I know, but when? How
much? For whom? For what? What am I
supposed to say today?” He closes the file,
and asks me to join him for a look at the
destruction.
On 8 of October 2005, a massive
earthquake devastated 30,000 sq. ki-
lometers of mountainous Northern
Pakistan. In its wake it left over 70,000
people dead, almost 70,000 people in-
jured, 3.5 million homeless, and in
4,000 villages it destroyed or serious-
ly damaged 600,000 houses. This repre-
sents the destruction of 76 percent of the
entire housing stock.
The government committed to invest
$2 billion for housing reconstruction – a
bill to be paid by the Pakistani tax pay-
er. The Earthquake Reconstruction and
Rehabilitation Authority (ERRA) re-
sponded by adopting an owner-driv-
en approach for rebuilding housing.
Individual families were to rebuild their
homes with financial support from the
Government: $2,800 for a home de-
stroyed. and $1,200 for a damaged
house. The money is disbursed in in-
stallments according to compliance with
earthquake resistant building standards.
This is the first time that an owner-
driven, pro-poor policy, ensuring eq-
uity has been uniformly applied across
an entire disaster affected area. To en-
sure the success of such an approach,
Pakistani civil society organizations and
the International Community have a
meaningful role to play in developing
Photo ©: Jean-Christophe Adrian/UN-HABITAT
the skills and capacities of those involved
in rebuilding to understand and apply
earthquake resistant housing reconstruc-
tion policies, principles and techniques.
The rural housing reconstruction pol-
icy, published in April 2006, was devel-
oped as a result of a consultative process,
facilitated by UN-HABITAT, that in-
cluded the ERRA, the Pakistan Army,
International Financial Institutions, do-
nors, 80 NGOs and others.
There is little doubt that one of the
greatest challenges in the rural housing
reconstruction process to date, is ensur-
ing the provision of consistent technical
assistance to maximize the investment
made by the government.
The initial lack of understand-
ing among stakeholders of the impor-
tance of a people centered policy, and
the reluctance of many donors to sup-
port an owner-driven approach has had a
significant impact on the levels of fund-
ing made available for skill development
for housing reconstruction.
Millions of dollars were pledged by
donors and NGOs alike, to build houses
for people, rather than to support people
re-building safer housing themselves aid-
ed by financial and technical assistance.
It is, however, to the credit of ERRA
and many of the organizations collec-
tively involved in developing the rural
housing strategy, that through persistent
advocacy and a joint approach, some of
the pledged funds have been diverted
from physical reconstruction by NGOs
to training local masons, carpenters, steel
fixers and the beneficiaries themselves.
For many of ERRA’s partners, both
national and international, despite fund-
ing constraints and being overstretched
in an operationally demanding environ-
ment, the disaster in Pakistan has raised
awareness of alternative and more sus-
tainable ways of supporting people’s re-
covery and reconstruction. The approach
that has been adopted has made effective
use of limited financial resources and en-
abled the remarkable levels of progress of
people rebuilding safer homes.
Many months ago Muhammad
Saleem sat in Zahid Amin’s tent waiting.
Now he leads me down a steep hill to his
building site. To one side is timber, cor-
rugated iron sheeting, a few doors and
window frames salvaged from his pre-
earthquake house. He shows the paper-
work signed by the assessment team that
qualifies him for financial assistance and
proudly explains to me the elements that
have now been incorporated into the
foundation to make his house safer. His
wife smiles a wide toothless grin, pulls
me aside and says ‘Don’t talk to him,
talk to me. I designed the house.” As she
drags me off to see the location of the
kitchen, I am convinced: there is noth-
ing like designing and building your
own home.
 Habitat Debate March 2007 New Publications 21

From technical Analytical perspective of

cooperation projects to pro-poor slum upgrading
national policies frameworks
ISBN: 92-1-1311861-0 ISBN: 92-1-131841-6
HS: 872/06 HS: 847/06
Language: English Price: $15
Publisher: UN-HABITAT Language: English
Publisher: UN-HABITAT, Cities Alliance
A documentary account of how
UN-HABITAT’s work in field The close of the last millenni-
projects is translated into nation- um saw the development of cit-
al policy. Drawing on projects in ies in the developing world being
many countries around the world, radically shaped by the intrinsi-
this report looks at lessons learned. cally related processes of urbani-
Each chapter shows how UN- zation and globalization. Neither
HABITAT’s global normative of these phenomena is new —
messages are taking into account what is unprecedented is their
in operational activities which in pace and scale. Indeed, urbani-
turn have a direct impact t on na- zation processes in most devel-
tional policies. Reciprocally, it ex- oping countries are intensifying.
plains how lessons from technical This poses immense challeng-
coopeation projects are feeding into the normative agenda es for governments at all levels.
of the agency through monitoring, evaluation and internal These are rapid urban population growth and the urbaniza-
discussions. tion of poverty. The latter is manifested most conspicuously
in the proliferation and expansion of slums and informal set-
tlements, which are home to a growing proportion of urban
Shared tenure options for dwellers in developing countries. It presents a major chal-
lenge to the international community.
women
ISBN: 92-1-131869-6
HS: 883/06E Enhancing Resource
Language: English
Publisher: UN-HABITAT
Allocation to Urban
Development in Africa
While independent forms of land
and housing tenure may provide HS: 862/06
most security of tenure, the reality Language: English
for the majority of women is that Publisher: UN-HABITAT
they cannot afford such independ-
This collection of papers by lead-
ent access. Indeed, secure tenure
ing experts proposes policy rec-
depends on their relations with
ommendations in the areas of
the husbands, fathers and oth-
public and private finance, the
er male relatives. Joint or shared
informal sector, and reliable data
tenure options, such as commu-
availability. The idea is to pro-
nity of property, co-ownership of
mote awareness among African
family land, family tenure, collec-
decision and policy makers in
tive land rights for informal settle-
budget and finance ministries of
ment dwellers, women’s groups accessing land and housing,
the need to enhance resource allo-
provide different levels of secure tenure for women in law
cation to African cities as a means
and practice. This publication gives a global overview of
of speeding up national econom-
marital property and co-ownership rights, both in legisla-
ic and social development.
tion and in practice, while also seeking to map out more in-
novative forms of shared tenure that may benefit women.

To order these and any other publications, go to www.unhabitat.org and click on publications
22 News & Events Habitat Debate March 2007
Mrs. Tibaijuka meets new Secretary
General on his first official overseas
trip
The new UN Secretary General Mr. Ban ki-Moon visited Kenya in
January where Mrs. Tibaijuka, escorted him through a section of
the crowded Kibera slum to give him his first taste of extreme ur-
ban poverty in Africa.
Mrs. Tibaijuka shows UN Secretary General Ban ki-Moon around
Kibera slum in Kenya. Photo: © UN-Habitat/N.Kihara
“I feel very much humbled by what I am seeing now. That makes
me resolve again my firm commitment to work for the improve-
ment of the living conditions, education, water, sanitation, hous-
ing – all these are the challenges which we must overcome,” Mr.
Ban said outside the UN-HABITAT offices in Kibera, as journalists
and members of the public scrambled to hear him speak. “This is
not the only place, I know. There are many other billions of peo-
ple suffering from lack of affordable housing – all the facilities
which make our life decent,” he said. “We must work together and
generate the political will to have a smooth implementation of
the Millennium Development Goals and I will work very closely,
and harder than before.”
First Asia Pacific Ministers Conference
held in New Delhi
The first Asia-Pacific Ministers Conference on Housing and Urban
Development was held in December last year in New Delhi, India
with clarion calls to reduce urban poverty and pollution in the
world’s most populous region. “Increasing urbanisation is emerg-
ing as the most pervasive and dominant challenge in the region,”
India’s Minister of Housing and Urban Poverty Alleviation, Kumari
Selja told the opening plenary. Cities, she said are the hubs of
economies, investments, technology, innovation, economic
growth and tertiary jobs. They make huge contributions to GDP
as reservoirs of skills and hope for millions of people in the rural
hinterlands.
Mrs. Tibaijuka said she appreciated the collaboration with coun-
tries in the region, the Asian Development Bank and sister agen-
cies like UNESCAP. “You represent the world’s most populous
region – the region with most of the world’s largest cities. You
represent a part of the world that is the global economic power-
house of the future. You are gathered here to help devise a com-
mon new vision aimed at harnessing some of that great Asian
know-how and economic power to ensure that our growing cit-
ies of the future will not only be better managed, but managea-
ble – or what we in the United Nations call, sustainable,” she said.
Mrs. Tibaijuka told the conference the year 2007 will be the year
in which for the first time, half of humanity will be living in towns
and cities. It marks the beginning of a new urban era. It is project-
ed that by 2030 that figure will rise to two-thirds.
Moving into Eastern Europe and
beyond
UN-HABITAT’s work in the transition economies of Central,
Eastern and Southern European States, took a boost in February
at the First meeting of the Advisory Council of the UN-HABITAT
Warsaw Office, the agency’s newest regional centre. “I am strong-
ly convinced that the UN-Habitat Office Poland can improve the
effectiveness and enhance the regional cooperation in the field
of sustainable development of human settlements,” said Mr.
Andrzej Aumiller, Minister of Construction of Poland said in wel-
coming remarks to over 70 delegates from 18 countries in the re-
gion. To fulfil these functions, the UN-HABITAT Office in Warsaw
would provide advisory services and facilitate the exchange of
knowledge and information, he said. It would also promote var-
ious contacts aiming at widening the cooperation in the fields
of housing and urban development. The Advisory Council is
made up of ministers of Central, Eastern and Southern European
countries responsible for housing and human settlements. Mrs.
Tibaijuka, who was in Warsaw for the occasion to thank the Polish
government, held talks with a number of senior officials, includ-
ing Mr. Aumiller, Ambassador Janusz Stanczyk, Undersecretary
of State at the Ministry of Foreign Affairs, responsible for the
UN System, and Mrs. Hanna Gronkiewicz-Waltz, the Mayor of
Warsaw.
Young people graduate as
entrepreneurs
Twenty-five young people from the One Stop Youth Resource
Center in Nairobi recently graduated from the first ever Global
Partnership Environmental Entrepreneurship Program spon-
sored by UN-HABITAT, Youth for HABITAT and the Environmental
Youth Alliance. “This training is important because it recognizes
both the youth need for employment combined with their con-
cern for the environment,” said Jane Bisanjou, a trainer with Youth
for HABITAT. “The programme demonstrates that youthful ideal-
ism for the environment can be combined with the pragmatic
need for a job.”
Blind cyclist carries UN-HABITAT
message
In January a blind Kenyan cy-
clist started a marathon cycling
challenge from Cairo to Cape
Town as a UN-HABITAT good-
will ambassador: “The message
I want to tell all those in pain
and suffering is that it is pos-
sible to pick up the pieces and
start life afresh.”
Coming from Douglas Sidialo
this is in fact a passionate state-
ment. Before 7 August 1998,
Photo: © UN-Habitat/N.Kihara Sidialo was an ambitious sales-
man with a Nairobi firm who
had his vision of the future well cut out. However, that Friday
morning everything changed, thanks to the terrorist attack at
the United States embassy in downtown Nairobi. Sidialo who
was driving by when the bombing occurred was blinded for life
in the bombing. The 37-year-old father of two girls overcame the
gloom that pervaded those early days after the bomb attack and
 Habitat Debate March 2007 News & Events 23

with time has become a leading voice for the disabled. Known as Mines, in the capital Kigali on
Tour d’Afrique, the test of man and machine was to wind its way 22 February. During a day-long
over a period of 120 days across some of the roughest terrains in visit that coincided with the
the world to end up in Cape Town. 2007 International Women’s
Parliamentary Conference, Mrs.
UN HABITAT hosts WSF delegates Tibaijuka also held talks with
President Paul Kagame. The aim
Hundreds of delegates to the World Social Forum in January con- of the programme in Rwanda
verged at the UN-HABITAT headquarters for a special session will be to upgrade water and
highlighting the troubles women face worldwide. sanitation services for the ur-
Known as the “World Court of Women on Poverty: lives, liveli- ban poor in Kigali, and look at
hoods, lifeworlds”, the session heard testimonies from women President Kagame meeting new ways financing local wa-
in developing countries on problems of poverty, pain, survival delegates. Photo: © UN-Habitat ter and sanitation initiatives.
and resistance to the structural causes of poverty and destitu- They said they would moni-
tion. The testimonies were received by a jury of wise women and tor progress on Millennium Development Goal 7, Target 10 for
men from all parts of the world. In a key note address to the par- improved water and sanitation. UN-HABITAT’s Water for African
ticipants, Mrs. Tibaijuka said that the World Social Forum 2007 Cities programme will also be taken into schools to provide class-
was being held at a critical time in human history, when half of es on water conservation, publicly promoted to ensure people
the global population will live in urban areas. are better informed, and promote the special needs of women in
all water and sanitation programmes. The Water for African Cities
Programme is currently running in 17 cities across 13 countries in
Africa – Burkina Faso, Cameroon, Cote d’Ivoire, Ethiopia, Ghana,
Kenya, Mali, Mozambique, Nigeria, Senegal, Tanzania, Uganda,
and Zambia.

UN-HABITAT honours Bahrain

Bahrain’s Prime Minister Sheikh Khalifa bin Salman al Khalifa to-
day won a United Nations award for his efforts in improving the
lot of the urban poor.

Photo: © UN-Habitat/N.Kihara

Conquering Kilimanjaro in fight

against crime
In what has become an annual event, a group of youths in
February embarked on the second climb of Africa’s highest
mountain, Kilimanjaro to highlight the problem of growing crime
in the East African cities. “This is a very good idea and my appeal
would be to our leaders to set aside some piece of land so that
the youth can engage in sporting activities which then would
help them keep off crime,” former Nairobi mayor Joe Aketch said.
The 14 youths from across East Africa will climb to the top of Mt.
Kilimanjaro. Their aim is to highlight the problems facing young
people living in slums on a daily basis and encourage them to be-
come agents of change. The climb will be led by Mr. Tim Challen,
founder of the Kilimanjaro Initiative who was himself a victim of
armed robbery in Nairobi, and Mr. Joseph Ogidi of the famed Gidi
Gidi Maji Maji Hip Hop Band.
Rwanda to benefit from water for
African cities
UN-HABITAT has announced that it will extend its Water for
African Cities Programme to help provide water and sanita-
tion services for people living in the Rwandan slums and other
poor neighbourhoods. The announcement was made follow-
ing the signing of a memorandum by Mrs. Tibaijuka and Mr.
Bikoro Munyanganizi, Minister of State in charge of Water and
Photo: © UN-Habitat
UN-HABITAT, which is mandated to promote socially and envi-
ronmentally sustainable towns and cities with the goal of provid-
ing adequate shelter for all, gave Sheikh Khalifa the 2006 Special
Citation of the Habitat Scroll of Honour Award for his “impressive
efforts in lifting the living standards of all Bahrainis through an
active focus on poverty alleviation and modernization while pre-
serving the cultural heritage” of his country.
Upcoming Events
Twenty-first Session of the Governing Council of UN-HABITAT,
Nairobi, Kenya, 16-20 April
Seventh Global Forum on Reinventing Government,
UNHQ, Vienna 26-29 June
What policies for globalizing cities: Rethinking the Urban
Policy Agenda
OECD INTERNATIONAL CONFERENCE,
29-30 March, 2007 - Madrid, Spain
http://www.rethinkingtheurban.org/english/presen.asp
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