Project code FS/GLD/05/504
Background and objectives
Slums have unrealized value and huge resources but their full potential will not be realized until they are upgraded and improved. Domestic capital is the key to sustainable development of slum upgrading. This can be in the form of community savings and resources, commercial capital through banks and other formal financial institutions and public finance through various forms of national and local government support. But the reality is that slum dwellers rarely have direct access to finance from formal financial institutions.
The central objective of the Slum Upgrading Facility (SUF) as a global technical cooperation and seed capital facility, is to help developing countries attract domestic capital into their slum and urban upgrading activities, including the development of new low-income housing and associated infrastructure. SUF is to achieve this objective by facilitating links among the slum dwellers, field-testing financial instruments and packaging the financial, technical and political elements of development projects to attract such investments.
After exhaustive research in the four pilot countries, it was established that there were no existing institutions that brought together all the stakeholders. The SUF Programme Management Unit through its SUF Pilot Team responded to the local demand for support for financial services to the underserved settlements. This will be provided through new Local Financial Facilities created to up-scale the concept of SUF throughout the four pilot countries.
The SUF Programme Management Unit is also providing direct project development support to slum dwellers through local community-based organisations in Ghana and Sri Lanka to enable them to develop bankable projects and financial instruments.
The main activities include:
- Advisory services to partners, including slum dwellers groups, NGOs, professional bodies, municipalities and commercial banks in the financial aspects of the upgrading of lowincome housing and infrastructure projects.
- Referral function for local, regional and international support, bringing expertise and partnership networks of multilateral programmes and NGOs.
- Financial packaging of different forms of investment so they become ‘bankable’ and provide the communal finance with the necessary confidence to lend for community upgrading activities.
- Development of financial products and projects that enable investors to provide loans to various upgrading initiatives
The SUF Programme Management Unit (PMU) through its Pilot Team (PT) have undertaken substantial groundwork in the four pilot counties to prepare bankable sub-projects accessing credit enhancement from established Local Finance Facilities (LFF):
- In Ghana: two citywide local finance facilities established in Tema and Sekondi Takoradi and sub projects being developed for credit enhancement in Kojokrom, New Takoradi and Amui Djor (market upgrade). SUF PMU has also given direct support for capitalization of the Ghana Urban Poor Fund. This has enabled them to give loans to their members for slum upgrading and to test pilot housing.
- In Indonesia: one citywide local finance facility created in Surakarta (Solo) and another in progress in Jogjakarta. Sub projects developed in Tipes, Tegalpanggung, Solo Kratonan, Ketalan and Setabelan. In addition, capacity building, through field testing, in Kratonan (USD20,000 for 11 houses) and planned for similar amounts in Ketelan and Setabelan. This field testing has been financed through loans from a local bank with technical support
- In Sri Lanka: one nationwide local finance facility established. A number of sub projects have expressed interest in applying for credit enhancements, including Siddarthpura, Wallauwatta, Kukruniyawatta, Majid Place and Kilapura. SUF PMU has given direct support to capitalise Moratuwa Urban Poor Fund. These funds have been used as collateral to access loans from a local bank for construction of a four- storey building and to advance loans to members for slum upgrading.
- In Tanzania: Three potential projects for credit enhancement in Kurasini, Buruguni and Mwisho. Construction has also started on a housing project with the Tanzania Women Land Access Trust (TAWLAT), in conjunction with the Chinese Government.