Social Innovation: The Poor Now Have Control Over How Cities Are Developed

The Urban Poor Fund International is the first global social innovation fund to give poor people direct control over development spending in cities. Launched in 2007 by Shackle/Slum Dwellers International (SDI), it is a network of community-based federations in 33 countries across Asia, Africa and Latin America. Since then it has invested more than $17.8m (£11m) in capital and technical assistance to more than 150 community-run projects in cities.

How this social innovation works is that it allows poor communities define development strategies and manage capital from neighbourhood to global level. Urban poor federations and the not-for-profits in the network submit proposals for community projects, which are evaluated by a council of long-time federation leaders. The money is then allocated and accompanied by strategic advice from a board of government ministers. Resources flow through national funds to local savings collectives, mostly made up of women who contribute their share and implement projects. Ultimately, the goal is to create a strong network of national funds that can independently attract government and private-sector investment and help shape urban development agendas. The fund has financed the construction of 50,000 homes, secured tenure for 20,000 families and supported projects in 18 countries.

All in all, this social innovation model has directly benefited poor families and allows poor communities to attract external resources and make a political impact. Capital helps federations leverage finance from governments, banks and donors, while demonstration projects encourage broader investment or policy shifts. For example, projects have produced positive changes in building regulations and attracted state housing subsidies. The fund also helps to give poor groups a voice in municipalities and international circles. Long term it will help to create political transformations.

The benefits of this financing model were evident in Mukuru Sinai, an informal settlement near an oil pipeline in Nairobi's industrial zone. In 2009, the fund awarded $315,000 to a savings collective of 2,000 families who, renting homes on private land there, suffered constant threats of eviction and gas explosions. Armed with capital, they got a bank loan to buy 23 acres of nearby land for just over $1m, and a government pledge to provide infrastructure. Tenants are now drawing up plans to build homes, partly subsidised by developing for-sale housing on the plot. Leaders are not only hopeful that the project becomes a pilot for other informal settlements on private land in Nairobi, but also that locals will share lessons with communities in Kenya and beyond.

Despite its success, this model faces challenges. The international fund needs to attract money, because it does not recover investments, yet many donors lack understanding of the fund's innovative strategy or just consider it risky. Plus, leveraging external resources and getting cities to partner with urban poor groups is also a challenge. The fund's success also depends on strong community organisations. While many SDI affiliates have mobilised for decades, newer members require time to ensure that individual projects yield stable federations and political gains. Either way this is a scheme to watch for the future.

Photo Credit: SDI Website