Slum upgrading initiative SBI has created the Global Financial Innovations Partnership (GFIP) with USAID in order to bring financial services to scale to achieve the Millennium Development Goal of “improving the livelihoods of 100 million slum dwellers by the year 2020.”

This Partnership is based on the premise that private sector involvement is essential to sustainable slum alleviation and that expanding access to financial services to the underserved forms the foundation of a healthy economy.

The overarching goal of GFIP is to implement an asset-building strategy for economically distressed individuals and communities through a two-prong approach that reaches to the core of poverty alleviation and economic development challenges. The first component of the strategy mobilizes private market forces to improve quality of life for slum dwellers and other urban poor by encouraging wealth-building through homeownership, property investment, and infrastructure building. The second component focuses on the strengthening of financial institutions to ensure effective delivery of the financial products serving slum dwellers and consistent with the institution’s overall safety and soundness guidelines.

Following the SBI Corporation model, the GFIP project leverages private capital and technical assistance resources to benefit disinvested and underserved urban communities in developing countries.

Innovative practices and characteristics of GFIP

• One of the few private-sector bank operated initiatives applying the leverage of financial institutions to slum-dweller markets.
• Focus is on the design and delivery of benefits to slum dwellers through research, comparative analysis and review of previous approaches to ensure “best-practices” and maximum results.
• GFP encourages a coordinated solution to the problems of slum dwellers by engaging multiple private, public and donor institutions.

Partners

• SBI, an affiliate of SBI Corporation, is a consulting company that designs and implements finance programs around the world.
• USAID on behalf of the federal government works in cooperation with U.S. and international partners to improve economic conditions for people around the world.
• The partnership will tap into an extensive network of donor, private sector, and non-profit institutions, including Cities Alliance, local financial institutions, NGOs and housing providers and other private sector entities.

Pilot projects in Morocco and South Africa were designed to increase financial intervention in the slums. Its intention has been to test the veracity of the belief that a local financial institution will enable the mobilization of local capital toward housing needs, when coupled with relevant technical assistance delivered to selected financial and housing partners.

Moroccan pilot
The GFIP Moroccan Pilot began in May 2005. The target segment of the market is low-income individuals living in slums eligible for relocation as part of the Moroccan government-run program “Villes Sans Bidonvilles” (or “Cities Without Slums”).

The pilot is working with two local banks (Banque Centrale Populaire and Banque Marocaine du Commerce Exterieur) to develop their skills in lending to this population. The pilot works with partners from both the government and the private sector in order to improve knowledge around the financial aspects of the Villes Sans Bidonvilles program. Three sites have been identified for the next implementation stage of the pilot, scheduled early 2006: Rabat-Sale, Meknes, Casablanca, and later, Fes.

South African pilot
SBI identified two partner organizations in the low cost housing sector and is working with two partner financial institutions: the Kuyasa Fund and the Social Housing Company (SOHCO).

The Kuyasa Fund is a non-profit NGO Micro Finance Institution managed by Olivia Van Rooyen and based in Cape Town. Kuyasa operations are currently concentrated in Khayelitsha with growth planned into the rest of the Western Cape, Kwazulu-Natal, the Eastern Cape and Gauteng. Kuyasa advances micro loans for home building or improvement activities to individuals from identified savings groups.

SOHCO currently has a successful project in Buffalo City with their Head Office based in Durban. Heather Maxwell manages SOHCO, also a non-profit organization. The business model is essentially the acquisition and management of housing stock on a rent-to-buy basis. The first tranche of owners from tenants is due to come online in early 2006. Expansion plans for SOHCO include Durban in Kwazulu-Natal and Cape Town in the Western Cape.


Key facts and definitions

Slum Population: 1 billion people (World Bank, 2002); expected to double over the next 25 years; one-third of the urban population in Africa and nearly one-quarter in Latin America. The scale of the backlog and the staggering growth of the urban concentration of poverty are acknowledged as daunting challenges facing developing economies. Most slum dwellers live in Africa, Asia, and Latin America. They represent about 30%, on average, of urban populations. Given the magnitude and seriousness of the problem, donor commitments alone are insufficient to meet the growing problem of urban poverty in a sustainable way.

Slums: Informal settlements that lack access to basic services such as clean water and sanitation services. Slums are usually high density areas with an insufficient number of quality health care services and educational opportunities – but often within communities of vibrant economic and entrepreneurial activity.

Slum Upgrading: The physical, social, economical and environmental improvements that are done in partnership with residents, community groups, businesses and local government agencies. Improvements include: introducing or enhancing basic services; mitigating environmental hazards; and improving access to health care and education.