UN Habitat Fund to Finance Slum Housing

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UN Habitat Fund to Finance Slum Housing
By: Stephanie Nieuwoudt, Inter Press Service
19 April 2007
 

NAIROBI - Some relief for the pressing housing needs of slum dwellers may be in sight. The United Nations Human Settlements Programme (UN Habitat) is planning a revolving fund to assist poor people with credit to build houses in slum areas. The proposal is contained in the organisation’s medium term strategic and institutional plan being discussed at the 21st session of its governing council currently underway in the Kenyan capital Nairobi.

With more than 1 billion slum dwellers across the globe, most of them in developing countries, it is clear that supplying housing to the urban poor is a pressing issue.

The executive director of UN Habitat, Anna Tibaijuka, said that governments, especially those in the developing world, cannot carry the burden of meeting the housing needs of their populations on their own - ’’let alone supply the sanitation, water and other needs of those people living in slums.’’

It is therefore imperative that the private and public sectors form partnerships to address the problem. Key to slum development is that slum dwellers obtain access to funding to enable them to build their own houses.

In the medium term plan, guidelines are set out for the establishment of an account to provide revolving seed funding for projects. The account will be independent of other accounts of UN Habitat.

The money in the account will be used to provide loans to low-income groups. Once repaid, the money will be available for further loans. In this way a multiplier effect is created as the money can be used for second, third and fourth projects.

The loans will be made available to community-based organisations or municipalities to undertake low-income housing and infrastructure projects which fall within the scope of the Habitat agenda and other related UN mandates.

Tibaijuka stressed the necessity of such a fund. Traditionally, financial institutions do not lend money to the poor due to the perceived high risk involved, she said. The revolving credit plan will be introduced in a cautious manner over three phases.

In the first phase (2007 to 2011), the loan money will be drawn from member countries’ voluntary contributions of earmarked funds. The money will be used to fund reimbursable seed capital operations.

In the second phase (2012 to 2016), the UN Habitat Foundation may embark on drives to borrow money - within certain limits - from governments, governmental agencies and intergovernmental organisations.

In the third phase, provision is made for UN-Habitat to raise funds by issuing credit through bonds and other instruments. Both the second and third phases will only be activated once the preceding phase proves successful.

According to the guidelines set out by the plan, the project will be introduced to a traditional financial institution which might supply further loan capital if the seeding project achieves success.

While the proposed fund is being applauded by governments of developing countries, donor countries have raised the question of whether another fund is indeed necessary. There is a host of other regional and global organisations like the International Monetary Fund and others which loan money to poor countries.

Tibaijuka told journalists at a press conference that financial institutions do not have the facilities to lend money to the poorest segment of society. They also do not have the experience or skills to work with social issues.

These institutions also do not lend money to community-based groups or local governments. All loans made by them go directly to central governments.

Smaller institutions like commercial banks also do not readily lend money to poor people. Slum dwellers find it difficult to access loans as they do not own the shacks where they live and therefore have no legal address.

Rose Molokoane of the South African Federation of the Urban Poor exp

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