Several articles in this issue of Alliance have argued that donors should be more willing to invest directly in developing country NGOs. This article shows how Shack/Slum Dwellers International (SDI), a global network of federations of the urban poor, achieves the flexible funding it needs to address the needs of its members by channelling funds from a wide range of donors both directly to its own network and through northern NGOs.

The aim is to take primarily project-based development finance and turn it into funds that can effectively address the needs of the poor.

As a global network of federations of the urban poor, SDI has to have a financing strategy that allows it to respond to community needs and priorities as they develop and change. Throughout SDI there is a commitment to allowing communities to drive development activities. This means being able to invest in demonstration projects, which can be replicated by other communities if successful. Together they need opportunities to use resources to explore options that scale up change.

How can such goals be achieved? Before explaining how SDI approaches the funding challenge, one must first draw out some of the characteristics of pro-poor funding.

What the poor need from their donors

For SDI, the challenge is to secure funds that enable community priorities to be addressed. The first characteristic of useful funds is that they are flexible. It is simply no good for communities to be told that there is money for community exchanges but not for follow-up activities. Or that Indian groups can visit South Africa but not the Philippines. Maintaining momentum at a community level is critical. If a community group has persuaded a local authority to permit a communal toilet block to be built on public land, the activities need to begin immediately. Waiting a year or even six months for funders’ approval can result in the offer being withdrawn and the community’s own energy moving elsewhere. Equally, communities may have internal disputes that take time to resolve. Ideal donors will be satisfied with six months’ inactivity.

SDI groups can achieve some successes in countries in crisis. As conventional ways of doing things break down, new openings emerge that sharp-minded federations can exploit. Zimbabwe is a current example. The Zimbabwe Homeless People’s Federation groups have secured over 2,000 plots of land and local authorities are sanctioning incremental development, thereby hugely increasing the affordability of secure tenure. But bilateral and multilateral funders have withdrawn from Zimbabwe and are refusing to finance activities. The best donors are those that accept the priorities of the poor themselves.

As well as being flexible, the scale of finance must be appropriate to the level of organizational development. In the early years of each federation’s development, relatively small amounts of money are required for exchanges, individual greenfield developments and exploratory infrastructure projects. However, the long-established groups in SDI now represent tens of thousands of families. Major development projects are under way with local authorities and state agencies. Investment capital is still required for individual community activities but large-scale funds are also needed.

How does funding work in practice?

How can SDI ensure that funding supports rather than constrains the priorities of the poor? SDI is a network of national federations made of up local savings schemes and/or city-level federated slums or shack settlements. Most federations work closely with an NGO that provides technical and financial support. These NGOs are the ‘jelly in the middle’. Their role is to blend (often) inflexible, rule-bound, generally project- specific funds from a range of donors to ensure that funds are available for community imperatives.

SDI groups receive grants and loan finance from a wide range of agencies including local foundations and financing agencies, local and national government sources, embassy and consultant funds,[1] corporations, northern NGOs, northern foundations, bilateral agencies and multilateral programmes. Support NGOs have to secure the flexibility to ensure that funds follow community priorities rather than dictate them, and the scale to ensure that growing capacities are encouraged.

While support NGOs can assist in blending funds to secure sufficient flexibility, funding agencies can make a significant difference to the task that they face. SDI has established partnerships with a number of northern NGOs to facilitate flexible and appropriate funding for local groups.

Working with northern NGOs

SDI has built many different initiatives with Homeless International (HI), a niche British NGO that works in the area of shelter. Most recently, SDI and HI have developed CLIFF (Community-Led Infrastructure Financing Facility). CLIFF emerged from a joint research project that examined the risks the poor took to participate in change and development. The project sought to engage bilateral and multilateral agencies in investing in such financing ventures in order to learn from the process. Today the UK government Department for International Development and the Swedish International Development Agency (Sida), working through the Cities Alliance (a consortium of bilateral and multilateral donors), have invested US$10 million in revolving loan funds for onward lending. The Cities Alliance has in turn commissioned HI to host the global facility.

The Indian alliance of SPARC, Mahila Milan and the National Slum Dwellers Federation will manage the first CLIFF in India. Communities will have access to revolving funds, local capacity to manage funds will be developed, and a partnership approach will keep all the agencies in this process involved. CLIFF helps to facilitate the scaling up of housing and infrastructure in cities. As various SDI groups need additional capital funds, similar processes may be established in other countries.

When the Ford Foundation supported SDI’s international exchange programme,[2] SDI proposed that it should be channelled through the International Institute for Environment and Development (IIED). The funding enabled IIED to work with SDI to document their activities and IIED helped to ensure funds could be distributed throughout the network as needed.

The partnership model offers further benefits to northern NGOs working with SDI. When CordAid wished to re-establish its commitment to social activism alongside its grant-giving, it turned to SDI. There is now a commitment on both sides to develop a joint programme to address issues of eviction and poverty in cities and to ensure that the Millennium Development Goals address the needs of the urban poor. In Madagascar, Misereor found that some of the communities they were supporting faced evictions. Misereor asked SDI to arrange an exchange to help the local communities to explore new and previously unknown choices that might better address their need for secure tenure.

Ensuring development finance meets the needs of the poor

The challenge is to transform the rhetoric into reality, to take primarily project-based development finance and turn it into funds that can effectively address the needs of the poor. If communities and their organizations can indeed be the drivers of development, then the contribution of all other stakeholders needs to be aligned with that aspiration. We know that a project framework that defines who will do what and when they will do it does not produce real change. New approaches open up new possibilities.

Creating a federative structure that allows poor communities to support each other has helped SDI to negotiate new partnership relationships with donors. The federations open up lots of exciting new investment possibilities for donors. Donors see the capacity and want to support it, so they seek alliances with northern NGOS that work with SDI. Through such alliances, they realize they can address some of the institutional constraints that have in the past prevented their funds being spent effectively.

What is required is for funding agencies to recognize their limitations and use strategic partnerships to overcome them in order to realize a common objective – addressing the needs of the poor.

1 The monies set aside for consultants to advice on bilateral projects.

2 The programme focused on supporting local activities and providing a platform for the urban poor to seek to ensure the relevance of multilateral institutions to their own agenda.

3 The two lead countries for Asia and Africa (India and South Africa respectively) both have exchange controls that make it expensive to shift hard currency quickly to SDI groups as it is needed.

For more information, contact the SDI Secretariat and Administration in Cape Town, South Africa.
Tel +27 21 371 7451
Email bunitak@courc.org.za
Website http://www.sdinet.org
The jelly in the middle
The emergence of the federations has created a real shift in power. The southern NGOs that provide support to the national federations and their member groups face multiple pressures. The community groups have many urgent needs and changing opportunities. The local political context is often highly dynamic, with openings emerging and closing quickly. Rapid response is critical – for example, to address internal disputes in a community, to have a demonstration project for community-managed sanitation, or to start investing in response to a commitment to municipal finance.

The support NGOs make a clear commitment to support community-driven development processes and the federations hold them to these promises. Local and national community leaders are not interested in being told that there will be a three-month wait for funds or that monies are available only for income-generation programmes for widows. The support NGOs have to reconcile the principles, understandings and sometimes prejudices of donor agencies with the dynamic realities on the ground. And a very significant part of the process is an acknowledgement that community groups may try and fail but the financial support needs to be there.