|The Human Settlements Conditions of the World's Urban Poor (HABITAT, 1996, 233 p.)|
|VII. Agenda for future work|
Whilst the capacity of local authorities to adjust to new roles needs greater support, it remains the case that the preconditions necessary for the development of market mechanisms in the shelter sector are also poorly developed in many developing countries. One may highlight by way of example three particular areas of activity:
· the legal and institutional environment for the ownership, transference, and management of land;
· personal savings and private sector institutional housing finance; and
· the underdevelopment of local materials production, marketing and distribution.
1. Improving the effectiveness of the land market
The ownership and control of land remains a fundamental issue perpetuating poor housing conditions in developing countries, and as observed earlier (see sections VI.E. and VI.F.), the effective operation of the land market is also essential to the development of institutional housing finance. A shift towards market mechanisms will require a more effective legal and institutional framework for the planning, registration and disposal of land. A greater emphasis on market mechanisms per se, however, is unlikely to operate to the advantage of the urban poor unless local authorities have the competence, procedures, financial resources, and political will to intervene more effectively in the land market, and via a range of measures such as those outlined in section VI.E., to ensure a regular supply of developable land, directly available for their use. Whilst both these areas, i.e. the legal and institutional framework and the competence of, and resources available to, local authorities, need strengthening, there is a danger that the drive towards privatization will eclipse the imperatives for intervention, and most particularly, will not yield the financial resources necessary for local authorities to purchase land directly on behalf of the urban poor.
2. Encouraging the development of institutional housing finance for the urban poor
The urban poor are also disadvantaged by their lack of access to institutionalized credit and whilst market circumstances have been far from ideal in recent years for the extension of credit facilities to low-income groups, informal credit mechanisms remain widespread, and a number of initiatives have occurred. These initiatives to extend down-market lending appear to reflect two different basic approaches. Firstly, existing housing finance institutions are seeking to circumvent the perceived problems of high risk and high transaction costs by modifying conventional lending criteria. Typically this means on-lending earmarked funds at subsidized interest rates and over longer terms in order to extend lending to low-income groups. To overcome problems of access for clients, housing finance institutions are seeking to work in partnership with NGOs. In this facilitated lending situation, the loan is made directly by the housing finance institutions to the borrower, but the NGO may assist with the loan origination and servicing.
In the second case, financial intermediation is done by a community-based financial institution using funds loaned by an housing finance institution or other financial institution. In these circumstances the community based-finance institution seeks to tailor loans more appropriately to the needs and affordability of the poor (most particularly in respect of the absence of security), and also uses its peer group association to reduce risk. Several changes to conventional lending practice are envisaged, however, and these include a wider use of insurance cover, the establishment of a delinquency risk fund linked to recovery performance, and loan spreads which ensure coverage of the higher transaction costs associated with a larger establishment (Mehta, 1994).
Both of these innovatory credit arrangements are in their infancy. Much technical and advisory support has already been forthcoming from national and international sources and much remains to be done before the projects may be deemed to be effectively operational. It will be necessary to initiate pilot schemes and to monitor and evaluate the outcomes, but these are important initiatives which appear to offer great scope for application amongst poorer groups in many other developing countries.
3. The enhancement of local materials production
Section VI.G. illustrates how the production of indigenous building materials has not been able to keep pace with demand and that the cost of materials in many developing countries has risen steeply in recent years. At the same time, local materials production is often characterized by low productivity, fragmentation, problems of distribution and poor marketing. Increasing the efficiency and organizational capacity of local materials production in particular countries would seem to offer a number of advantages, such as, increasing economic output and reducing the need for costly imports; increasing supplies to reduce shortages and therefore costs; providing increased job opportunities, especially for women and low-income groups; and encouraging low-cost shelter options for the urban poor.
For these reasons this report endorses the recommendations made by UNCHS (Habitat) on building materials for housing in 1992 (see section VI.G.) (UNCHS, 1992a). The latter report advocates that operational strategies at national level should concentrate on developing, transferring and diffusing new technologies; creating a supportive policy environment and strengthening institutional support. It also strongly recommends greater cooperation amongst developing countries, especially on a regional basis, in sharing ideas, experience and expertise, as well as greater North-South cooperation to provide appropriately targeted development finance, improved technology, and technical expertise. In supporting these recommendations this report highlights the need for national strategies to maximize the benefits for low-income groups, and especially women, in terms of job opportunities and training in the production, distribution and sale of materials; in promoting easier access to local materials for self-building purposes or renovation; and in encouraging innovative says of reducing the costs of materials, e.g. through bulk purchase arrangements or building-materials banks.