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close this bookAssessment of Experience with the Project Approach to Shelter Delivery for the Poor (HABITAT, 1991, 52 p.)
close this folderII. Financial and economic impact of shelter projects
close this folder2.3 Institutional framework and financial management
View the document(introduction...)
View the document2.3.1 Institutional culture of public-sector agencies
View the document2.3.2 Role of local government agencies
View the document2.3.3 Relationship with local community groups

2.3.3 Relationship with local community groups

A third major factor related to the institutional framework is the extent to which project agencies can develop positive relationships with local community groups. Administrative flexibility in Sri Lanka even enabled the local community in the Nagagahapura project to block out the land and prepare the site layout for a small (1 hectare) sites-and-services project and allocate plots among themselves. They then proceeded to formulate their own building regulations with official professional advice. This must be one of the most innovative approaches in terms of community-led new shelter development undertaken with official support, though it is by no means unique. In Zimbabwe, for example, the Kuwadzana project provided a model for local authorities. The project provided community orientation materials and developed cost and loan affordability calculation methodologies. Furthermore, it provided guidelines for legal agreements and guidelines on project staffing (see Mutizwa-Mangiza, 1990: 29).

A major innovation of the Kwekwe-Gutu project was its use of building societies to finance low-income housing, despite their normal reluctance due to problems with affordability and default (Mutizwa-Mangiza, 1990: 36). The arrangement involved substantial grants from the UNDP and USAID. The funds from USAID were used to set up revolving funds that would enable building societies to establish a financing system for low-income housing. As an alternative to deposits, an allowance was imputed for the value of self-help labour. The loan only required repayment of the cost of the building, however, and it appears that land, infrastructure and interest rates were largely subsidized.

The ability of urban authorities to ensure the provision of land, services and social facilities on a routine basis ultimately depends upon the revenue base they are able to generate. Efficient project management can contribute significantly to this by encouraging a sense of financial rigour in all sections of the population. Politicians and administrators seem to share a common tendency to regard projects as a welfare service, rather than a developmental investment This tendency militates against this approach and prevents adequate resources from being generated. The evidence from the case studies suggests that the opportunity to use projects as a means of increasing the urban revenue base has yet to be grasped.

One example from Sri Lanka exemplifies this issue. As was mentioned earlier, only one out of the 81 projects undertaken in Colombo pays property taxes to the Municipal Council. One reason for this poor performance is that although decision-making in projects has been decentralized to local levels, procedures for cost recovery are still centralized. Another reason is that the whole process of cost recovery within the MHP has been politicized. Before the Presidential elections in 1989, the Government decided to forgo collections of loan payments from all households with incomes below the official poverty line. Since most households in housing projects belong to this category this has been a major reason for the low level of cost recovery (Jayaratne, 1990: 106).