Business for Sustainable Urbanisation - Challenges and Opportunities
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Making cities better places to live, work and do business
Business Partnership for Sustainable Urbanisation
UN-HABITAT
Business for Sustainable Urbanisation
Challenges and Opportunities
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Boxes, tables and figures
Milestones 7UrbanizationScenario 8ReachingtheMillenniumDevelopmentGoals 9Slums-Keyfacts 9Themarketsatthe“bottomofthepyramid”(BOP) 10Themarketsatthe“bottomofthepyramid”(BOP),byregion 11TheUnitedNationsGlobalCompact 12TheBusinessPartnershipforSustainableUrbanization(BPSU) 13UN-HABITAT’sallianceswiththebusinesscommunity 13WaterandSanitationprojectwithCocaColaandUN-HABITAT 16Veolia,UN-HABITATandUNITAR:AccesstoBasicServicesforAllInitiative 16CommunityManagedWaterSupplySchemeinIndia 16Alexandria’ssolidwastemanagement 18EcologicalPlasticInc.,CostaRica 19InclusionofSalvagersintheWasteManagementProcess,Odi-Moretale,SouthAfrica 19‘ElCeibo’Recyclingcooperative,BuenosAires,Argentina 19OpportunitiesforValueChaincollaborationsinhousing 20Cemex,Mexico 22Mutirões,Brazil 22ADAPT,Egypt 22Sheltermicrofinance 25Community-basedshelterfunds 25TheSlumUpgradingFacility 25GlobalHousingFinancePractices 26TheCommunity-ledInfrastructureFinancingFacility(CLIFF) 26GrameenBankHousingProgram,Bangladesh 26AcumenFundandSaibaninPakistan 26Incentivesforsolarsystemsincities 29Photovoltaicsolutionsforoff-gridhouseholdsandbusiness 29PublictoiletsandbiogasplantswithSulabhSanitationMovement,India 29Windgeneratorsfordomesticuse 29Bio-dieselinMali 29BusRapidTransitinBogotáandCuritiba 29M-bankingwithWizzit,SouthAfrica 31
Acknowledgement
ThispublicationisacontributiontotheFirstStakeholdersMeetingoftheBusinessPartnershipforSustainableUrbanization(BPSU)tobeheldon13and14April2007inNairobi.
Acknowledgementsandthanksgotoallthepersonswhohavecontributedtothispublication:AlanAguilarandChristineAuclair,PartnersandYouthSection,MonitoringandResearchDivision,KulwantSingh,WaterforAsianCitiesProgramme(Challenge1),LizCaseandChristianSchlosser,HumanSettlementsFinancingDivision(Challenge4),VincentKitioandSaraCandiracci,EnergyandTransportSection(Challenge5).
Allrightsreserved.NopartofthisbookmaybereproducedinanyformwithoutpermissionfromtheUN-HABITAT.
PublishedbyUN-HABITATHSNUMBERCopyright©2007UN-HABITATPrintedbyUNON,Nairobi,Kenya
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Table of ContentsIntroduction 4UN-HABITATandthebusinesscommunity 6Urbanisationchallengesandtheprivatesector 8Addressingthebottomofthepyramid 10ResponsibleBusinessPracticesandCorporateSocialResponsibility 12
Challenge 1: Water and Sanitation 14DeficientFinancingofthewatersector 14Businessopportunities 15
Challenge 2: Waste management 17Reduce,recycleandreuseofwaste 17BusinessOpportunities 18
Challenge 3: Shelter 20Housingsolutionsthroughvaluechaincollaborations 20Low-cost,energyefficient,eco-friendlyshelter 21
Challenge 4: Housing Finance and Real Estate 23Privateinstitutionsshyawayfromthelow-incomesegment 23BusinessOpportunities 24
Challenge 5: Energy and Transport 27Fosteringeconomicactivityandraisingstandardsofurbanliving 27BusinessOpportunities 28
Challenge 6: Information Technology 30Mobilebankingafinancialtoolforsmallentrepreneursinslums 30
References 32
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TheUNhasembarkedonabroadandcontinuousprogrammeofinstitutionalchangeandreformtowardsbecomingamoreeffectiveandaccountableinstitution.OneimportantpartofthisprocesshasbeentheopeningoftheUnitedNationstonon-stateactors,includingbusinessandcivilsociety,asessentialpartnersforchange.
Wearenowataverysignificantturningpointinhistory:Theyear2007willbetheyearinwhichforthefirsttime,halfofhumanitywillbelivingintownsandcities.Itmarksthebeginningofanewurbanera.Itisprojectedthatby2030thatfigurewillrisetotwo-thirds.Makenomistake,weliveatatimeofunprecedented,rapid,ir-reversibleurbanisation.Thecitiesgrowingfastestarethoseofthedevelopingworld.Andthefastestgrowingneighbourhoodsaretheslums.Anotherandunacceptablefeatureofthenewurbanageisthat2007willalsobetheyearinwhichtheglobalnumberofslumdwellersisforecasttoreachthe1billionmark.
Giventheenormityofthischallenge,UN-HABITATiswellawarethattheprivatesectorisnotmerelyapartofthesolution,butinsteadisavitalpartnerthatmustbeengagediftheworld’scitiesaretoachievesustainability.Privatesectorpartnershipsandtheconcertedapproachtoland,basicinfrastructureandservices,affordablehousingsolutionsandaccessiblehousingfinancesystems,arecriticaltopracticalsustainabilityincities.
TheprivatesectorandtheUNsharecom-monobjectivesofmoreefficient,produc-tiveandinclusivecities.Thecorporatesectorneedsspecificconditionsinordertorunitsbusiness,andtheUNisengaged
Introduction
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Intr
oduc
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inimprovingthelivingconditionsofpeoplewhowillworkandbuyproductsandservicesfromtheprivatesector.Thegrowthofslumsandthedeteriorationofurbaninfrastructuresarethreatstobusinessandtheprivatesectorhasamajorstakeinmaintainingthehealthofcities.Fornationalandlocalgovernments,significantrethinkingisrequiredtoembracethepri-vatesectorwhileensuringhealthygovern-anceandsaferegulatoryframeworksthatcanmakethishappen.
Thechallengeisfirstandforemosttoad-dresstheshelterandbasicservicesneedsoflow-incomesegmentsinurbanareas.Doingthismeansexploringbusinessmod-elsanduntappedopportunitiesincitieswhileengagingtheprivatesectortoworktowardsamoresustainableurbanization.Afurtherchallengeistoscale-upopera-tionsthroughnewpartnershipsinordertoaddressthedauntingchallengeofrapidurbanizationandthegrowthofslums.
Globalcorporateleadersareknownworldwidefortheirengagementandcontributiontosustainabledevelopment,andtheircommitmenttotheMillenniumDevelopmentGoals.Theyarecommittedtoeco-efficiency,innovationandcorporatesocialresponsibility.Sustainableurbaniza-tionshouldbepartoftheiroverallmission.Forsmall-andmedium-sizeenterprises,whicharekeyplayersinareasaddressedbyUN-HABITAT,increasedparticipationinthepolicydebate,bestpracticesexchangeandaccesstoleading-edgeinformationoncitiesshouldopennewbusinessopportu-nitiesandnewformsofpartnershipstobettermeettheirneedsandaddressthedemandinurbansettings.
Thispublicationprovidesanoverviewofthechallenges,businessopportunitiesandbestpracticesinthedifferentsectorsthatarepartoftheUN-HABITATmandate.TheseareasneedtobeexploredifwewanttoachieveourcommitmenttotheMillen-niumDevelopmentGoalsandtoefficientcities,whereinnovationscanflourishandmarketscanexpandtowardsnewsegmentsatthe“bottomofthepyramid”.
Ihopethispublicationwillbeasourceofinspirationanddebateforbusinessesandotherpartnersengagedinthesustainabledevelopmentofourtownsandcities.
AnnaKajumoloTibaijukaExecutiveDirectorUN-HABITAT
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UN-HABITATand the Business Community“Even though business focuses on economic growth and profit while the United Nations works to pro-mote peace and security, reduce poverty and ensure human rights, the United Nations and business need each other. The work of the United Nations can be viewed as seeking to create an enabling environment within which business can thrive.” United Nations Secretary General Ban Ki Moon�
ThebusinesscommunityhasplayedanactiveroleintheUnitedNationssinceitsinceptionin1945.Recentpoliticalandeconomicchangeshavefosteredandintensifiedthesearchforcol-laborativearrangementswiththeprivatesector.EffortstorenewandreformtheUnitedNationsprovidetheoverallrationaleforclosercoop-erationandpartnershipbetweentheUnitedNationsandnon-stateactors,includingthebusinesscommunity.AbroadpolicyframeworkforcooperationwiththebusinesscommunitywasestablishedunderSecretaryGeneralKofiAnnan’sleadership.
Thebusinesscommunityhasagrowingroleingeneratingemploymentandwealththroughtrade,investmentandfinanceandUNmemberstateshaveincreasinglystressedtheimportanceofprivateinvestmentindevelopment.Thebusinesscommunityisalsoincreasinglyap-preciativeoftheroleoftheUnitedNationsinpromotingpeaceandsecurity,providingnormsandstandardsandaddressingissuesofvulner-ability,poverty,environmentaldegradationandsocialconflict.Allofthisisseenashelpingprovideastableandfavorableframeworkforbusinessanddevelopment.
UN-HABITAT’smissionistopromotesociallyandenvironmentallysustainableurbandevel-opmentwiththegoalofprovidingadequateshelterforall.Townsandcitiesaregrowingatunprecedentedrates,leadingtoincreasednum-bersofslumdwellerswithlittleornoaccesstoshelter,water,sanitation,educationorfinance.UN-HABITATacknowledgesthatsustainableurbanizationcannotbeensuredwithoutthe� Address to UNA-USA Business Council, New York, �0 January 2007
helpfromtheprivatesector.
UN-HABITATiswellawarethattheprivatesectorisnotmerelyapartofthesolution,butinsteadisacriticalpartnerthatmustbeengagediftheworld’scitiesaretoachievesustainability.Privatesectorpartnershipsandtechnologiesarekeytopracticalsustainabilityincities,particularlyindeliveringsustainableurbanisa-tionatscale.
Giventhechallengeofurbanpoverty,andwith1billionslumdwellersprojectedtorisetomorethan1.3billionby2020,meetingMillenniumDevelopmentGoal7targets10and11onslums,waterandsanitationwillrequireacon-certedapproachbyallpartnerstoland,basicinfrastructureandservices,affordablehousingsolutionsandaccessiblehousingfinancesystemsthroughpartnershipsengagingtheprivatesector.Inordertodothis,thereisaneedtoimproveunderstandingamongdecisionmakersregardingtheroleoftheprivatesectorandap-proachessuchaspublicprivatepartnerships.
Inthisprocess,twotypesofprivatesectorpart-nersneedtobeconsidered.OneistheGlobalLeadersknownworldwidefortheirengagementandcontributiontosustainabledevelopmentandtheircommitmenttotheMillenniumDevelopmentGoals.Thesecompaniesadvocateforsustainabledevelopmentapproaches.Theyarecommittedtoeco-efficiency,innovationandcorporatesocialresponsibility.Theywanttoparticipateinpolicydevelopmentinordertocreateaframeworkthatallowsbusinesstocon-tributeeffectivelytosustainabledevelopment.Theywanttodemonstratebusinessprogressinenvironmentalandresourcemanagementandcorporatesocialresponsibilityandtosharelead-ing-edgepractices.
Small-andMedium-sizeEnterprises(SMEs)representawiderangeofprivatesectorcompa-nies,fromtechnologiestoservices,andarethemaincontributorsinareasaddressedbyUN-HABITAT’smandate.Theyincludeprofession-
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UN-H
ABIT
AT a
nd th
e bu
sine
ss c
omm
unity
alsinconstruction,technologyandservicepro-viders(architect,planners,builders,realestateagents,etc.)thatareinvolvedinmajorurbaninfrastructureandconstructionprojects.Theseactorsarealreadyengagedinpolicydialoguewiththeirgovernmentslocally,andwork,onamodestscale,withtheUNthroughprofessionalassociationsandnetworks.Yettheydonotyetworkonascalethattakesthebestadvantageofmarketopportunitiesthatcanaddressbothprivatesectorneedsanddevelopmentneeds.
AsSMEsoperateontheground,theyarelikelytocontributeagreatdealtopolicydiscussions.Theycouldexpandtheirimpactbyexchang-ingbestpractices,demonstratingeffectivetechnologiesthatcanaddressthechallengingneedsincitiesandfindingnewavenuesandbusinessopportunitieswithnewpartners,beitcitymanagers,NGOs,foundationsandotherprivatesectorcompaniescomplementingtheirbusinesses.
Milestones
1972UNConferenceontheHumanEnvironmentconvenedinStockholmtodealwiththeper-ceivedthreatofhumanactivitytotheenviron-ment.1974HabitatandHumanSettlementsFoundationestablishedtomobilizefinanceandinvestmentforhumansettlementsactivities.
1976HabitatIConference,Vancouver:Worldlead-ersstartedtorecognisetheconsequencesofrapidurbanisation,especiallyinthedevelopingworld.1978 EstablishmentoftheUnitedNationsCentreforHumanSettlementsinNairobi,basedontheUNHabitatandHumanSettlementsFounda-tionandtheCentreforHousingandBuilding,whichwaspartoftheUNSecretariat.1988TheUNGeneralAssembly,inits83rdplenarymeeting,adoptstheGlobalStrategyforSheltertotheYear2000withthemainobjectiveofimprovingthesheltersituationofthedisad-vantagedandthepoor,andthefundamentalobjectivesofenablingpolicies,“Whilethe
privatesectorhasalmostinvariablyproveditselfmoreefficientthanthepublicsectorinproduc-inganddistributingshelter,itcannotfunctionwithoutamatching‘enabling’frameworkprovidedbythepublicsector’.1992Agenda21,RiodeJaneiro.RepresentativesofallofthemajorgroupsidentifiedinAgenda21–businessandemployers’organisations,tradeunionsandworkers,NGOs,indigenouspeoples,localauthorities,youthgroups,wom-en’sorganisations,farmersandthescientificcommunity–engagedinthedevelopmentandimplementationofpolicyframeworksforsustainabledevelopment.1996HabitatIIConference,Istanbul.TheHabitatAgendaofficiallyrecognisespartnershipasakeyprincipleforitsfuturework,includingtheprivatesectorasakeypartnerwithwhichtoengage.ThesuccessfulimplementationofTheHabitatAgendareliesontheabilityofmanydifferentactorswithinthehumansettlementssectortoworkinpartnership.TheHabitatAgendadescribeswaystopromoteefficientlandmarketsandsustainablelanduse,mobilizesourcesoffinancingandfacilitateaccesstolandandsecurityoftenure.2000MillenniumDevelopmentGoals:UN-HABI-TATinchargeofMDGGoal7–Targets10and11toimprovethelivesofslumdwellers,accesstowaterandsanitation.LaunchoftheUNGlobalCompact.UN-HABITAT,aspartoftheUNfamily,supportsthetenprinciplesoftheGlobalCompact.2001 TheUNGeneralAssemblytransformsUN-HABITATintoafullyfledgedprogrammeandcallsuponitsExecutiveDirectortoreviveandrevitalizetheHabitatandHumanSettlementsFoundation.2002 WorldSummitonSustainableDevelopment.TheJohannesburgDeclarationandthePlanofImplementationreaffirmedcommitmentsmadeintheEarthSummitin1991,andpledgedallegiancetotheMDGs,alsorecognisingthattheprivatesectorisnotonlypartofthesolu-tion,butavitalpartthatmustbeengagediftheworldistoachievesustainability.
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Urbanisation Challengesand the Private SectorThe private sector and the UN share com-mon objectives of more efficient, productive and inclusive cities. The challenge is to harness profit towards sustainable urbani-zation.
The urban transition has been reachedWehaveenteredintoanurbanmillenniumwhere,forthefirsttimeinhistory,morethanhalfofhumanityislivingintownsandcities.Closeto3billionpeople,orabout40%oftheworld’spopulationby2030,willneedtohavehousingandbasicinfrastructureservices.Thistranslatesintocompleting96,150housingunitsperdayor4000perhour.Thechallengeishigherindevelopingeconomies,whicharewit-nessingthegrowthofslums.Currently,morethanonebillionpeoplearelivinginslums.Overthenext25years,over2billionpeoplewilladdtothegrowingdemandforhousing,watersupply,sanitationandotherurbaninfra-structureservices2.
Housing CrisisThehousingcrisiscomesatatimewhentheglobaleconomyhasdemonstratedconsistenteconomicgrowth.However,despitethisim-pressivegrowth,povertyremainsan“enduringproblem”asapproximately64percentofthepopulationinAfricaandSouthAsiastilllivebelowUS$2aday.Mostcritically,suchlowincomespreventthepoorfromaccessingbettershelter.ThehighestpriorityforUN-HABITATisim-provingaccesstosafewaterandhelpingprovideadequatesanitationtomillionsoflow-incomeurbandwellers.Worldleadershavecommittedthemselvestoreducebyhalftheproportionofpeoplewithoutsustainableaccesstosafedrink-ingwaterby2015andtohalveby2015,theproportionofpeoplewhodonothaveaccesstobasicsanitation.UN-HABITATisalsocom-mittedtoimprovingthelivesof100millionslumdwellersby2020.Althoughthetaskisenormous,itisnotinsurmountable.Improvingaccesstowaterandsanitationinlowincomeurbansettlementsispossible.
2UN-HABITAT, Global Report on Human Settlements, 2005
Private sector is a key player in reach-ing the Millennium Development Goals Itisnotsimplyamatterofprovidingmoremoney.Consumershavetobeservedbymoreefficient,responsiveutilitiesandthatmeansanincreaseintheroleoftheprivatesectorinthemanagementandfinancingoftheseutilities.TheUNMillenniumProjectestimatesthatupgradingslumsandmeetingTarget11oftheMillenniumDevelopmentGoalonimprov-ingthelivesof100millionslumdwellerswillrequireinvestingUS$4.2billionperyearor$294billion(US$440perperson)overtheperiod2005to2020.Muchofthefundingforslumupgradingwillhavetocomefromsubsidies,loans,savingsandself-helpanddonorcontributions.
In order to ensure sustainable urbani-zation, cooperation with the private sector is a necessity, not just an optionMostprivatesectorenterprises–frommanufac-turingtoserviceindustries–arebasedincities,wheretheyhaveaccesstotheinfrastructure,labourandmarketsnecessaryfortheirexist-enceandgrowth.Thedeteriorationofurbaninfrastructure,labourandmarketsisathreattosustainablecities.Theprivatesectorhasamajorstakeinmaintainingthehealthoftheseurbansettlements,sotheycanensuretheirownsustainability.
Urbanization Scenario•By2030itisexpectedthat60%oftheworldpopulationwillliveinurbanareas;almost180,000peopleareaddedtotheurbanpopula-tioneachday;•Theurbanpopulationofdevelopingcountriesisexpectedtoreach50%in2020.Itwilldou-blefrom2billionin2000tonearly4billionby2030.•Almostonebillionpeopleworldwidearelivinginslums.Withoutradicalchangethatnumbercoulddoublein30years.By2050,theremaybe3.5billionslum-dwellers,outofatotalurbanpopulationofabout6billion.
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Urba
nisa
tion
Chal
leng
es
Reaching the Millennium Development Goals (MDGs)
Engaging business to achieve MDG 7 Target 10Halve, by 20�5, the proportion of people without sustainable access to safe drinking water and basic sanitation •2.6billionpeoplelivewithoutaccesstoap-propriatesanitation•InvestmentmustdoublefromthecurrentUS$15billionto$30billionannuallytoachievetheMDGTarget10•InAfrica,onanaveragetherequirementforwatersectorfinanceis1.3percentofGDPand1.4percentforsanitation.•Theshareofprivatesector’sinvestmentshouldincreaseinordertoreachMDGtarget10
Engaging business to achieve MDG 7 Target 11Improving the lives of at least �00 million slum dwellers by 2020•US$4.2billionperyearneededoverthe2005-2020periodoratotal$294billiontomeetMDGTarget11•Fundingforslumupgradingtocomefromsubsidies,loans,savings,self-help,donorscontributions•PrivatesectorisakeyplayerinreachingMDGtarget11
Slums - Key facts• Worldwide, 18% of all urban housing units (some 125 million units) are non-permanent structures and at least 25% of all housing (175 million houses) does not meet urban construc-tion codes. • For every 10 non-permanent houses in the cities of developing countries, 3 or 4 are located in areas prone to floods, landslides, hurricanes and earthquakes.• When 4 or more people live together in one tiny room, they experience a loss of dignity and are susceptible to infectious diseases and domestic violence.• In 2003, two-thirds of overcrowding was in Asia with half of the people (156 million) in Southern Asia. Africa ranked second in 2003 with 75 million suffering overcrowded conditions.• Sanitation and health are interlinked. As many as 1.6 million people die annually as a result of poor sanitation and hygiene.• In 2002, nearly half the developing world (2.5 billion) had no access to proper sanitation – Asia (1.98 billion), Africa (470 million), Latin America and the Caribbean (130 mil-lion).• Between 1990 and 2002, some 1.1 billion people were able to access safe drinking water, a global rise in coverage from 77% to 83%.• But the number of people without access to improved water will double between 1990 and 2010 from 108 million to 215 million.• Only two-thirds of the global urban popula-tion gets water from a tap – Latin America and the Caribbean (89.3%) ranks top and Sub-Saharan Africa (38.3) at the bottom.Source: UN-HABITAT, State of the World’s Cities Report 2006
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$3,000 - $20,000
Market:$12.5 trillion
population: 1.4 billion
population:4 billion
Market: $5 trillion
Income per capita/year:
<$3,000
4 billion people earning less than $3,000 per annum at the bottom of the pyramid
The markets at the bottom of the pyramid (BOP)
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Addressingthe Bottom of the Pyramid
Thereisastrongdemandamongtheurbanpoorforbetterservices,aswellasademon-stratedabilitytopayforthoseservicesfromtheurbanpoorthemselves.Thefailureofgovernmentsandtheprivatesectortoprovideadequateservicesisinfactacontributortopoverty.Slumdwellersoftenpayfarmoreforwaterofpoorqualitythanresidentsofwealthierneighbourhoods,wherepipedwaterissupplieddirectlybythecity.Similarly,whilerentisregularlypaidtolandlordsbymillionsofslum-dwellers,thequalityoftheshelterprovidedisusuallyverysub-standardandrepresentsamajorfactorinthepoorhealthandsecurityconditionsofpeoplelivinginslums.Intheseandmanyotherareasthereareclearopportuni-tiesforimprovingthelivesoftheurbanpoor,throughtheprovisionofadequateservicesthatthepoorthemselveswillpayfor.
ForUN-HABITAT,thechallengeistoaddressthemarketsatthe“bottomofthepyramid”.DevelopedbyPrahalad,theBottomofthePyramidargument1isthatglobalfirmshavedemonstratedtheirabilitytocreatewealtharoundtheworld.Butboththewealthcreatedandthemarketsthattheseglobalfirmsreach,whicharemiddleandupperclass,donotyetreachmostofthe4billionpeoplewholiveinrelativepovertyatthebottomoftheeconomic� C.K.Prahalad and Stuart L. Hart, 2002
pyramid.Itispossibletoexpandtheglobalmarketsystemtoincludethosewhonowhavenostakeinit—toeffectivelygrowthemarketatthebottom,providingdirectbenefitsandexpandedopportunityforpoorcommunities.Prahaladsays:“Wearenotsuggestingthatprivatesectoractionscansolvealltheproblemsofdevelopingcountries.Targetedinternationalaidandimprovedgovernancewillstillbeur-gentlyneeded.Butitseemsclearthatthedirectandsustainedinvolvementofmultinationalcompaniescouldradicallyimprovethelivesofmanypeopleinpoorcommunitiesandprovetobeapowerfulcatalystfordevelopment.”
Businessesusuallybelievethatprofitisbestachievedatthetopormiddleofthepyramid-the1.5to1.8billionpeoplewithanannualin-comeof$1500-20000US).Thewidermarketisatthebottomofthepyramidandcomprises4billionpeoplewhohavelessthenUSD3000peryearinlocalpurchasingpower.Itisherethatcompaniescanmakesmallerprofitsbutwithalargermarket.Thereareopportunitiestoexpandtheglobalmarketsysteminordertoprovidedirectbenefitsandexpandedopportu-nitytopoorcommunities,whileatthesametimeprovidingnewopportunitiesforprofitforthebusinesssector2.
Finding solutions at the “bottom of the pyramid”Atthebottomofthepyramid,thepoorliveinveryhigh-costeconomies.Forinstance,urbanslumdwellerswithoutaccesstomunicipalwaterpay4to100timesasmuchfordrinkingwaterasdomiddleandupperclassfamilies.Inslums,creditisunavailable,oravailableonlyfromlocalmoneylenderswhochargeunreasonableinterestonadailybasis.Addressingthe“bottomofthepyramid”inurbanslumsbyprovidingshelterandbasicservicesolutionsfortheurbanpoorrequirestheinvolvementoflargeprivatesectorcompanies.Italsorequiresinvolvementoflocalbanks,
2 Allen L. Hammond, William J. Kramer, 2007
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Addr
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BOPpopulationsegmentisdefinedasthosewithannualincomesuptoandincluding$3000percapitaperyear(2002PPP).Source:WRI,IFC,2007
Region BOPincome(mil-lions)total(PPP)
BOPshareoftotalincome(%)
BOPpopulation(millions)
BOPshareoftotalpopulation(%)
Africa 42.9 70.5 486 95.1
AsiaincludingMiddleEast 3,470 41.7 2858 83.4
EasternEurope 458 36.0 254 63.8
LatinAmericaandCaribbean 509 28.2 360 69.9
The markets at the bottom of the pyramid (BOP), by region
medium-sizedenterprisesaswellassmallentrepreneurs,mostlyfromtheinformalsector,whoareessentiallythedriversoftoday’smostdevelopingurbaneconomies.Partnershipsbetweenthesedifferentbusinesslevelsaswellastrainingofunemployedorunskilledlaboursareessential.Whilelargenumbersofunem-ployedpeoplecouldbetrainedinconstructionjobsandsmallbusinessenterprises,lowincomehouseholdscouldalsochannelpartoftheirincometomicro-creditschemesforupgrad-ingtheirhomes.Thislowincomesegmentofsocietyissimplytoooftenignoredorneglected.Becauseofthis,slumsaregrowingacrosstheworldandtheuntappedandunrealizedre-sourcesthatexistwithinslumsandlow-incomepeoplearebeingoverlooked.
Addressingthe”bottomofthepyramid”mar-ketsrequiresnewproductsandservices–thosethataremarketabletolowincomegroupsandwhereriskisminimized.ThemobilephonesectorhasbeenverysuccessfulinAfricaandhasdevelopedinnovativewaystoreachthelow-incomemarketandstillretainprofitability.Whenitcomestoshelterinfrastructureandhousingfinance,thechallengeisofanothernature,andriskneedstobealleviatedbyanexternalpartyorthroughalliances,establishingsynergies,creatingconsortia,venturegroupsandinvestmentfundsaimedatseedingentre-preneurialventures.
Working with all partners at the “bot-tom of the pyramid” Thechallengeistoworkwithallpartnersatalllevelsofsociety:-smallandmedium-sizedenterprisesthatarethekeyprivateoperatorsontheground;thosealreadyfunctioningasenginesforpracticalactionandinnovationwiththecommunitiesat
thebottomofthepyramid;-globalprivatesectorleadersthatcanprovidebusinessleadership;-governmentthatcanregulate,deregulateandprovideincentivestobusinessinordertoexpandtoincludethelow-incomepopulation;-UNplayingabrokeringrole,bringingdiffer-entpartnerstogetherandnegotiatingkeyissuesandactionsthatcanreinforcemarketsatthe“bottomofthepyramid”.
Theinformalsectoriscentralinaddressingtheneedsoftheurbanpoor,asmostlivelihoodsinthissectorareinformal.TheInternationalLa-bourOrganizationestimatesthatmorethan70percentoftheworkforceindevelopingcoun-triesoperatesintheinformalorundergroundeconomy.Theinformaleconomyaverages30percentofofficialGDPinAsia,40percentinEasternEurope,43percentforbothAfricaandLAC,soalthoughinformal,itisaformidableforceintheeconomy.
The challenge is to start identifying and harnessing areas for profit towards sustainable urbanization and exploring untapped opportunities in cities.Thiswillrequiresignificantrethinkingofthepracticesoftheprivatesectorandthevisionsofnationalgovernmentstoembracetheprivatesector.Itmeansintegratinginformaleconomicactivitiesandensuringhealthygovernanceandsaferegulatoryframeworksthatcanmakethishappen.Fortheprivatesector,thiswillrequirefocusingonuniqueproducts,servicesandtechnologiesthataddresstheneedsatthe”bot-tomofthepyramid”.Thatwillrequirebuildingadequatesupplychainforproductstoreachtheirtargetsandbuildingthenecessarycapacityincommunitiestoutilizetheseproductsfortheirbenefit.
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Responsible Business Practices and Corporate Social ResponsibilityWhilephilanthropyandcharitableapproachesundoubtedlymakeanimportantcontributiontoimprovingthewelfareofindividualsandcities,theyonlymakesasmallcontributiontosustainableurbanizationcomparedtocorebusi-nessfunctions.Corporatesocialresponsibility(CSR)goesastepfurtherbyextractingsocialresponsibilitycomponentsfromtheprivatesectorinlinewiththeirdefinedcorporategoals.However,inmanycases,theseapproachesremainsuperficial,anddonottrulyaddressthe‘triplebottomline’,whichdemandsafocusnotjustontheeconomicvalueaddedofbusiness,butalsoontheenvironmentalandsocialvalue.
Thereisagrowingconsensusthatcompaniesactivelyengagedinmanagingtheirimpactsonsustainabledevelopmentaremorelikelytoperformbetterfinancially.Suchcompaniesnotonlyintroducesustainabledevelopmentstandardsintheirapproaches,butalsodevelophumanrightsandcorelabourstandardsintheircorporatecommitments.Theyreporttheirsuc-cessesandfailurestothepublic,usingcorporatesocialresponsibilityreports.TheUNGlobalCompactinitiative(seebelow),launchedin2000,reflectsandsupportsbusinessesthathaveunderstoodthevalueofsuchprocessesfortheirowncorporatedevelopment.
Theuseofindicatorsfordevelopmentbyinter-nationaldevelopmentagenciesandbycorpora-tions,suchastheGlobalReportingInitiative,presentnewopportunitiestotrackprivatesec-torcontributionstosustainabledevelopment.Suchtoolsallowcorporationstomovebeyondtraditionalphilanthropytowardsstrategicsocialinvestmentswithdefinedbenchmarksandquantitativetargetsthatbudgetandreportonresultsontheirprogress.Thesenewtoolsalsoallowforacleareridentificationofbusinessmodelsthatwork.
Theresearchonbusinessmodelsthataddress“bottom-of-the-pyramid”marketshasbecomeanavenuetomovetowardsmoreinclusiveand
sociallyresponsivebusinessapproaches.Inparticular,newbusinessmodels,tailoredforthepoor,canadvancerevisedstandardsofsustain-abilityandpublictrust.Businessescanalsoreinforcesupplychainandcapacity-buildingtostrengthensmallentrepreneurs,mostlyintheinformalsector.
Sofar,corporationsandbusinesseshavebeenshyaboutoperatingintheslums.Theysimplydonotyetseethepotentialinthisvastandas-yetuntappedmarket.“Bottomofthepyramid”approachesopennewdirectionsfornewtai-loredbusinessmodelsthatcanaddressmarketsinslumsareas.Slumsofferlargeecosystemsofunrealizedmarketopportunitiesandunderusedskillstobeexplored.
The United Nations Global CompactLaunched in 2000, the United Nations Global Compact is an international vol-untary initiative that brings companies together with United Nations agencies, labour and civil society to support ten principles in the areas of human rights, labour, the environment and anti-cor-ruption.
The ten principles:
Human Rights1Businessesshouldsupportandrespecttheprotectionofinternationallyproclaimedhumanrights,and2makesurethattheyarenotcomplicitinhu-manrightsabuses.
Labour3Businessesshouldupholdthefreedomofassociationandtheeffectiverecognitionoftherighttocollectivebargaining,4theeliminationofallformsofforcedandcompulsorylabour,
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SR5theeffectiveabolitionofchildlabour,and6theeliminationofdiscriminationinrespectofemploymentandoccupation.
Environment7Businessesshouldsupportaprecautionaryapproachtoenvironmentalchallenges,8undertakeinitiativestopromotegreaterenvi-ronmentalresponsibility,and9encouragethedevelopmentanddiffusionofenvironmentallyfriendlytechnologies.
Anti-Corruption10Businessesshouldworkagainstcorruptioninallitsforms,includingextortionandbribery.Source: http://www.unglobalcompact.org/
The Business Partnership for Sustainable Urbanization (BPSU)
TheBusinessPartnershipforSustainableUrbanizationisastrategicallianceofbusi-nesscompanies,includingfoundationsandotherpartners,workingtowardssustainableurbanization.UN-HABITAT’sbrokeringroleinBPSUwillbetopromotedialoguebetweenpartnersandhelpthemtakeconcreteaction.Thepartnershipwillalsoprovidecutting-edgeinformationonurbanizationissuestohelpidentifymarketopportunitiesaswellasbusinessmodelsthatwork.
Objectives•Todisseminateandsharefirsthandknowledgeoftheproblemsfacingcitiesaroundtheworld,tostimulateprivatesectorinterestandcreateaframeworkthatallowsbusinesstocontributeeffectivelytosustainableurbanization.•Toidentifyuntappedmarketopportuni-tiesandbusinessmodelsthatworktoaddresssustainableurbanizationinordertoattractbusi-nessinvestment,particularlythroughcorporatesocialresponsibility.•Toofferbrokeringsolutionsbetweenpartnersincitiesbringingtogetherbusiness,localauthorities,urbanenvironmentalactivistsandlocalcommunities.•Toencourageandinitiatelocally-driveninitia-tivesthataddresstheurbanpoor,suchastheSlumChallengelocalinitiatives.
UN-HABITAT’s alliances with the business community
UN-HABITATseeksallianceswiththebusinesscommunitythatcanhelpusfulfillitsmission,bysupportingitswork,directlyorindirectly.UN-HABITAT’sallianceswiththebusinesscommunitycantakemanyforms:program-maticalliances,advocacy,fundraisingsupportorin-kindcontributions.
UN-HABITATlooksforpartnershipswithen-titiesthatdisplaycorporateresponsibilityinthecommunity;makeapositivecontributiontotheurbanenvironment;havearecordofsocially-re-sponsivebehaviour;andhaveresponsivelabourandenvironmentalpractices.
Also,businesspartnersareencouragedtoadheretotheprinciplesoftheGlobalCompact(above).Businesspartnersshouldshowacom-mitmenttodevelopingandadoptingpolicies,strategiesandpracticesthatfacilitatetheprovi-sionofbasicinfrastructureandurbanservices,includingadequatesanitationandsafewater,wastemanagement,sustainabletransportthatisintegratedandaccessibletoall,andaccesstoaffordablelandandshelter.Theyneedtodem-onstratetransparentandaccountablemanage-mentofservices,aswellastheinclusivedeliveryofthoseservicesinordertoreachtheurbanpoor.Businessentitiesshouldalsodemonstratewillingnesstoengageinmulti-stakeholdersdialoguewhenappropriate.
UN-HABITATgivesspecialattentiontosomeindustrysectorsworkingintheareaofshelterandbasicservicesandcontributingtoimprov-ingthelivesofslumdwellers:construction,servicesandinfrastructures,realestate,finance,energyandcommunication.
UN-HABITATfollowstheGuidelinesonCo-operationbetweentheUnitedNationsandtheBusinessCommunityissuedbytheSecretary-GeneraloftheUnitedNationson17July2000.http://www.un.org/partners/business/otherpages/guide.htm
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CHALLENGE 1Water and Sanitation
Intheyear2000,therewere1.1billionpeoplewithoutaccesstoimprovedwatersupply,ofwhich16percentwereurbandwellers,and2.4billionwithoutaccesstoimprovedsanitation,ofwhich17percentwereurban.Mostoftheworld’sgovernmentsandinternationalagencieshavecommittedthemselvestotheMillenniumDevelopmentGoals,andmorespecificallythetargetofhalving,by2015,theproportionofpeoplewithoutsustainableaccesstosafedrink-ingwaterandbasicsanitation.Ifthisandre-latedtargetsareachieved,billionsoftheworld’spoorestcitizenswillbeabletolivehealthierandmorefulfillinglives.
Waterisoneofthemostimportantissuesintheworldtoday.Thereareanumberofreasonsforthat.First,accesstowaterisarightandabasicneed.Second,althoughwateristhesubjectofonlyoneofthegoalscontainedintheMillenniumDeclaration,itisvitaltoachiev-ingtheothers,suchaspoverty,educationandgenderequality.Third,accesstocleanwaterandpropersanitation,andattentiontowastewaterdisposalandtreatment,hasprovenbenefitsforpublichealth.Fourth,effectivewaterresourcesdevelopmentandmanagementarebasictosustainablegrowthandpovertyreduction,inseveralways.
Deficient Financing of the water sectorThe“WaterSector”hasmanyfacets,butthemostbasicdistinctionisbetweenwaterasaresourcetobedevelopedandmanagedforthebenefitofallitsfunctionsandusers,andwaterasaservice,tobeprovidedtoitsmanyusersafterabstractionfromtheresource.Bothaspectsneedfinancing,andbotharecurrentlydeficient.
Thesecondfacetofthewatersectoristheprovi-sionofservices,andhereagaintherearelargeglobaldeficits.Africahas38%ofitspopulationunservedbysafewaterand40%arewithoutsanitation.Asiahas19%withoutsafewaterand52%withoutsanitation.LatinAmericaandtheCaribbean;15%withoutwaterand22%withoutsanitation.Inthemid-1990sthebreakdownoffinancialsourcesforwaterandsanitationwasestimatedtobedomesticpublicsector65–70%,domesticprivatesector5%,In-ternationalDonors10–15%andinternationalprivatecompanies10–15%.
Thewatersector’sfundingofinvestmentfromitsowncashflowhasshownlittlechange.Internationalaidforwaterandsanitationhasfalleninthelastfewyears-(at$3.1billionayearin1999–2001,comparedwith$3.5billionin1996–98).LoansfromthemainMFIstothewatersectorhaveshownavariedtrend.World
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Bankannuallendingapprovalsforwaterandsanitationaveraged$1.1billionin1999–2001,slightlydown(from$1.25billionin1990–98)butwithgreatyear-to-yearvariation.
TheAsianDevelopmentBank’slendinghasbeenrising,thoughwithyeartoyearfluctua-tions($275millionayearin1996–2000,com-paredwith$200millionayearin1990–95).LendingbytheAfricanDevelopmentBankhasalsobeenrising,althoughatalowerlevelthanthosementionedabove.Internationalprivateinvestmentandcommercialbanklending,neverlarge,havesufferedfromthegeneraldeclineinprivateflowssincetheirpeakin1996–97.Waterandsewerageprojectsreceivedonly5.4%ofallprivatecommitmentstoinfrastructureinthe1990s.
Business opportunitiesThepoolofprivatecompanieswiththeresourcesandwillingnesstoinvestinwaterandsanitationremainaninvaluablesourceofknow-howandpotentialforinnovation.IntheframeworkofwelldesignedPrivateSectorParticipation(PSP)schemes,theycouldbeessentialactorsinrespondingtotheneedsofarapidlyurbanisingworld.
Itisacknowledgedthatthereisaneedforpartnershipstomaximizethebenefitsthatbothpublicandprivatesectorscancontributetothewaterandsanitationsector.Privatesector
participationinthewatersectorisexpectedtobringgreaterefficiencytomanagement,mobi-lizeinvestmentfundsforsectordevelopmentandbringautonomyofoperationsthroughlegalcontracts.Oneoftherationalesforprivatesectorinvolvementisforincreasingaccessandimprovingthelevelofservicethroughbench-markingandreducingnon-revenuewater.Themainprivatepublicpartnershipoptionsincludeestablishmentofpublicautonomouswaterandwastewatercompanies,servicecontracts,man-agementcontracts,leases,concessions,‘Build,OwnandTransfer’(BOT)contractsandfullorpartialdivestiture.
Thereisnodenyingthefactthattherearecontroversiesoverprivateversuspublicwaterandsanitationprovision.Still,thereareenoughopportunitieswherebothprivateandpublicoperatorscanbemadetoprovidebetterservicestopoorersectionsinthelowincomeareas.Privatesectorparticipationcanbringprivatefinancetothesector.Therearemanysmallandinformalenterpriseswhicharefindinggoodbusinessopportunities,eveninlowincomeareas,forimprovingwaterandsanitationtodeprivedhouseholds.Inprinciple,thereisagreementthatprivateenterprisesoperatinginlowincomesettlementsprovidebetterservicestothosewhodonotyethaveadequateaccesstowaterandsanitation.Thereareampleexamplesofavailingsuchbusinessopportunitieswhichcanbereplicated.
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Water and Sanitation project with Coca Cola and UN-HABITATHopingtorestoresomeofthegoodwillthatmadeitsflagshipproductaglobalicon,Coca-ColaCo.hasgoneonaclean-waterkickinthedevelopingworld.InKenya,CocaColaCo.isprovidingwatersupplies,treatmentandstoragesystems,sanitationandhygieneeducationinschoolsandfourcommunitiesinawesternKenyanprovince.Sofar,Cokeanditsbottlershavespent$13.4milliononwater-relatedefforts.Another$35millionisbudgetedfor2007,includingcommunitywaterprojects,investmentsinwaste-watertreatment,andotherwork.Cokehas70communitywaterpartnershipsin40countrieswithgroupssuchasCAREandtheU.S.AgencyforInternationalDevelopment.CocaColaIndiaisinvestingin270rainwaterharvestingstructures,with50moreplannedthisyear.CocaColaIndiaisalsocontributingUS$150,000toundertakeseveralactivitiesinthewaterandsanitationsectorinpartnershipwithUN-HABITATondemonstra-tionprojectsrelatingtowaterconservation,sanitationinitiativesinslums,communityawarenessraisingprogrammesonwaterusage,sanitationandconservation.
Veolia, UN-HABITAT and UNITAR: Ac-cess to Basic Services for All Initiative Thisinitiativeseekstodevelopaninternationalstandardsframeworkonhowtobuildeffec-tiveandfairpublic-privatepartnershipsthatimprovethedeliveryofandaccessto,basicservices.Theprocessbringstogethervariousactors–publicandprivate,local,nationalandinternational–withthegoalofdevelopinga
referenceframeoftheirrespectiverightsandresponsibilitiesintheprovisionprocess.Forcompanies,suchaframeworkcreatesamorepredictableenvironmentforinvestmentandoperations.TheimpetusfortheinitiativecamefromVéoliaEnvironnement(formerlyVivendi),aFrenchcompanyinvolvedinternationallyinlocalutilitiesmanagementofwater,energyequipment,wasteandpublictransport.
Community Managed Water Supply Scheme in IndiaTheAsianDevelopmentBanktookupaninitiativeofpromotingSmallPipedWaterNet-worksinManila,Philippines;Hanoi,VietnamandAhmedabad,Indiabyinvolvinglocalsmallscalewaterproviders.UN-HABITAT,astheADBpartner,developedasimilarmodelinthethreecitiesofMadhyaPradesh,India,wherelocalprivatesectorentrepreneurs,inassociationwiththecommunityareprovidingpipedwatersupplytoindividualhouseholdsonafullcost
recoverybasis.Theframeworkallowsfor:(a)adoptionofademand-re-sponsiveapproachalongwithcom-munityparticipationintheproject;(b)community’sfullownershipoftheassets;and(c)100%responsibil-ityofO&Mwiththecommunity.Thesearequick-winprojectsimple-mentedover8-10monthsandareunderimplementationinselectedslumssettlementsoftheprojectcit-iesofGwalior,IndoreandJabalpurinMadhyaPradesh(India),oneofwhichhasalreadybeenlaunched.
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CHALLENGE 2Waste ManagementAppropriatemanagementofsolidwasteisessentialtothehealthandwell-beingofurbanpopulations,andthisinturnhelpsensuretheproductivityofbusinesses.Inmostdevelopingcities,garbageisleftuncollectedonthestreetseachday,actingasafeedinggroundforrelatedhealthandinfrastructuralproblems.Increasesinurbanwastevolumearedueprincipallytoincreasinglyaffluentlifestyles,ratherthanurbangrowth.Theurbanpoor–particularlythoselivinginslums,withlittleornoaccesstosolidwastecollectionandadjacenttoopendumps-areparticularlyvulnerable.
Reduce, recycle and reuse of wasteDespitemanygoodpracticesfromaroundtheworld,inappropriatetechnologies,particularlyforsolidwastecollectionanddisposal,stillexistinmanydevelopingcountries.Donor-providedequipmentisoftenunsuitableforthecomposi-tionandnatureofthewastewhilecollectionvehiclesarefrequentlyill-suitedtoextremesinclimateorroadconditions.Thisresultsinalargeproportionofvehiclesbeingoutofuse.Additionally,inappropriateoperationandlackofmaintenanceofwastehandlingequipmentisamajorcauseofbreakdowns.
However,inmanydevelopingcountries,highlyefficientsolidwastecollectionanddisposalequipmentisbeingproducedbylocallydevel-opedtechnologies,andconsequently,bottle-necksinthecollectionandcarryingtodisposalpointsofsolidwastehavebeeneliminatedinthosecountries.
Thechallengestobefacedwilldramaticallyin-creaseinthenext30yearsasaresultofboththerapidgrowthofdevelopingcitiesandincreasesinpercapitawasteproduction.However,itisbecomingclearthatassertiveeffortstoreduce,recycleandreusecangreatlycontributetosolutions.Inparticular,localauthoritiesshoulddesignenvironmentally-soundurbanstrategiestoaddressunsustainablepatternsofconsump-tionandproduction.Inthisprocess,thereis
growingevidencethattheprivatesectorneedstobeinvolved.
Business OpportunitiesIncitiesofdevelopingregions,asmuchas70percentofwastecanbeorganicmaterials.Notonlyisthisareclaimableresourceinitself,butrecyclingcanalsohelpreducedemandforvaluableandscarcelandfillspace.Inaddi-tion,organicwastedisposedofinlandfillareasgreatlyincreasesgreenhousegasemissions.Incitieswhereitsuseinagricultureisapossibility,compostingwouldbeasensibleoption.
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Althoughthesmall-scaleprivatewastemanage-mentsectorisoftenforgotten,itcanplayakeyroleinacity’soverallwastemanagementstrategy.Theincorporationofmicro-enterprisesandinformalwasterecyclingcooperativesinthemunicipalsolidwastemanagementsystemhasshowninterestingresults.Addressingthe“bot-tomofthepyramid”canbedonethroughthepromotionanddevelopmentofrecyclingcoop-eratives,whichalsoprovideawayofupgradingthelivingandworkingconditionsofinformalwastepickers,resultinginincreasedlivelihoods.
Privatizationcontractsandlegislationshouldbeflexibleenoughtopermittheentryofsmall-scaleserviceproviders,particularlyinlower-in-comeareas.InDelhi,100,000–150,000wastepickerscurrentlycollect12-15percentofthe6,000tonnesofwastegenerateddaily.Rational-izationofwastecollection,however,wouldnotbesufficientwithoutcreatingsanitarydisposalcapacities,intheformofeithersanitarylandfillsites,orrecyclingorincinerationplants.
Alexandria’s solid waste managementTheprivateFrenchfirmVeoliaEnvironne-mentandtheGovernorateofAlexandriahavejoinedhandsinthefirstpublicprivatepartnershipintheEgyptianwasteman-agementsector.Themainobjectiveistoprovideintegratedmanagementforthe1milliontonsofwastegeneratedeveryyearbytheover5millioninhabitantsintheGovernorateofAlexandria,fromcollec-tionandcleaningtotreatment,andfinalrecycling.Thepartnershipalsoincludescompostapplications,therehabilitationoftwoolddumpsitesandthecollectionandtreatmentofmedicalwaste.Theschemeprovidesemploymentfor4,500citycleaners,andisresponsibleforforthecollectionandtreatmentof2,500tonsofwasteeveryday(3,100tonsduringthesummer).Thesuccessliesinthefactthat100percentofthewasteistreated,while150,000tonsofcompostareproducedandsoldeveryyeartolocalfarmers,thusboostingfarminginthearea.ThewasteprojecthasbeenregisteredforalistingasacertifiedCleanDevelopmentMechanism(CDM)withintheframeworkoftheKyotoProtocol,becauseitinvolveslandfillgasrecoveryexpectedtoreducegreenhousegasemissionsbyapproximately3.7millionmetrictonsovertheperiod2005-2015.
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Ecological Plastic Inc., Costa Rica Plasteco´smissionistoconvertthebananaplasticwaste,thatcouldlast500yearsburiedunderground,intonewcompetitiveself-sup-portedmassiveendproducts,suitableforthecommunity.Therefore,Plastecocollects,reuse,andrecycleplasticscraptodevelopintonewproducts.Plastecohasalsodevelopedthetech-nologyforconvertingthegranulatedrecycledplasticintorooftilesandpolesforsustainingbananatrees.ThemainenvironmentalimpactofPlasteco’sinitiativeisthe37%reductionofthebananaplasticwastepollution.Thismeans350tonsperyearfromthetotalof950.000tonsspreadacrossCostaRica’sfarmareas.Plas-tecoiscleaningalmost17.500hectaresperyearfromatotalof48.000ha.Source: UN-HABITAT Best Practices Database, 2000. http://database.bestpractices.org/
Inclusion of Salvagers in the Waste Management Process, Odi-Moretale, South AfricaScavengerswereinvolvedintheimprovementofuncontrolledandunhealthywastedumpsintheOdi-MoretaleProvinceinSouthAfrica.Alldumpingsiteshavebeenidentifiedandanalyzed,includingthewastevolumesandthesourceofgeneration.Theprovincialdepart-ment’smainobjectivewastoestablishregis-teredwastedisposalsitesandtomanagethemeffectively,and,intheprocess,toaccommodatethesalvagers.Ateachsite,aleadermanagesthesalvageteamandactsasthespokespersonwiththesiteoperator.Cleandrinkingwaterandtoi-letfacilities,aswellashealthcareandeducationfacilities,areprovidedtotheworkers.Source: UN-HABITAT Best Practices Database, 2002. http://database.bestpractices.org/
‘El Ceibo’ Recycling cooperative, Buenos Aires, ArgentinaInArgentina,theeconomiccrisishasforcedmanypeopleoutofjobsandintoscavenging.InBuenosAiresaloneitisestimatedthatthereare25000cartonerosandmorethan14cartonerocooperatives.OnesuchcooperativeisCoop-erativaElCeibo,foundedbywomen,with102members,whoaremostlywomen.Thiscoop-erativehasestablishedacollectionandsortingfacilityanddevelopedsalesagreementsusingoneprivatesectorintermediary.Theyalsoworkonagarbageprocessingenterprisetorecoverpaper,glass,metals,plastics,andhouseholditemsandrecyclethem.Source: http://www.worldbank.org/urban/urban-forum2005/
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CHALLENGE 3ShelterMorethanonebillionoftheworld’stotalurbanpopulationliveininadequatehousing,mostlyinslumsandsquattersettlementsofthedevel-opingworld.Improvingthehousingconditionsofone-sixthoftheworld’spopulationconsti-tutesamassiveeconomic,social,andenviron-mentalchallenge.Overthenext25years,over2billionpeoplewilladdtothegrowingdemandforhousing,watersupply,sanitationandotherurbaninfrastructureservices.Whatiscriticalwhenconsideringthisnumberistheorderofmagnitude.Closeto3billionpeople,orabout40%oftheworld’spopulationby2030,willneedtohavehousingandbasicinfrastructureservices.Thistranslatesintocompleting96,150housingunitsperdayor4000perhour1.Althoughthestatisticsaredaunting,fromabusinessperspective,thisrealityrepresentsasignificantuntappedmarket.
Whilesomeprogressinaddressingthehousingdemandhasbeenachievedatthepolicylevel,privateinitiativeshavegenerallybenefitedmid-dle-incomeratherthanlow-incomefamiliesindevelopingcountries.Facedwithalmostnoformaloptions,thepooruseavarietyofincrementalandinformalmeanstomeettheirshelterneeds.Informalsystemsarestillthedominantshelterproducersinmanydevelopingcountries-anestimated60and70percentofthecurrenthousingstockinMexicoandBrazilisbuiltinformally,becausecurrentvaluechainsarenotadaptedtotheneedsandrealitiesofthisgrowinglow-incomemarket.Andwhileanumberofbottom-upinitiatives,throughtheactiveinvolvementofcommunitygroupsinhousinginitiatives,haveemerged,themajorityofbusinessesinthehousingsectorstillconsiderlow-incomepopulationstobeanunattractiveandriskytargetgroup.
� UN-HABITAT, Global Report on Human Settlements, 2005
Housing solutions through value chain collaborationsAspresentedbyAshokaatthe2006WorldUrbanForum,housingsolutionsforthepoormightresideinpromotinghybridvaluechainsofcollaboration.Whileanincreasingnumberofbusinessesarestartingtoexplorelow-incomemarketopportunities,mostofthemsoonrealizethattheyneedtolearnmoreaboutthesemar-ketsandfindinnovativewaystoaccessthem.Inthemeantime,thecitizensectorhasbuiltgrass-rootsnetworksandalternativeservicedeliverysystemsanddemonstratedsignificantoutreachcapacitiestolow-incomefamiliesthroughoutthedevelopingworldformanyyears.Thesenetworkscoveradiversearrayofspecializedservicestargetingbasichumanneedslikeeduca-tion,healthcare,andaccesstofinancialservices.
Whilebythemselvesmostofthesenetworksarenotprofitable,theyconstituteanoutreachinfrastructurethatcanservemultiplepurposes,oneofwhichisthedeliveryofvaluableprod-uctsandservicestothepoor.Thesenetworksarethecornerstoneonwhichtoestablishanewdeliveryinfrastructurecapableofreachinghundredsofmillionsofpeoplethroughmarket-basedsolutions.Civilsocietyorganizationsmustsensitizethemselvestothepossibilityofbuildingnewtypesofcommercialcollabora-tionsthatwouldfacilitatetheiraccesstothespecializedinfrastructureandfinancialresourcestypicallyavailableonlytobusinesses,andtosignificantlyincreasingtheirimpact2.
Atthesametime,businesseswillneedtochangetheirperceptionofthecitizensector,recognizingthemasco-designersofsolutionsandfindingwaystocompensatethemfairlyfortheassetsandskillstheybringtothepartner-ship.Alternatively,theycouldalsoconsideradoptingandscaling-upspecificelementsofsocialinnovationsdevelopedbycivilsocietyorganizations.Fromprovidingaccesstobasic
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services(water,sanitation,electricity)todis-tributingbuildingmaterials,therearemultiplevalue-addedstepsthatconstitutethehousingvaluechain.Businesseswillbeabletoenterlow-incomemarketsmorerapidlyandprofit-ablyiftheylearntotapintotheknowledgeandresourcesofcitizenorganizations.Multi-partnercollaborationsarerequiredtocreatean“ecosys-tem”becausemanyservicesareinterdependentandfeedeachother(suchasaccesstoland,basicservices,financingandtheconstructionprocess).
Opportunities for Value Chain collabo-rations in housing Construction process3
1. Main barriers to serve low-income markets profitably•Smallindividualtransactions•Limitedfinancingavailable•Limitedconstructionskills•Lackofexistingdistributionchannelsinslums
2. Potential value proposition of citizen organizations•Organizecommunities•Createdemandforbetterenvironment/changemindsets•Aggregatedemand(forconstructionmaterialsforexample)•Providealternativedistributionchannels•Providetechnicalassistance(createnewskillsandemploymentopportunities)
3. Examples of main players needed•Constructionmaterialcompanies•Distributors•Constructors(largeandsmall)•CSOs
Low-cost, energy efficient, eco-friendly shelterTheconstructionindustryindevelopingeconomiesisfacinganimmenseandappar-entlyworseningproblemofrequiredmateri-alsshortageaggravatedbyrisingprices.Inmostcountries,frequentshortageshaveledtofurtherincreasesinpricesandprofiteering,thus� Ibidem
marginalizingmoreandmorepeoplewhowishtobuildhomesandshelter..Theconsequentimpactsaresevere:skyrocketinghousingcostsandexpandingunplannedsettlementsinurbanareas,andanever-deterioratinghousingqualityinbothurbanandruralsettlements.
Together,publicpolicyandprivateinvest-mentshouldfacilitateanadequatesupplyofcost-effectivebuildingmaterials,constructiontechnologyandbridgingfinancetoavoidthebottlenecksanddistortionsthatinhibitthedevelopmentoflocalandnationaleconomies.Byimprovingthequalityandreducingthecostofproduction,housingandotherstructureswilllastlonger,bebetterprotectedagainstdisastersandbeaffordabletolow-incomepopulationsandaccessibletopersonswithdisabilities,whichwillprovideabetterlivingenvironment.
Moreandmore,businessespromotetheuseofinnovativecompositematerialsbasedonlocalresourcesfromforestry,agriculture,naturalfibres,plantmaterialsandotherlocalresourceslikeagriculturalandindustrialwastesavail-ablewithinsmallgeographicalregions.Besidesmeetingtheneedsofthehousingsector,thein-dustrialproductionofthesecompositematerialswouldgreatlyhelpinenvironmentalprotection,energyefficiencyandemploymentgenerationinthemanufacturingsector.
Cemex, MexicoCEMEX,Mexico’slargestandtheworld’sthirdlargestcementcompany,createdtwokeypro-grammestotapintothelargepoorpopulationofMexico,where60%ofthepeoplesurviveonlessthan$5aday.PatrimonioHoytargetsthelowincome,do-it-yourselfhomebuildersegmentofthepopulation.Itissetuplikeamicrocreditscheme,withsmalllendinggroups,butthesavingsareusedtopurchasecementandotherbuildingmaterials.PatrimonioHoytripledtherateofcementconsumedbylowincome,do-it-yourselfhomebuilders.CEMEXhasnotdevelopedlowercostorlowerqualityproductsforlow-incomemarketsbutoffersitsstandardproducts.Inadditiontocement,supplyincludesmorethan200otherbuildingmaterialsprovidedbyotherdistributors.Newmembersreceivefreeadvicefromanarchitect/engineeraboutdesign,planning,selectionof
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materials,andconstructiontechniques.Thisassistanceisveryvaluabletodo-it-yourselfhomebuilderswhocanwasteupto30percentofmaterialsduetoinappropriatemethods.Morethan130,000familieshavegonethroughPatrimonioHoy,improvingtheirlivingcondi-tionsandbuildingroomsfasterandatanaver-ageof80percentofpreviouscosts.PatrimonioHoyaimstoreachoveronemillionfamiliesby2010.Itdoesnotcurrentlytargettheverypoor;instead,ittargetsthoseearningbetweenUS$1,825andUS$5,475peryear,mostlyinurbanandperi-urbanareas.Source: United Nations Development Programme (2004), Unleashing Entrepreneurship: Making Business Work for the Poor, Commission of the Private Sector for Development, New York: United Nations Development Programme. Page 32
Mutirões, BrazilInBrazil,low-incomecommunitieshavealonghis-toryofbandingtogetherintheformofsocialmovementstopressthegovernmenttoprovideland,services,etc.Atthesametime,unwillingorunabletorelycompletelyonthestate,thesecommunitieshavecometogetherafterworkandduringweekendstoconstructtheirhomesandneighborhoodsthemselvesthroughmutualselfhelpprojectscalled“mutirões”-aphenomenonthatoccursinmanydevelopingcountries.Inspiteofamorelengthyprocess,thecommunityapproachreducescosts.Itisalsoinstrumentalinteachingself-managementandnumerousadministrationskillstothecommunity.Whilemutirõesarenotnew,thepracticeofleveragingthemasamat-terofpublicpolicytohelpmeetthegrowingdemandforlow-incomehousingisrelativelyrecent.InSãoPaulo,BairroLegalarrangedfordesignatedcommunitiesengagedinmutirão
toreceivemicrocreditforbuildingmaterials.Twobankspartneredwiththemunicipalitytoprovidethefinancing.Source: Schmidt Stephanie, Ashoka, 2006
ADAPT, Egypt Between1966and1986,80percentofthehousingbuiltinEgyptwasshantyhousingbuiltbylocalmasonsortheresidentsthemselves.The“slumupgrading”marketisthusasignificantcenterofdemandforqualityconstructionma-terialsandtechniques.ADAPTisworkingwithlowincomecommunitiestomeetthisdemandinasustainableway.TheorganizationuseslocalingredientscommontotheancientEgyptians,alongwithtreatedwasteproductslikericestraw,cementdust,andiron-fabricleftoverstoproduceenvironmentally-friendlybuilding
materialsthatarehighquality(certifiedbytheEgyptiangovernment)andlowcost(30percentbelowstandardalternatives).ADAPTinvolveslocalyouthinthematerialin-novationandproductionprocessesandtrainsthemindesignandcon-struction—for
example,usingthetraditionalKasbahlayoutwithsmallalleysforwomen,centralcourtyards,anddoublewallsandceilingstomakeindoorspacescooler.Theseyouththenactascatalysts,spreadingtheirskillsintheircommunities.TwoofADAPT’searlysettlementsinAlgeria,total-ing220unitsin1985,haveexpandedtomorethan20,000unitsthroughthismechanism.Source: Ashoka, 2006. Hany El Miniawy
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CHALLENGE 4Housing Finance and Real EstateHousingfinanceandrealestatearekeyelementsinhousingandinfrastructuredevelopment.Inmostcountries,thedevelopmentprocessheavilyreliesonprivatesectoractivities.Consequently,businessescananddoesplayavitalroleinachievingsustainableurbanization.
Inhousingfinanceaswellasintherealestatesectorasawhole,awiderangeofprivateactorsareinvolved.Thecontributionofprivatebusi-nessesiscrucialinthefinance,constructionandmanagementofhousing.Inhousingfinance,theimportanceofprivatecapitalformortgagelendingandconstructionfinanceisevident.Banksandotherfinancialinstitutionsalsoplayanimportantroleinmobilizingprivatesavingsandfacilitatingpersonalfinancialmanage-ment.Developers,contractorsandrealestateagentsareinstrumentalinmakingthestepfromidentifyingmarketdemandtoconstructionanddeliverytothemarket.Thisisespeciallyfortheprovisionofprivaterentalhousing,whererealestateinvestorsandhousingcompaniesarecriti-calplayers.PrivatecapitalandengagementcanalsobecrucialforfundinglocalinfrastructureinvestmentsastheincreasingnumberofPublicPrivatePartnerships(PPP)demonstrates.
However,tobeabletofulfillitsroleandexplorethepotentialindeliveringgoodsandservices,thehousingfinanceandrealestatesectorrequiresaconducivepolicyframeworkthatena-blesprofitableandsecuremarketinteractions.Onlyiftherightconditionsexistintermsofmacro-economicpolicy,landmarkets,urbanplanningandinfrastructureprovision,butalsointermsoflendingregulationsandeffectiveforeclosuremechanisms,cantheprivatesectorengageinapartnershipforsustainableurbani-zation.Encouragingprivatesectorengagementisespeciallyimportantforaddressingtheshelterneedsofslumsdwellers.
Private institutions shy away from the low-income segment Inmanycountries,therearedeficitsinthelegalandeconomicframeworksforthehousing
financeandrealestateindustry,particularlyasfaraslow-incomehousingprovisionandfinanceareconcerned.Asaresult,investors,privatefinancialinstitutionsanddevelopersshyawayfromengaginginthelow-incomehousingsectorandtheyinsteadfocustheirattentiononmiddleandhigherincomeresidents.Thereluctancetoengageinhousingandrealestatesegmentisverymuchduetodeficitsintheurbandevelopmentprocess,whichmakeinvest-mentsinthesectorcommerciallyunattractiveorextremelyunsafe.
Thekeychallengesthatfrequentlydeterprivateentrepreneursfromventuringintothelow-in-comehousingsegmentareasfollows:•Alackofmacroeconomicstability,makingreturnoninvestmentsunpredictable;•Deficitsintheregulatorybasisforhousingde-velopmentandfinance:effectivenessofpropertytitles,foreclosuremechanisms;•Unattractiveregulatoryandfiscalframeworkforbanking,savingandlending;•Ineffectiveandnon-transparentlandmanage-ment;•Slowandunpredictableurbanplanning,lackofbuildingcontrol;•Insufficientpublicinfrastructureprovisionandmaintenanceduetofinancialandmanage-mentconstraints;•Absenceofeffectiveandtargetedhousingas-sistanceframeworksforlow-incomeresidents;•Lackofconsumerinformationandprotectiononfinance;•Insufficientrecognitionofhousingfinanceininformalarrangements(e.g.bywayofmicrofi-nance)•Highcostofhousingduetoinappropriatestandards;•Highcostofhousingduetoinappropriatebuildingmaterialsandinefficienttechniques,and;•Limitedresearchandknowledgedissemina-tioninhousingmarketsandfinance.Therefore,thekeychallengeistoaddressthesefactorswhichrestraintheprivatesectorfromengaginginadevelopmentprocessgearedtowardssustainableurbanization.
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Business Opportunities Ifthedeficitslistedabovecanbeaddressed,andifworkinghousingfinanceandrealestatesystemscanbeestablished,thehousingfinanceandrealestatesectorinanycountrycouldprovidehealthyandaffordableshelterandinfrastructureoptionstoachievesustainableurbanization.
Opening the housing and mortgage market for the bottom of the economic pyramidEvenwiththeimperfectregulatoryandeco-nomicframeworksintherealworld,businessescanextendtheirreachtolower-incomeresi-dentsandstilloperateonaprofitablebasis.Inmostdevelopingcountriestherearevastgrowthopportunities-thecurrentvolumeofhous-ingconstructionisoftenlessthanonetenthofwhattheactualhousingneedwouldbe.Therefore,thereisawidemarketwaitingtobeserved–onebillionlow-incomeslumdwellersrepresentoneofthelargesttargetgroupsintheworld.Going“down-market”providesextraor-dinarygrowthpotentials,sincethemediumandhighermarketsegmentsarefrequentlysaturated.Substantiveandlong-termgrowthcanonlybeexpectedintheaffordablehousingsector.
Investment and the Private SectorGenerally,publicandprivateactorshavetorec-ognizethatthevastmajorityoftheinvestmentneededinthehousingsectorwillbebornebytheprivatesector.Evenindevelopedcountrieswithastrongpublicfinancialengagementinhousing,mostfundsareprovidedthroughtheprivatesector.Therefore,toachievearealdif-ferenceinhousingdelivery,theprivatesectorhastobeencouraged,bysupportivepolicies,toextendtheirreachbeyondtheirtraditionalmar-ketsegmentsofupperandmiddleclasscitizentotheurbanpoor.Atthesametime,theyneedtoconsidernewandinnovativeproductsandmechanismstoeffectivelyreachthisnew,as-yetuntappedmarket–onesthatsuitthelocalconditions.
Tomakethishappen,privateentrepreneur-shipandingenuitywouldhavetoestablishamassmarketfordecentandaffordableproducts
inhousingparalleltoexperiencesinothereconomicsectors.Ashistoricalexamplesshow,providingalternativehousingoptionsforthepoorisalsothebestwaytoaddressslums.Anditisobvioustoeverybodythatthepoorintoday’sslumsdesperatelyneedalternatives.Byventuringintothisunder-servedmarket,developerscanofferdecenthousingoptionsatpricesthatareaffordabletolow-incomeresidents,usingefficientconstructiontech-niquesandappropriatebuildingmaterials.Thebankingcommunityshouldbeencouragedtoapplyappropriatelendingrequirementsforpoorresidents,butalsoenableaccesstobankaccounts,whichisthecentralprerequisiteforinitiatingtheprocessofsavingandborrowing.Moreover,theformalbankingsectorshouldestablishlinkstothegrowingnumberofmicro-financeinstitutions.
The Role of GovernmentThatisnottosaythatthehousingfinanceandrealestatesectorisexpectedtodeliverlow-costhousingandinfrastructurealone.Evenwhenprivatedevelopersandinvestorsarewillingtoengageinhousingfinanceandlow-costhousingprovisionforthepoor,governmentshavetodeveloptherightregulatoryandmacro-eco-nomicframeworks,andlocalresourcesmustbeleveragedfromtheurbanpoorthemselves.Fortheprivatesectortoventureintolow-in-comehousingatalargerscale,effectivepoliciesareaprecondition.Nationalgovernmentsinparticularhaveanimportantroletoplaybyenablingmarketstoworkinhousingfinanceandconstruction.First,theyshouldprovideaframeworkforhousingdevelopersandinves-tors.Thisrequirementspansmacro-economicpolicyandfavorablebankinglegislationtoatransparentlandregistry,settingappropriatestandardsandaneffectivebuildingapprovalprocess.
Afurtherkeyresponsibilityofgovernmentsistoprovidethenecessaryinfrastructureforhu-mansettlements.Thedirectprovisionofroads,waterandsewerlinesisagenuinetaskoflocalgovernments,andnationalgovernmentshouldsupportthisbycreatingtherightconditionstoenablemunicipalitiestofulfilltheirrole.Thisappliesparticularlytofinancingandtheinter-governmentalarrangementsforrevenuesharing.
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Targeted Support for Low Income Resi-dentsAboveall,experienceacrosstheglobeshowsthateveninhighly-establishedhousingmarkets,thereisaneedfortargetedsupportforlowerincomeresidents.Therefore,aneffectivesystemofsocialhousingisneededtoenabledecentandaffordablehousingoptionsforthepoor.Thisisnottosaythatsocialhousingmustbedirectlyprovidedbythegovernment(whichispartofanolderparadigm),buttargetedsupportcanbeachievedviafinancialincentives(forinstancereducedinterestratesorlandatdiscountedprices)andcontractualarrangementsregardingthesellingpriceortherent.
Modifyingexistingrulesandpoliciesatnationalandlocalleveslcanbepartofalong-termpo-liticalandadministrativeprocess.UN-HABI-TATisworkingwithnationalandlocalgovern-mentstocreateconditionsforefficienthousingmarketsandimprovedaccesstohousingfinancetoestablishaproductiveandeffectiverealestateindustrycateringforallpartsofsociety.
Achievingsustainabledevelopmentandhous-ingfinanceisacomplexprocess,andonethatrequiresnewapproachesandtools.Theremustbeinvolvementofawiderangeofpublicactors–suchaslocalandnationalgovernments,utilitycompaniesorotherserviceproviders–andprivateactors–suchasrealestateinvestors,financialinstitutions,developers,contractors,housingcompaniesandindividualcitizensashome-ownersortenants.Thiscomplexitybearschallengesbutalsorepresentsanopportunitytosharesomeofthecostsandrisksoflow-incomehousingandslumupgrading.
Shelter micro financeThemajorityofurbanpoorhouseholdscanonlyaffordtobuildincrementallyinstagesasfinancialresourcesbecomeavailable.Short-term,small-scaleloansofonetoeightyears,inamountsofUS$500to5000aremoreusefulforincrementaldevelopmentthanthelongterm,largevalueloansfavoredbythemort-gagemarkets.Smallhousingloans,disbursedthroughhousingmicrofinanceinstitutions,aresomeofthemostpromisingdevelopmentsinhousingfinanceduringthelastdecade.Inthecontextoflargenumbersofnewlowincome
householdsincitiesoverthenexttwodecades,itisimportanttoincreasethenumberoflend-ersinthehousingmicrofinancesectorratherthanconcentrateonlyonmortgagefinance.Guaranteesareimportantinbroadeningtheappealofmicrofinanceinstitutionstolenders,thisrequiresthatGovernmentssetupguaranteefundstoallowforgreaterrisk-freelendingtolowincomehouseholds.
Community-based shelter fundsAnothersignificanttrendinthelastdecadehasbeenincreasinginterestinsheltercommunityfundgrouploans.Community-basedfinanc-ingofhousingandserviceshasbeenusedforbothsettlementupgradingandforbuildingongreenfieldsites,and,inacontextwheresmallloansareevidentlysuccessfulandwherethereisanincreaseinpoverty;ithasmanyadvantagesforlow-incomeandotherwisedisempoweredhouseholds.Source: UN-HABITAT, GRHS, 2005
The Slum Upgrading Facility WithinUN-HABITAT,theSlumUpgradingFacility(SUF)isatechnicalcooperationandseedcapitalfacilitywithacentralobjective:tomobilizedomesticcapitalforslumupgrad-ingprojectsandactivities.Domesticcapitalcantaketheformofcommunitysavingsandresources,commercialcapitalthroughbanksandotherformalfinancialvehicles,andpublicfinancethroughvariousformsofgovernmentsupport.SUFiscurrentlypilotingaseriesofnewfinancialproductsandactivitiesinGhana,Indonesia,SriLankaandTanzania.SUFissupportingapartnershipwiththeHFCBankofGhana,whichisworkingwithCHFInternationaloncreatinglow-incomefinanceproductsincludingahomeimprovementfinanceproduct.InTanzania,SUFisworkingwithpartnersoncreditfacilitiesforhousingco-operatives.Community-wideslumupgradingprogrammesareunderwayinSriLanka,withprivatebankparticipationplannedforbothmortgageandconstructionloans.InIndonesia,afundtoblendgovernmentsubsidies,localrevenueandcommercialbankfinancetoofferlowincomehomeimprovementloansisbeingprepared.InKenya,partnershipsarebeingdevelopedwithlocalfinancialinstitutions,aswiththeJamiiBoraTrust,whichwasoriginally
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establishedwith50streetfamiliesinNairobiandnowhas130,000members.JamiiBorahasdevelopedalow-costhousingprogrammeworthoverUS$12million,withmembersborrowingmoneybutalsobuildingtheirownhomes.
Global Housing Finance PracticesInSenegal,bankshavefinancedmortgagesforlow-incomegroupsandpublicwatersupply.InIndia,ICICIisextendingawiderangeoffinancialservicestothepoor.InKenya,FauluKenya,amicro-financeinstitution,issuedsocialbondstotheextentofKenyaShillings500million(aboutUS$7.0million)ontheNairobiStockExchangein2005.Partofproceedswillbeutilisedforhousing.TheWestAfricanEconomicandMonetaryUnion(WAEMU)establishedtheRegionalSolidarityBank(BRS)in2004.TheBRSwill,inturn,establishsubsidiariesineachofthecountriesinregion.Thepurposeoftheseinstitutionsistocreateuncollateralized,butsoundfinancialproductsforpoorinassociationwithcommercialbanks.Theseinitiativespresentanopportunitytoattractprivatecapitalintoslumandurbanupgrading.
The Community-led Infrastructure Financing Facility (CLIFF) CLIFFisafurtherexampleofanurbanpoorfundcapitalizedbydonorsanddesignedtoactasacatalystinslumupgradingthroughprovid-ingstrategicsupportforcommunity-initiatedhousingandinfrastructureprojects.Thegoalistoincreasetheaccessofurbanpoorcommuni-tiestocommercialandpublicsectorfinanceformediumtolarge-scaleinfrastructureandhous-inginitiatives.Itdoesthisthroughavarietyofmeansincluding:providingbridgingloans,guaranteesandtechnicalassistance;undertakingmedium-scalerehabilitationprojects;seekingtoattractcommercial,localandpublicsectorfinanceforfurtherschemes.
Grameen Bank Housing Program, BangladeshInBangladesh,withapproximately70percentofthepopulationatthe“bottomoftheeco-nomicpyramid”byglobalstandards,accesstoformalfinancialservicesisseverelyconstrained.However,BangladeshisalsohometoGrameen
Bank(GB)-amicrofinancepioneerwhichseededanindustrythatnowservesover50millionpeopleworldwide.Itskeyinnovationwastosubstitutepeersupportfortraditionalformsofsecurity,suchasproofofincomeorcollateral,bylendingthroughsolidaritygroups.Contrarytoconventionalwisdomoffinancialinstitutions,Grameenventuredintogivingloanstotheshelterlesstobuildhousesforthem-selvesbasedonthephilosophythatinvestmentinshelterforthepoorisproductive.Ratherthanaconsumptionitemburdeningthepoor,itisavitalinvestmenttoincreaseproduc-tivecapacityandoverallwellbeingofafamily.Itsstrategyforprovidinghousingmicrofinanceistwopronged:leveragethesameorganiza-tionalinfrastructureitusesforincomegenera-tionloans,andrestricteligibilitytomemberswhohaveeffectivelydevelopedcredithistoriesforfouryears.Thisreducesthecostandriskassociatedwithahousingloanproduct,makingitcommerciallyviable.ApproximatelyUS$200millionhasbeendisbursedforhousingthroughtheGrameenBankandover621,341houseshavebeenconstructed.Source: www.grameen-info.org
Acumen Fund and Saiban in PakistanFinancingahomemortgagetoapersonmak-inglessthan$4adaywouldbeadauntingtaskanywhere.InPakistan,AcumenFund’sventurecapita,Saiban,ahousingdevelopmentnonprofit,isworkingtoestablishamortgageguaranteefacilitytostimulateaprivatemort-gagemarketforthepoor.Thisisdonethroughinformaldevelopers’abilitytocreateaffordablehousingsupply.Itprovidespoorsquatterswithaccesstoplotsofdevelopedlandinseveralsettlementsataffordablerates,thusprovidingthemwithsecureresidentialtenureandpublicutilitiesinareaswheretheywouldnormallyhavenorealaccesstopropertyorsuchservices.AcumenFundandSaiban’sgoalistoprovide6,456poorurbanfamilieswithhousinginaplannedresidentialcommunity.AcumenFundoperateslikeaventurecapitalfirmforthepoor,providingresources,bothfinancial,intheformofloans,equityinvestmentsandoccasionalgrants,andintellectual.Source: www.acumenfund.org/
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CHALLENGE 5Energy and transportEnergyisacentralchallengeintheoverallissueofsustainableurbanization.Makingcitiesbet-terplacestoliveinanddobusinessmuststartbyimprovingaccesstoenergy.Manufacturing,construction,transport,communication,educa-tion,information,healthandmedicalfacili-tiesincitiesallneedreliableenergy.EnergyiscentraltoallaspectsofhumanwelfareandrecognisedasaprerequisitetotheachievementoftheMillenniumDevelopmentGoalsattheWorldSummitonSustainableDevelopmentin2002.Lackofclean,affordableenergyispartofthepovertytrap.Achievingincreasedenergylevelswillmeanimprovingurbanandenviron-mentalsustainability.
Intoday’scities,sustainabletransportationsystemsarealsocrucialtofosteringeconomicactivityandraisingstandardsofurbanliv-ing.Thenegativeimpactsofurbantransport,includinghazardouslevelsofairpollution,congestion,noise,sprawl,andthreatstopublicsafetyrestrictthepotentialforgreatereconomicgrowthandhappiness.
Oneofthemostsalientfeaturesoflifeinthe20thcenturyhasbeentheriseoftheprivateau-tomobile,whichhascompletelyreshapedurbanlife.Automobilesaremajorconsumersofnon-renewableenergyandmajorcontributorstocarbonemissions.Vehicularemissionsarerisingatarateof2.5percenteachyear.Thehumanconsequencesofthisenergy-generatedpollutioncanbequitesignificant.InMexicoCity,highlevelsofpollutionareestimatedtocauseover6500deathseachyear.InChina,airpollutionisestimatedtocauseanywherefrom170,000to280,000deathsannually.Ontopofthehumantollregisteredinthesefigures,therearegrowingfinancialcostsaswell.Indevelopedcountries,airpollutionisestimatedtocostaround2percentofGDP;indevelopingnationssuchpol-lutioncancostanywherefrom5to20percentofGDP.Onaglobalscale,thehealthcostsof
urbanairpollutionarethoughttoapproachUS$100,000millionannually.Findingatransportmodelthatmeetssociety’sneedtomovefreely,communicate,andgainaccesstojobs,education,hospitals,andotherfacilities-allwithoutsacrificingessentialhu-manorecologicalvalues-isthusaprimarychallengeofsustainabledevelopment.
Fostering economic activity and raising standards of urban living Urbanpopulationgrowthhasincreasedthedemandformodernenergyservices.Inmanydevelopingcountries,thedemandoftenexceedspowergenerationanddistribution,resultinginfrequentpowerrationings.Withrapidur-banization,powerrationingwillbecomemorefrequentintheyearstocomeifnewcapacitiesandmanagementsystemsarenotputinplace.Thiswillseverelyhampereconomicgrowthandthequalityoflifeofpopulations.
Therapidexpansionofsecondarycitiesinmanydevelopingcountries,withtheirgrowingthirstforenergy,isamajorcauseforconcern,especiallywhenitcomestodeliveringafford-ableandreliableenergyforboththeformalandinformalsectors.Thechallengeofprovidingmodernandreliableenergyiscriticaltothepursuitofsustainabledevelopment.Thisisespeciallythecasewhenitcomestofindingalternativestowoodfuel,whichisdepletingforestsandwatercatchmentareas.
Anothermoreimportantchallengeisclimatechange,seenasthemostseriousglobalenviron-mentalchallengefacinghumankindinthe21stcentury.Townsandcitiesarethemainproduc-ersofgreenhousegasemissionsfromtheburn-ingoffossilfuel,particularlyfromtransport.Climatechangeisalsoimpactingdrasticallyontheenergysector.Droughtreducesthepowergenerationcapacitiesofhydro-electricpowerplantswithsignificantconsequencesforbothsocialandindustrialsectors.Powerrationingaffectswatersupply,industrialproductionand
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commerceanddirectlyhitsbusinessesandjobs.Billionsofpeoplestillrelyontraditionalbiomassastheirprimarysourceofenergy.TheWorldHealthOrganisationestimatesthat1.6millionsdeathsperyear,ofwhich60%arewomenandchildren,areassociatedwithindoorairpollutionfromtheuseofbiomass.RecentUN-HABITATstudiesshowthattheurbanpoor,andespeciallyslum-dwellers,areparticularlyhardhitbylackofaccesstomodernenergy.Theypaymorefortheircooking,waterandelectricitythanwealthierpeopleconnectedtotheservicenetworks,andtheypaythispen-altysimplybecausetheyarepoor.
Transportationsystemsdefinethequalityoflifeformillionsofcity-dwellersworldwide.Unfortunately,thenegativeimpactsofurbantransport,includinghazardouslevelsofairpollution,congestion,noise,sprawl,andthreatstopublicsafety,restrictthepotentialforgreatereconomicgrowthandhappiness.Theriseofmegacitieswithmorethan10millionpeople,hasonlyamplifiedtheseproblems.Growthratesofprivatevehicleownershipinthedevelopingworldcontinuestosoar,despitethefactthatautomobilesconsumenon-renewableenergyandcauseconsiderablepollution.Inresponse,decision-makersshouldpromotesustainablesolutionstourbantransportdilem-mas,integratedenergyandenvironmentalplanning,andbetterincomegenerationfortheurbanpoorbylinkingenergyandtrans-portserviceprovisionwithlivelihoodcrea-tion.Whilerapidurbanizationisassociatedwithanattendantriseinenergydemandanditsproblems,manyofthenegativeeffectsofurbanizationcanbeatleastpartiallymitigatedbyinnovativeenergypolicies.
Business OpportunitiesEnergyisoneofthekeydrivingforcesofeconomicgrowth.AtwopercentincreaseinpowergenerationcapacitycanaddonepercentgrowthinGrossDomesticProduct.Thisclearlydemonstratestheimportanceofenergyineconomicdevelopmentandsocialtrans-formation.Countriesthatdevelopovertimedosointandemwithimprovementstotheirpowersector.Nocountryinmoderntimeshassubstantiallyreducedpovertywithoutinvestinginenergyproduction,distributionandmanage-
ment.Thisisbecausecitiesarethedrivingforceofoureconomiesandwhere75percentoftotalenergyisconsumed.
Giventhechallengesahead,non-conventionalenergyoptionsandrenewableenergytech-nologiesarekeytoincreasingaccesstoenergyforhouseholdandbusinessuse.However,inordertomakethealternativeoptionsworkable,governmentsneedtoadoptpoliciesthatenablethewidespreaduseofsolarenergy,mini-hydrotechnologies,windgenerationandimprovedbio-fuels.Also,programmesshouldbeputinplacetoempowerpeopleandtheircommuni-ties,includingtheinformalsector,toplayanactiveroleinpowergenerationanddistribu-tion.Individualsandsmallscaleenterprisescanbeencouragedtosellenergytothegrid.Thewidespreaddisseminationandapplicationofthesesystemsandoptionscouldyieldsignifi-cantbenefitsfortheurbanandruralpoorandcoulddiversifysourcesofenergy.Supportingandenhancingtheutilizationandimplementationofrenewableenergysourcescouldprovideformorethanhalfofourfutureenergyneedswithoutdepletingprimaryenergyresources.Renewableenergycurrentlyaccountsforabout11percentoftheworld’sprimaryenergysupply.Withappropriatecoordina-tionbygovernments,communities,theprivatesectorandcitizens,alongwithmaximizingtheefficiencyofhowweuseenergy,itwouldbepossibletoreachatargetof60%forthecontributionofrenewableenergytotheworldtotalsupply.Businessopportunitiesclearlyresidewithnon-conventionalenergyoptionsandrenewableenergytechnologies--solarenergy,mini-hydrotechnologies,windgeneration,improvedbio-fuels--inareaswhereenergyisnotavailabletobusinessesandhouseholdsbutundoubtedlyneeded.Thesearethedeprivedurbanareaswheremanpowerisavailablebutbecauseofpoorservices,developingbusinessesisalmostimpossible.Thesearetheareaswherethepoorpayaveryhighpricefordeficientservices.
Asforthetransportsector,whatisneededisaninfluxofpublicandprivateinvestmentsthatcanfinancethepromotionandimplementationofsustainablesolutionsforreducingvehicularemissionsandtrafficcongestion.Opportunities
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fortheprivatesectorinrapidlysprawlingtownsandcitiesare:•Promotingthesubstitutionofcleaneralterna-tivefuelsandtechnologies,e.g.cropresiduesforagro-industriesandhouseholds,andnaturalgasinindustryandtransport(compressednaturalgas,liquefiedpetroleumgas,ethanolandbiodiesel).•Promotingtheuseoflower-sulphurandleadfreefuels.•Promotingenergyefficientpublictransportsolutionsandnon-motorizedtransportoptions.
Incentives for solar systems in citiesAllbuildingslessthan27mhighinIsraelarerequiredbylawtobeequippedwithsolarwaterheaters.Asaresult,over80percentofdomestichotwaterisprovidedbysolarenergy,representinganestimated3percentofthetotalprimaryenergy.Themunicipalityofrequiresthatallnewresidentialbuildingsbeequippedwithsolarwaterheating.SeveralotherSpanishmunicipalitieshavefollowedsuit,leadingtoatenfoldincreaseinsolarheatingnationwide.OtherEuropeanscitiesprovidefinancialincen-tivestopeoplewillingtoinstallenergysavingdevices.
Photovoltaic solutions for off-grid households and businessAsmallcompanyinIndia,SolarElectricLightCompany(SELCO),andtheNGOSolarElec-tricLightFund(SELF),providephotovoltaicsystemstohouseholdsatanaffordablecost,withfinancingoptions.OrbEnergyisbuildingsolarpowerforcommercialandresidentialunitsfortheIndianmarket.Public toilets and biogas plants with Sulabh Sanitation Movement, IndiaThiscompanyhasbeenpromotingthecon-structionofpublictoiletsconnectedtobiogasplantstoprovidecleanenergyforhouseholdsinIndia.Effluentsfromtheproductionofbiogasareusedasmanureoraresimplydischargedsafelyintotheenvironmentwithoutcausingpollution.Thebiogasgeneratedfromthisanaerobicdigestionprocessisusedforcooking,streetlightingandelectricitygeneration.Amodifieddieselenginecanrunonbiogasbyconnectingthegastoitsairfilter.High-densitysettlements,slums,publicmarketsandschoolsareidealfortoiletbiogasplants.
Wind generators for domestic use CraftskillsEnterprises,asmallengineeringcom-panybasedinNairobi’sKiberaslums,manu-
facturesandinstallssmall-scalewindgeneratorsfordomesticusetoproduceelectricityforhouseholdneeds.The“windcruiser”generatorscanprovideenoughelectricitytorundomes-ticlighting,televisionandradio,thefridge,computersandotherhomeappliances.Thecompanyhasinstalledover50windgeneratorssofarinbothurbanandruralareas.Accord-ingtothemanager,SimonMwacharoGuyo,thepricecouldcomedowndramaticallyifthedemandincreases.
Bio-diesel in MaliBio-dieselsystemsusingvegetableoilssuchasjatrophaoilcauselesspollution.Mali,acoun-trywithoutoilreserves,hasstartedproductiontoreduceitsdependenceonimportedfossilfuel.Withagrantof4millionUSdollars,Maliplanstohaveanumberofcarsrunningonbio-dieselby2009.Theprojectusesamodifieddieselenginetodriveageneratorthatprovides10hourselectricitydaily.
Bus Rapid Transit in Bogotá and CuritibaEnergyefficientpublictransportsolutionshavebeensuccessfullyimplementedinBogotá,Colombia,andCuritiba,Brazil.TheBusRapidTransit(BRT)systemssavefuelandsubstantial-lyreducegreenhousegasemissionsatrelativelylowcost.Importantachievementshavebeenpossible,suchasreducingtravelingtimesby50%fortripsmadewithinthesystem,reducingnoiseandgasemissionsby40%inthecity,makingzonesaroundthetrunkroadssafer;de-creasingaccidentratesby90%inthecorridorswherethesystemoperates,reducingautomobileuseby40%duringpeaktimesandimprovingpublicspace.Thissystemhasalsoallowedrealestatedeveloperstobuildnewpropertiesinspecifiedlocations,withtheconfidencethatthepublicwouldhaveeasyaccesstotheircommer-cialandresidentialareasonthetransitlines.
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CHALLENGE 6Information TechnologyAsasmallinformationtechnologyandcriti-calingredientindevelopingbusiness,mobilephonesarespreadingatanextraordinaryrate.Countrieswithhighmobilephonepenetra-tionhavehigherratesofeconomicgrowth.Accordingtoastudy1adevelopingcountrywhichhasanaverageof10moremobilephonesper100peoplebetween1996and2003wouldhaveenjoyedpercapitaGDPgrowththatwas0.59percenthigherthananotherwiseidenticalcountry.Thesurveyalsofoundanumberofotherbenefitsfrommobilephoneownership.Forinstance,ithasshownthat62percentofsmallbusinessesinSouthAfricaand59percentinEgyptsaidtheyhadincreasedtheirprofitsasaresultofmobilephones,inspiteofincreasedcallcosts.Thecombinationofpowerfulphones,inexpen-sivenetworks,andvoice-accessibleInternetap-plications—forobtainingmarketprices,healthinformation,orgovernmentservices—mayfurtheropenuptheInternettolargenumbersofnewusers.Inanyevent,itisclearthatongo-inginnovationintechnologywillhelpincreasethepotentialofmarketsatthe“bottomofthepyramid”2.Inurbanslums,wherethequasito-talityofhouseholdsandbusinessareunbankedandrelyoncashtransactionsinless-than-safeenvironments,thereducedcostofcommunica-tionandITpotentialforfundstransfersisgoodnewsforimprovingaccesstolivelihoods.
Mobile banking a financial tool for small entrepreneurs in slumsMillionsofpeopledonothaveaccesstobankaccounts.TheWorldBankestimatesthatinmanycountries,overhalfthepopulationis“unbanked”–hasneverhadabankaccount.Withoutthis,manypoorurbandwellersarestuckintheinformal,casheconomy.Theycannotsavesecurelyorborrowmoneyexceptatveryhighinterestratesfrommicrolend-ers.Forthem,thereisasignificantneedforaffordabletransactionalbanking.Manyurbanworkershavelefttheirruralfamiliesinsearch� Centre for Economic Policy Research, 20052 Allen L. Hammond, William J. Kramer, 2007
ofjobsinthecities,andtheyneedtobeabletoremitmoneytotheirfamilieswhodonotlivewiththem.Peoplealsoneedtobeabletopayexpenses,suchasrent,withouthavingtostandinaqueueatarentofficethatmightbefarawayfromwheretheyworkorlive.Withtheexplosionofmobilephoneuse,thesituationhaschanged.Electronicfundstransfersystemshavecontributedtotheveryhighgrowthofprepaidmobileservicesinthesemarketsegments.Whilethepoortendtobeexcludedfromtraditionalbanking,mobilepenetrationisonthevergeofchangingthataccess,especiallyinAfrica.In2000,fewerthan8millionAfricanshadamobilephone,nowitisestimatedthatover100millionofthecontinents’900millionpeoplehaveamobilephone.Whatisneededistransactionaltechnologythatinvolvesnoaddi-tionalexpenseforthecustomer.Fortheurbanpoorwithoutabankaccount,mobilebanking,orM-banking,isaneasyandcost-effectivewayofpayingfortransactions.
Theuseofamobilephonetoconductpaymentsandbankingtransactions(m-banking)isatanearlystage,butbecausem-bankingusestheexistingrapidlyexpandingmobilephoneinfra-structure,ithasthepotentialtospreadquicklyandaffordablyamong“unbanked”people.Withm-banking,anyonewithaccesstoacellphonehasaplacetokeephisorhersavingswithoutneedingatraditionalbankaccount.Mobilebankinginvolvestheuseofamobilephoneoranothermobiledevicetoundertakefinancialtransactionslinkedtoaclient’sac-count,butalsoinvolvesaccessbymobiledevicetothebroaderrangeofbankingservices,suchasaccountbasedsavings.M-bankingisoneofthenewestapproachestotheprovisionoffinancialservicesthroughICT,madepossiblebythewidespreadadoptionofmobilephoneseveninlowincomecountries.Mobilebankingisabridgethatbringstraditionalbankingandpaymentservicestousersofhandheldmobilephones.Existingtelecomnetworksprovidethetelecom-municationsinfrastructurefordeliveryof
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mobilebankingservices.Strategicpartner-shipswithmodernbanksenablethefulfillmentofbankingservicesthatweretraditionallydeliveredthroughbranchoffices,ATMsandtheInternet.Sohowcanbankingonamobilephonehelpthepoor?Itisaboutgivingmillionsofpoorpeopleinthedevelopingworldaccesstofinancialservicesfortheveryfirsttime.Theproliferationofmobilecommunicationsindevelopingcountrieshascreatedapotentialtobringawiderangeoffinancialservicestoanentirelynewcustomerbase.M-bankingservices,fromacustomerperspec-tive,mustprovideperceivedvaluethatexceedscost.Theserviceprovidedmustincludeconvenience(accessibilityandeasytouse,“bankinaphone”savestime),affordability(SMStextmessagingischeapandreducesthecostsofremittances),functionality(thereisnoneedfornewinventions,onlynewdeliveryvehicles),safety(thereisnoneedtotravelandcarrycash),andflexibility(allowingconsumerstomakepaymentsremotely).Thosewhoarecurrently“unbanked”nowhaveanopportu-nitytobecomeengagedintheformalbankingsector.Banksaredependentondeposits,andmobilebankingcanhelpconvertcash-under-themattressdepositsintobankdeposits,andtherebyaddingcashavailabletothebank.Eventhoughtheamountofdepositsandtransactionsofpooraresmall,theymakeitupinnumbers.ThesamegaincanbedeliveredtotheGSMprovider.BasedonsimpleSMStextmessaging,theycanearnrevenuesforeachtransaction.Telecomcompaniesarenotofferingm-bank-ingoutofkindness,butasawaytoattractnewcustomersbydoingwhattheyalreadydowell,-processingmillionsoftinytransactions.Formerchants,m-bankingcanincreasesalesthroughimpulsepurchasing,andimprovesecu-ritythroughreductionofcashhandling.
M-banking with Wizzit, South AfricaSouthAfrica’sfirstcellphone-basedbankingfacilitywasdesignedtoprovidethe“unbanked”and“underbanked”withanaffordablealterna-tivetothemainstreambanks.Itworkslikethis:withaWizzitaccount,youdon’thavetogoanywheretodoyourtransactions.Youcanuseyourcellphonetosendmoneyorpayanaccount.Allyouneedistheotherparty’saccountdetailsandbankbranchnumber.Acustomercanmakedepositsatabankoratanypostoffice.Theyscanthedebitcard,takethecash,andthenimmediatelycreditthe
account.Thecustomergetsatextmessagetoproveit,andcanusecommandsonthecellphonetocheckthebalance,transfermoney,orpayabill.Thedebitcardcanalsobeusedtobuythingsortowithdrawcash.ProvidingbankingtotheunbankedisthecorebusinessofWizzit,demonstratedbythelowfees(therearenominimumbalancesandtransferchargesarecheap).Inaddition,Wizzitonlyemployprevi-ouslyunemployedpeopleandtrainpeoplefromwithinacommunitytomarkettheproductandtoopenaccounts.
ReferencesAllenL.Hammond,WilliamJ.Kramer,RobertS.Katz,JuliaT.Tran,andCourtlandWalker,TheNextFourBillion-MarketSizeandBusi-nessStrategyattheBaseofthePyramid,Wash-ington:WorldResourcesInstitute,InternationalFinanceCorporation,March2007C.K.PrahaladandStuartL.Hart(2002),TheFortuneattheBottomofthePyramid,Strategy+Business,Issue26.Carpenter,GeorgeandPeterWhite(2004).SustainableDevelopment:FindingtheRealBusinessCase.”CorporateEnvironmentalStrategy:InternationalJournalforSustainableBusiness,vol.11,No.2.MillenniumProject(2005).InvestinginDevelopment.APracticalPlantoAchievetheMillenniumDevelopmentGoals.ReporttotheSecretary-General.NewYork:UnitedNationsDevelopmentProgramme.SchmidtStephanie(2006),HousingthePoorbyEngagingthePrivateSectorandCitizenSectors:SocialInnovationsand‘HybridValueChain’.PapersubmittedbyAshoka:Innova-torsforthePublicattheWorldUrbanForum,Vancouver.UN-HABITAT(2005).FinancingUrbanShelter,GlobalReportonHumanSettlements,Nairobi:UnitedNationsHumanSettlementsProgramme.UnitedNations(2003).EnhancedcooperationbetweentheUnitedNationsandallrelevantpartners,inparticulartheprivatesector.A/58/227(http://www.un.org/business.)UnitedNations(2005).BusinessUnusual,NewYork:UnitedNationsGlobalCompactOffice.UnitedNationsCommissiononthePrivateSector&Development(2004).“UnleashingEntrepreneurship:MakingBusinessWorkforthePoor.”ReporttotheSecretary-GeneraloftheUnitedNations.NewYork:UnitedNations.
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UN-HABITAT’s mission is to promote socially and environmentally sustainable urban devel-opment with the goal of providing adequate shelter for all. With towns and cities growing at unprecedented rates, leading to increased numbers in slum dwellers with little or no ac-cess to shelter, water and sanitation, UN-HABITAT is well aware that the private sector is not only part of the solution, but a vital partner that must be engaged if the world’s cities are to achieve sustainability.
Given the challenge of urban poverty and with 1 billion slum dwellers projected to rise to more than 1.3 billion by 2020, meeting the Millennium Development Goal 7 targets 10 and 11 on slums, water and sanitation, will require a concerted approach to land, basic infra-structure and services, affordable housing solutions, and accessible housing finance sys-tems, through partnerships engaging the private sector. In order to do so, there is a need to improve understanding among decision makers regarding the role of the private sector and partnership approaches.