Mr. Aruna Paul of Habitat for Humanity and Mrs. Anna Tibaijuka, Executive Director UN-HABITAT
In an attempt to confront the current economic crisis by encouraging pro-poor investment in housing, Mrs. Anna Tibaijuka, Executive Director of UN-HABITAT, today signed six agreements with project partners from Argentina, Bangladesh, Kenya, Nepal, Tanzania and Uganda with the aim of providing funds for affordable housing and infrastructure.
Known as Experimental Reimbursable Seeding Operations (ERSO), the initiative operates on the basic premise of providing loans, rather than giving grants or donations, as has been the norm in the past for the UN. The loans are provided to local financial institutions, rather than to end users, and these institutions in turn leverage the ERSO loan to provide loans to the urban poor, for house building, improvements and infrastructure upgrading.
As of 2008, it is estimated that more than half the world’s population (3.3 billion people) live in urban areas. Over one billion of these live in slums and squatter settlements. Their future, the future of cities in developing countries depends on how the problem of slum upgrading and housing is addressed.
Spain, the Kingdom of Bahrain and the Rockefeller Foundation provided the initial funding for the initiative. Speaking during the signing ceremony, Spain’s ambassador to Kenya Nicolas Martin Cinto and the Bahraini Deputy Minister of Housing Dafer Al Jalahma expressed their satisfaction in the manner which UN-HABITAT had utilized the funding extended to it.
The chair of the Committee of Permanent Representatives Jacqueline Mendoza thanked Spain, Bahrain and Rockefeller and hailed the initiative saying it would contribute towards availing affordable housing for the poor.
On her part, UN-HABITAT Executive Director Mrs. Anna Tibaijuka said the signing agreement was a landmark event in the agency’s history.
“The launch of the experimental operations marks a key step towards reviving the United Nations Habitat and Human Settlements Foundation, which was established in 1974 by the General Assembly to assist member states to mobilize resources for their shelter and infrastructure programmes through technical assistance and seed capital,” she said. “Yet the full potential of the Foundation was never realized because the lending function was never implemented.”
In Kenya the partner is Housing Finance Kenya, a finance institution with over 40 years experience in providing construction and mortgage loans to middle and high income market segments. With ERSO seed capital, the bank will now lend for construction of about 100 houses near Athi River and for mortgages to members of housing cooperatives.
“The target beneficiaries of the first 100 housing units are members of a cooperative society and our engagement with UN-HABITAT has so far been very fruitful,” the firm’s Managing Director Frank Ireri said during the ceremony.
In Tanzania, ERSO is supporting Azania Bank to loan to Mwanza City Council so that the municipality can implement a comprehensive resettlement plan using participatory urban planning processes benefiting over 600 low-income individuals. “UN-HABITAT has been very supportive and we promise to deliver on our side,” Charles Singli, the Managing Director of Azania Bank said.
The DFCU Bank is being helped to set up a loan facility of approximately US$ 1.5 million for local developers and low-income households belonging to the Kasoli Housing Association. The Managing Director of DFCU Juma Kissame said: one of our biggest challenges has been where to get the funding for low cost housing and now we are very grateful for the help we have received from UN-HABITAT.
Habitat for Humanity International will be partnering with 11 local NGOs and microfinance institutions to implement the “Save and Build” programme of building decent housing for slum dwellers in 8 urban slums in Nepal. The projects in the 8 slum areas are expected to last 3 years and benefit over 1,760 families comprising 6,700 individuals. The same organisation will provide credit and technical assistance to low-income families in the Buenos Aires region to purchase and renovate a dilapidated building and create decent apartment units with basic amenities.
Speaking on behalf of Habitat for Humanity International, Aruna Paul said: housing is a process and if you help people make the first step they will be on their way to acquire a house.”
The Association of the Realisation of Basic Needs (ARBAN) has trained and assisted the Cooperative of Slum Dwellers in Dhaka to set up a savings programme. The members managed to save enough money to buy two plots in the Dhaka area and with ERSO’s seed capital amounting to US$ 214,286 they will construct 40 flats for 240 slum dwellers. “The process will help us see people getting out of poverty and we are happy to be a part of it,” said Kamal Mohamed Uddin, the Managing Director of ARBAN.
Traditionally, financial institutions do not like to service the borrowing needs of the lowest income levels in society, due to the high transaction costs involved and the perceived risk of high default rates. However, since the early 1990’s, several microfinance initiatives have proved that lending to the poor can in fact be a profitable exercise, and that default rates are often much lower than previously assumed.