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NEIGHBOURHOOD UPGRADING AND SHELTER

SECTOR PROJECT INDONESIA

Dialog II on FINANCING SLUM UPGRADING19th Session UN Habitat Governing Council Conference

Nairobi, May 07, 2003

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Back Ground

Population of Indonesia : 210 million people

Total population grew by 1.19% (1990-2000), but

all growth occurred in urban areas

Average annual urban population growth rate

between 1990-2000 of 4.6%

Urban population increases from 55.1 million

(1990) to 86.4 million (2000). Urbanization rate of40%

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Back Ground (cont.)

- After the crisis, poverty has increased from 9.6%

of the urban population in 1996 to 16% in 2000.

- Low finance affordability. From 60 to 65% of

households cannot afford the lowest priced housecurrently produced in the market.

- Almost all of these people are living in informal

areas and are experiencing a deterioration in thelevel of services and infrastructure provided by

local government

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Back Ground (Cont)

- Indonesia needs to house roughly 800.000 new

urban households per year. Indonesian cities

failed to provide adequate shelter for the

majority of their inhabitants.- In some cities over 60 percent of the population

is housed informally. This housing is of low

standard, and is insecure as the occupants have

no formal title to the land.

- Weakness of alternative lenders i.e.

cooperatives, credit unions, micro-finance

lenders.

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Lesson Learned

Kampung/Village Improvement Programme

(KIP)

The beneficiary include the middle-incomepopulation

Not to be regarded as sustainable.

Top-down planning

Limited at addressing the public infrastructure,

not land, housing or community development

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Lesson Learned (cont.)

Community-Based Initiative for Housing and

Local Development in Indonesia (CoBILD)

Conventional housing finance mechanism

cannot meet the needs of the lower incomehousehold.

Housing provided in stages, or built

incrementally can be affordableCommunity or collective action can help reduce

the price of land and infrastructure

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Lesson Learned (cont.)

Revolving fund must fully recovery their costs

in order to be self-sustaining

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Neighbourhood Upgrading and Shelter Sector

Project (NUSSP)

Strategy

A comprehensive approach to the upgrading

of neighborhoods and the improvement ofhousing and living conditions in poor areas.

- The project will use a system of grants and

loans. Cities will be provided with matching

grant funds for meeting community needs,which may also include contributions by the

community in cash or in kind as well as internal

cross-subsidies.

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Strategy (cont.)

Principle

Participatory; enabling and empowering the

community members to participate in and benefitfrom all aspects of the project

Demand-driven;

Transparent - allowing all members of the

community access to the decision makingprocesses.

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Components

- Upgrading

Activities including water supply, sanitation, solid

waste, drainage, access roads, open space,

environment, income generation and employment.

- Capacity Building

Training and attitudinal change will be an

important component of the strategy to enable andempower communities and cities to engage more

actively in participatory processes that address the

housing needs of the poor.

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Components

- Housing finance

All households will be able to access a series of

sequential loans, with community intermediation,for incremental provision and improvement of

housing and living conditions, including the

purchase of land or improvement of tittle.

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Funding and Financing

- In general, interventions that primarily serve the

needs of the poor will be financed through

matching grants

- Funding for households will be financed throughmicro-credit in the form of a series of small, short

term, sequential loans available at market rates of

interest

- The Criteria for the loans are that the applicant is a

resident of targeted area.

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Funding and Financing

- The loans will be managed by Participating

Financial Institutions

- Only upon successful repayment will other

members of the community be able to borrow.- Borrowers who repay will be guaranteed second

and further loans

- Groups may also borrow for income generationactivities especially the creation of work facilities.

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Conclusion

Combining the housing investments of the

families and government, then governments might

reduce their investment per household.

Technical skill in the microfinance sector are low.

Need more incentive for private sector to involve

in the low income housing finance

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Thank You