Communities of the poor after much reflection and discussion have decided that housing for all which is affordable and scaleable will emerge if the state creates the basis for giving them land and affordable housing finance, cities provide infrastructure and workable norms for building standards, and communities design and build their own houses.

Sounds very easy and simple, but it transforms the relationships that cities have with the poor, and the relationships between the poor themselves. Now they need to create institutional arrangements for themselves which are workable and democratic and serve their needs and aspirations.

This year we have achieved many milestones. We have begun to get substantial support from our main funding partners to expand our work into construction. We have seen many communities have got secure land and have begun to build their houses, and we have financial institutions who are beginning to look at what we do and begin to examine poor communities as clients for loans.

SPARC Mahila Milan and NSDF have started a non profit company whose job over the next three years will be to "take over" the construction business of the alliance. That means we train some among ourselves to manage this transfers and demonstrate how such institutions operate in an environment where so far only developers whose interests are opposite that of the poor presently

We have many expectations for the readers of this material. It is as much for financial supporters as it is for peers and for those interested in development. Please read it, share it with others and send us your comments ideas and suggestions. Another exploration we seek to do is to try and examine how reports written for statutory purposes of reporting on usage of funds can be further utilised for maintaining a record of evolution, for sharing information for campaigns and for fund raising.

contents:

The event that is the basis of this report

On 21^st January 1999, at a meeting Hosted by Bilance ( Cord Aid) in Holland, representatives of Bilance, Miserior, Homelessness International met with Representative of SPARC. This meeting was set up to serve many reasons:

1. It was to help all the funding partners of SPARC Mahila Milan and NSDF the nature of development that was occurring in this part of the work of the alliance.
2. It was to help each partner who was seeking , or has already made a serious contribution to "invest " in this process to locate how the alliance was managing this process.
3. To be able to locate the roles and each organisation sought to play, how their money was being used and
4. Finally given that the process on the ground was moving very fast but in many directions, how information on the ground would be transferred to the donors.
5. Given that all the donors themselves were only recently examining issues of financing leading to credit, this was also a chance to examine what strategies the others use and how they could work together.

The content of the report and its author:

This report is written by Sheela Patel, Director SPARC. It does not seek to cover the minutes of the meeting, but put together information which would in some ways level the information transfer of what is happening in India in the work of the alliance. While it would have been useful to have the minutes of the meeting, maybe that will be compiled by some of the others present. The discussions may figure as boxes in the report to illustrate issues and concerns and how these will be addressed.

The report will begin with a brief sketch of the three partners in the alliance and what they do as their main work. This is mainly to clearly state that although the investment both financially and otherwise seems to focus on construction, most of the main manpower and community investments by the alliance continue to be directed to the core activity of the alliance which is to build, strengthen and widen the sphere of influence of the organisations of poor people in issues of both urban development and poverty alleviation in cities in India.

The report them examines how communities negotiate for land, norms and standards that suit them in design and construction, and how they have planned to obtain finance. Within this negotiation, it looks at why construction activity is so essential to sustain the process of mobilisation both for the organisational growth as well as for the resources that must flow towards communities. Finally we look at what these construction activities are, where they are located, what is the range of activities, and how we have so far managed the financing of them. Finally we examine the project proposal that is presently under scrutiny by Miserior for additional funds into this work, and how we propose to use it, How we seek to locate more support through guarantees and continued capacity building and the Company that we have set up to ultimately manage this business called NIRMAN.

This report will now be sent to George and Gregor at Miserior, Marjolyne and Jan Lanslot at Bilance, Ruth Macleod at Homeless International, Diana Mitlin at IIED, Father Jorge of Selavip, Samsook Boonyabancha of ACHR, Joel Bolnich at People’s Dialogue and the staff and trustees of SPARC and NSDF.

II. Backdrop of the Construction activity of SPARC Mahila Milan and NSDF

The alliance of SPARC Mahila Milan and NSDF

SPARC Mahila Milan and NSDF have a alliance which began in 1986, but which over the years has gradually developed into a powerful educational and organisational process. SPARC remains the NGO with all legal requirements to manage money and participate in legal transactions. Mahila Milan is a network of women’s collectives which begins by training women in local micro communities to increase their participation in community activities, and to strengthen and build women’s capacities to participate in all designing of new options within the process and manage change. Gradually this process also helps women develop confidence to move beyond micro communities and enter into negotiations in support of other groups in the network, teach other women, and gradually participate in the leadership of NSDF. NSDF The national Slum dweller’s federation is a federation that presently covers 24 cities in 5 states of India. Although it is not legally registered, it has a wide coverage of all informal settlements in the cities and its city federations comprise of communities who become members and agree to share information, organisations strengthen and learn from each other.

In this process the role of SPARC is always changing and evolving. When any new activity is taken up, SPARC and its staff and the consultants it bring sin participate in the process and begin to learn as communities and federations do about what works for poor people. We collectively look at what existing rules and regulations of precedents in practice restrict what poor people can do of what the state can do for people and is not bring done, and together we experiment on possible option stoat people can take to change this status quo. These experiments can be in simple things like going to the police and registering a complaint and not paying a bribe or being afraid, or it may negotiation for land tenure or sanitation.

What makes this process very special and unique is that in the business of seeking to change the status quo, there is an attempt to examine roles and relationships, and to bring changes in this as well. The federation strongly believes that poor people do many things more efficiently that the state, and so the business of the state is to create procedures that ensure that resources are available, that everyone has the opportunity to access them and that while they get accessed they do not impinge on the rights of other groups. This for us are critical issues of governance, and uniquely in everything that the alliance does, this features very centrally in the process.

When some solutions or increased options to access resources seem to work, then the horizontal exchanges create opportunities for more communities to learn this and consolidate the experience. Often this means that community leaders need to get hands on training to take the message to other cities, in other instances government officials need to be sensitised to this process. That educational activity and ensuring that it continues to spread and grow becomes the work of SPARC and mm and NSDF take care of the transfers and mobilisation and education. This way the work that SPARC does gets complex as more activities increase, but all success within the organisation is gauges at how the activity responsibility is abdicated to NSDF and Mahila Milan.

The educational and organisational process which builds capacities of communities to participate in change: In the areas of savings and credit and housing land tenure, negotiations.

The most valuable lesson that all the leadership in the three organisations have learnt are:

1. There is need for a critical mass of people making demand for change….That individual micro communities cannot demand for resources. In cities both the state and municipal authorities have no tools or inclination nor interest in dealing with dismempowered groups. On the other hand, civil society institutions which work either as philantrophies or NGOs remain too marginalised themselves to bring change on behalf of people, and when they do, these policy changes cannot be "delivered" because communities need to do this themselves.
2. Creating organisations that work in issues of urban poverty require long staying power as most change is very slow….such a process requires large numbers of people to want to change the situations, and that cannot be achieved until they have tangible evidence that change is possible. Therefore mobilisation activities must have dual content… they must educate and mobilise at the same time.
3. There are no existing solutions that work f r the poor: The communities of the poor would have already been using a solution if they found it worked, but such solutions do not exist or their evidence is not available to the poor. So a very important part of the process is to explore solutions, test them and try them out.
4. Finally there needs to be priority setting which is determined by communities: When poor women especially examine their priorities, they are clear what is fundamentally needed, and when they get evidence that change is possible in those areas, they are committed to that learning and advocacy even if it takes a very long time.

Land Tenure, secure habitat, basic services and increased opportunities in employment are the main priorities that have been universally named as the priorities of poor communities in cities in India as stated by Mahila Milan and NSDF. In order to create systems by which communities can obtain them, the alliance has developed a strategy in which the process which builds community capacities to participate in change forms the basis of the solution that communities and their federations present to the city, state and civil society to negotiate for land tenure, improved housing and basic amenities and employment.

Take the TOOLS that the federation has for examples.

Savings and credit…. Each Mahila Milan collective does daily savings. Women in the collectives meet their neighbours everyday and gather their savings. This not only gathers the money from the community but it collects people, and women begin to have a deeper sense of what is happening in each household. This helps them when they design priorities or solutions, it makes them good loan managers when people seek loans and through the managing of this process internally they get recognised as the real community managers. When they are seen as being able to manage their own resources, they begin to become attractive to external lending agencies to provide credit. So a small amount of money saved and circulated leverages larger amounts. This in turn increases employment opportunities and in turn due to the new saving habits begins to expand the savings pool. With this collective savings poor of a federation, the alliance negotiates with local and internal donors and lenders to lend them money for housing. With Government it creates the basis for making demands that communities are better managers and deliveries of subsidies allocated to the poor.

Land tenure , Housing and construction:….

Today the poor exist in a vicious circle of not having land so squatting on what they can, building in a manner that can withstand demolition and through finances which come so meagrely that they have to be constantly upgraded and in the long run the real costs are very high.. Now these same collectives and NSDF have trained themselves to develop a range of options that work for them:

1. The Mahila Milan house model: house design and construction system in which the design reflects their needs, the construction system is such that it reduced material costs, and when built collectively by community reduced the costs of the house in financial terms to the cost of materials and skilled labour. All other supervision purchase and management and unskilled labour costs are done my communities by their own time and resources.
2. Incremental development. Where community houses are favourable consolidates, the communities gave a wide spectrum of ways by which the structure in improved and amenities are added.
3. ground plus three: In circumstances where the land availability is such that there is need for compromise, Mahila Milan has developed strategies to undertake construction in which a combination of loans, subsidies and their managerial skills makes it possible to undertake this option which is considerable expensive ( EG In the slum rehabilitation programme in Bombay)

The process of negotiations itself:

The communities which are not only very interested in wanting change but ready to actively participate in risk taking becomes the site for the experimentation and their process and work becomes the pilot on the basis of which the federation negotiates for changes in design and policy of the state. There are some very clear rules of the game in this FEDERATION MODEL" of how negotiations occurs.:

1. Although the pilot is done in one area. It is the outcome of deliberations in the whole federation and all their representatives are there when the negotiations occur.
2. The negotiations are always started among the people. Often the officials and the people with whom the negotiations are done, come to the site or among people to start negotiations. This in many ways equalises the playing field and allows community leadership which is negotiating to operate from a situation of strength.
3. This always seeks to sensitise others about the need for understanding the peoples process and paradigm and helping the other side of the negotiations be it state city or private sector to see a win win situation in the solution. Clearly no government or city or private sector will do something substantial only to serve the interest of the poor… that is indeed the pragmatic reality. But when a combination of doing good for the poor is combined with the what works well for all… it has many more possibilities of being sustainable.
4. The most powerful demonstration of this process is that people are not passive and clearly the women are the movers and shakers of the process. This makes communities very strong and important ingredients of the solutions.

Evolving construction systems

Specifically in the areas of construction activity, no solution begins with being perfect and we all accept and acknowedlge the frailties of many ideas when we begin. However they remain better options in the absence of other solutions that work and which can be scaled up.

In designing construction systems, we begin with what :

1. The micro community can do.
2. What the alliance can do,
3. What professionals need to do
4. what the state needs to provide.

Over time, the idea is that more and more things move in the direction of people can do so that their skills and resources get built up and they can deliver more goods and services to this sector. In India, the level of insight and knowledge about building systems and ability to learn is very high. This makes this strategy very possible. Communities also develop this knoweldge and gradually as part for the federation begin to teach each other.

Initially the pilot may be in some city, then in a city in many states and gradually in each city. This creates the foundations for scale, since each city finally needs to accept this possibility in its own context. So rules need to be changed at the level of the city, state and nationally.

Financing this constructions and managing risks therein.

So how does all this begin? In the federation model, the communities make a very strong contribution to the entire process from the beginning by the investments they make of their time and energies. Even in the organisational and educational process, the alliance seeks externally only that which people cannot pay. The same principle is maintained with the construction process. When the strategy to take construction pilots are done, communities volunteer to participate. This resources and capacities are first assessed and only what they cannot provide is them sought through loans and grants from outside.

In all pilots, there is a lot of "wastage" which occurs because there is a series of risk which have to be covered. Some of these risks are within the process and its learning systems, others are in relationships to the rules and regulation this system breaks in order to prove its point. We in the alliance believe that the poor should not pay for this entire costs, and seek to cover the risks from outside with development assistance.

As the process gets stronger then issues of making it sustainable increase. So we examine local loans which we can take. Even at that stage most initial resources have to be made before we can begin to obtain them. Often we have to start by demanding that they be available to people in the first place. In the area of housing and infrastructure there are no credit facilities available for medium and long term for the poor. In other situations those Moines that are available in subsidies for the poor are only made available to public and financial institutions which do not pass the benefit to the poor.

So in order to create a process of some scale and expand the skill base of the federation the alliance seeks to combine grants, loans, working capital, bridge funds and loans and guarantees to make this work. This is the phase in which we are today. It is a phase which is complex, in which we do not have the possibility of doing one thing at a time, and when we do not have the luxury to say lets do it later. Its that phase in the life of organisations when there is a window of opportunity for which you have worked so hard for, and if you miss it, you have lesser chances for similar breakthroughs later.

What does this entail for the alliance:

At the moment, the scale of dialogue and negotiations within the federations and with other stakeholders in the urban drama such as city authorities, state and parastatals and private sector, combined with the general development environment of examining wider spectrum of financing of developments, there are many opportunities on the horizon of the alliance. What do we see:

1. Internationally the extent of development finance while shrinking on the whole, is beginning to examine urban issues and urban poverty.
2. National government must address issues of urban poverty both because of the impact it has on economic and financial developments within cities which are the engines of growth, and because urban poverty statistics are soon indicating that urban poverty levels almost match rural ones.
3. City governments have little understanding of how to address issues of governance in cities and how to create space for participation of the poor who have been its traditional adversaries.
4. NGOs and Philantrophies themselves are at stage when their traditions systems of addressing poverty issues are now showing any dramatic and yet sustainable results.

In the midst of all these changes, the last 15 years of the work of the alliance in building up the FEDERATION MODEL, of examining and establishing successful processes from local to international level, create space for the alliance of SPARC Mahila Milan and NSDF to have something substantial to contribute to the process of development itself and to development co-operation.

A very significant aspect of this strategy which sustains it internally and which makes it attractive to examine from the outside, is the process encompasses both strategic and practical issues. It creates information which works for communities and the city through its community driven surveys; it ensures that the poor have a clear position on many issues which the city is not quite sure how to address and the federation has an example somewhere which it has tested and which everyone ,people and city and others can see and look at; it has a cadre of leadership which can with some phasing and time frames facilitate replication of the process under many circumstances ; and it has community management systems which can deliver these changes.

How is all this done?

• Experimentation and pilots: stirring many pots
• Creating learning out of wastage that occurs during experimentation: a pebble becomes a snowball.
• Breaking rules and not only surviving but training communities and cities through these examples
• Developing juggling skills needed in all enterprenual behaviour: managing cash flows, legal issues, transparency and still forging ahead.

We have explained these as being the general principles of all the work that we do. However these processes have a special significance in the area of Construction.

III. Why taking on construction is essential :

Construction activity has remained an area of very little experience for most NGOs and especially urban NGOS in India. By and large the State has taken on the task of "delivery" of houses, amenities and services to the poor, and has neither been able to deliver these in quality and quantities needed, nor has it been able to do so at a prices which is efficient and reasonable. Yet As a result huge backlogs of construction activity remains to be done, and on the one hand, the poor and NGOs and institutions which work with then have no experience to do this, on the other hand the state, while seeking to divest itself of these activities, may possible, cut subsidies and supportive measures rather than pass them on to others who will do them. Therefore a very vital part of taking on issues in the construction process at this point are essential because firstly, as this debate of what the state should do and should give up, there are new and demonstrable activities that the federation is showing which opens space of itself and others in the same sector to undertake. Secondly in its process of transition, the chances of changing procedures and norms and standards are better…. And thirdly, at this point of time, with the private sector also beginning to operate in this field, movements like the federation have some advantages over the considerable resources and skills the private sector have… they have solutions which can set trends, and drive the "market". Finally, the challenge before communities is to be in the driving seat.

Movements of the poor need to create scales for change which are changeable:

Very quickly and at a speed which is sustainable, changing systems of construction negotiations, designs financing and management if presented by the federation have a good chance to be adopted by the state policy. Even if the actual construction is moved from the state, people will possible have the choice of managing it. To do that there is need to how that the process is capable of adapting and operationalising in many different geographic areas, different political and social conditions. Bt where the common frame is that it is designed and managed by people.

Polices for change only work if precedent setting is done by the poor themselves.

The experience of the federation in the past has been that even the best policy ( and there are many such policies in India unless communities can participate in operationlising them from the start do not work for the poor. It is important to accept that different parts of civil society compete for the same resources, and if the poor do not institutions and systems to protect and utilise the resources which they have fought so hard to obtain, these will be used by others. The capacity to lobby for resources, obtain and absorb them … and to ensure that the distribution is democratically spread and equitable… are the real outcomes of governance in issues of poverty and development. Over time the poor and their institutions must undertake to manage and distribute these resources, and if they do not, there can be no hoe of sustained development.

Demonstrate that solution for the poor must be driven by them.

Increasingly governments fail to ensure that resources meant for the poor are used by them. In the more efficient institutions and countries as well, the state has to increasingly shrink its administrative mechanism to ensure that it does not use most of the development investment in administering the development itself. Who them should inherit these skills responsibility and resources… it is only logical that the poor do themselves. But that process is slow and cannot be speeded too much… yet if there is a vacuum, someone else will fill it.

Refinement and increasing capacities are ensured as the process moves: Complex processes need to move many issues together

Than manner in which the alliance deals with this process is that it ensures that its critical mass of possible users of the "product" of change is huge and that that constituency as primary agreements on issues that are priorities and how these solutions to address issues of priorities are developed. Increasing demonstrations of solutions increase community confidence in the solutions, it forms basis for more resources to come in the way of the people, and while all this is on, people develop skills and also refine the solutions. Houses we build five years ago, and those we build now show that difference.

Creating scale in the federation model has its own guiding principles that have emerged form its practice.

1. Start in a strong supportive environment and change things there
2. Send the message all over and allow those who want to learn to come and see, and help them in their own environment to change
3. Address issues at local, city region and national level… and have capacity to address this at international level…. World bank e.g.
4. maintain communication systems that allow new knowledge information to pass both ways.
5. Multiplication is exponential.

What is evident is that the construction activities are a MUST as a area of growth for the activities of the alliance, and while they must move in full steam, there must be no confusion that they are a by product of the process of larger change and transformation. Although they may have huge differences in the amounts of money utilised of put into construction, the community development mobilisation and organisational activities are the golden goose, construction merely one of it golden eggs. And just like the goose if killed cannot give more eggs, the community process needs to be protected and nurtured .

IV. The present range of construction activities, sources of financing and potential opportunities

Systems of management : who constructs who manages

In the construction activities, the focus is multifaceted.

• First of all there is the question of making the outcome one which serves community needs in the optimal way.
• Secondly, after examination of what people can pay in cash and kind, immediately and gradually, the total cpsts are divided. That which people can pay immediately is put together through savings, and that which they can pay over time comes through loans. That which is more than they can afford either immediately and on a long term basis is them sought through other means.
• Thirdly, in most cases where the costs of land and infrastructure are concerned, the political process spear headed by the federation is seeking to get land tenure free and off site infrastructure’s capital costs subsidised by the state

In this process the permutation of who constructs and managers various aspects of all this are developed based on what is the skill and resource base of the community. The issue is to build a body of experience on which more and more communities get land tenure and begin to obtain secure tenure.

At the moment the range of who manages ranges from community themselves, the federation alliance leadership, petty contractors or combinations of all or some.

1. Sholapur bidi and mathadi workers In Sholapur city and thirteen districts around it are some of the most organised unions of bidid and mathadi workers. They have recently joined the federations and want to establish demonstration projects which they can scale p among their members. This scheme will use community savings, subsidies and subsidised loans in the first phase.
2. Kanjurmarg: house construction and infrastructure This project is a very important one as it defines how communities can design and manage their own relocation and resettlement. Over the next 8 years 30,000 households will be resettled in the MUTP II project financed by the World Bank. In this project people will get land and off site infrastructure.
3. Bombay sanitation project: In this project of 208 crore rupees, 20,000 toilet seats will be constructed. The alliance is now participating in developing prototype designs and construction systems by which at least one third of this project construction will be managed by communities.
4. Kanpur housing by KDA In Uttar Pradesh, the city of Kanpur has sought to commission the local federation to construct houses for its housing division as a contractor. These houses, will have loans and subsidies and the strategy is to involve communities who will move into those houses later in the design and construction, the city will pay for the houses, and then part of it will be repaid by the people.
5. SRA self development and SRA in collaboration with state. In this scheme, additional FSI is used to pay for cost of construction, and this can be developed by contractor of community.

Mix of grants, subsidies, subsidised loans and normal loans, guarantees and bridge funds.

As we work in many situations in many cities and states, and over time this number has to grow, it is clear that there is no uniformity in what combination of resources are available. Our basis for making choices is that if there is land tenure, what is the optimum manner in which a core house can be made available with minimum infrastructure to the community… as a means of providing basic equity and safety net in cities.

Even today as we discuss all kinds of funds, about 20% of real costs in the form of technical and managerial and negotiation support emerges from the grants made towards SPARC and on which it leverages its own skills and knowledge to produce this resource.

Subsidies are available at various levels. For instance, there are various sub groups of the poor, like bidi ( Indian cigarettes) workers special casts groups and others who have a entitlement to a certain amount of subsidy towards their houses. At the present moment, no city has really drawn down these subsidies, and nor can houses be built in the amount of the subsidy. By putting together a mix of start up capital, some loans and grants, we may be able to obtain the subsidy… in such matters the subsidy will come later in the project and reduce the liabilities in the medium and long run, and will set precedents for others to draw down its money… however in this instance it will not be part for the start up process.

In other instances, subsidies are also available for infrastructure… for instance RS 800 per capita is available for informal slums for infrastructure… this money is made available only to municipalities at the moment, as is cheap loans for sanitation. The alliance will now seek to make this available to the alliance and to communities and demonstrate that the city liabilities actually reduce if they agree to allow this subsidy to come to the people.

Subsided loans: Although this amount is not adequate at macro levels in term of fulfilling need, it is not even used marginally for loans…. Communities have no direct access to this money, and the cities don’t take it because the amount for the loan is too little for the house to be constructed by the city! So a major challenge is to draw down this money. Start up capital, bridge funds … all these start construction activity on the ground, and help demonstrate that people can use this amount. But at present although we have lobbied for a credit line, we cant draw out the money quickly enough.

Rupee loans: There is adequate legislation for banks to obtain loans for this sector, as the Reserve bank requires all banks to make such loans. But so far they could prove that they were no one asking for such loans, and get away from dialoguing with its sector. Now the alliance is negotiating with may banks and beginning a process by which Rupee loans at subsides and prime rate are available.

Often to obtain these loans we may have to help spread risks, and international guarantees, and bridge funs are means to do this.

Bilance has given a bridge fund whose rupee value we are planning and hoping to retain, and which will be the beginning of the construction momentum that we take on. Clearly given the construction we have already got into there is need for more funds, and yet the absorption of the money on the one hand and regular pace of obtaining funds to cover costs of start up operate at paces we cannot yet control.

Our major goal: Accessing all local funds for construction: The role of international support at this stage.

Clearly we seek to optimise our borrowing at local level in rupee terms. We have neither skills, expertise on the one hand, nor profit margins which ensures that we can service hard currency loans yet. At the same time we feel that the it is essential to engage a wide spectrum of agencies in the process so that our knowledge grows together. The most effective way of doing that is to begin to develop instruments like the guarantee… in which main risks which lobby banks are fearful of are shared by northern institutions seeking to help, but whose money stays in hard currency in the north.

This interaction will also make northern partners more familiar with our work and the rules and regulations under which we operate nationally.

For both financial and political terms it is vital to create recognition that supporting housing and infrastructure I a vital aspect of urban poverty alleviation, and the state must invest in this solution.

The strategy of the alliance seeks to create large enough numbers of precedents to make housing for the poor accessible not only to the federation members but to other poor as well.

Projects already started and their location and financing strategy