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This special issue of Global
Urban Development Magazine is the result of collaboration
with Ashoka, and we want to especially thank
Stephanie Schmidt, Valeria Budinich, and Aileen Nowlan of Ashoka,
and Bruce Ferguson of Global Urban
Development, for
assembling a series of papers that focus on the role of the
private sector in meeting the challenges of affordable housing and urban
economic and community development.
INTRODUCTION
Transforming Urban Markets for the Poor through Collective
Entrepreneurship
Bill Drayton and
Ashoka
As an increasing number of financially self-sustaining models
are developed to serve low-income markets, new opportunities
emerge for players involved in housing, basic services, urban
development, and finance. There is a need for new business
models combining profits and social impact, new roles, new
investment mechanisms, new policy frameworks, and new mindsets –
all these driven by innovation and competition. The aim of this
issue of Global Urban Development Magazine is therefore
to inspire new players to explore the social and financial
potential of low income housing and urban development, to equip
existing players with practical “how to’s” and to trigger a
dialogue about collective entrepreneurship. Our goal is to
foster a learning community of business, social, and public
entrepreneurs to learn from previous experiences, keep refining
our understanding of obstacles and success factors to drive
transformative solutions at a big scale and innovate together.
more
Creating a World Without Poverty: Social Business and the Future
of Capitalism
Muhammad Yunus
Since the fall of the Soviet Union in 1991,
free markets have swept the globe. Free-market economics has
taken root in China, Southeast Asia, much of South America,
Eastern Europe, and even the former Soviet Union. There are many
things that free markets do extraordinarily well. When we look
at countries with long histories under capitalist systems—in
Western Europe and North America—we see evidence of great
wealth. We also see remarkable technological innovation,
scientific discovery, and educational and social progress. The
emergence of modern capitalism three hundred years ago made
possible material progress of a kind never before seen. Today,
however—almost a generation after the Soviet Union fell—a sense
of disillusionment is setting in. To make the structure of
capitalism complete, we need to introduce another kind of
business—one that recognizes the multidimensional nature of
human beings. If we describe our existing companies as
profit-maximizing businesses (PMBs), the new kind of business
might be called social business. Entrepreneurs will set up
social businesses not to achieve limited personal gain but to
pursue specific social goals.
more
How to
assess the size of low income housing markets
The Next 4 Billion – The Housing Market
Allen
Hammond, William J. Kramer, Rob Katz, Julia Tran, Courtland
Walker
Housing is one of the larger base of the
pyramid (BOP) markets—larger than transportation, smaller than
energy. The market encompasses major spending items—rent,
mortgage payments (or imputed rents), and repairs and other
services. But the BOP housing market is perhaps uniquely
handicapped by informality. Both lack of legal title to housing
in squatter settlements—Hernando De Soto’s “dead capital”—and
lack of access to mortgage financing for the BOP limit its
potential size. Despite
these barriers, both private sector approaches and policy
reforms—sometimes catalyzed by NGOs—are showing how to tap this
market in ways that provide significant benefits for BOP
households.
more
A Value Chain Framework for Affordable Housing in Emerging
Countries
Bruce Ferguson
Housing the low/moderate-income majority of
developing countries creates enormous potential demand for many
types of goods and services – from cement to home credit.
However, designing, marketing, and delivering products for this
market requires understanding the settlement and shelter problem
of low/moderate-income families. Modern management strategies
well suit the challenge of squeezing the costs out of the
low/moderate income housing process through creating “value
chains” consisting of innovative packages of
products and services. Involving citizen-sector organizations
(variously called “NGOs”, “nonprofits”, and “the social sector”
) in marketing and delivery can build the trust necessary for
modern companies to reach low-income people with these housing
packages, resulting in “hybrid” value chains.
more
How to
mobilize and empower communities to transform urban markets
WWB Gender Study: The Capacity of Poor Women to Grow Their
Businesses in the Dominican Republic
Inez Murray
Providing credit to poor women is a great way
to enable the financial stability and economic progress of
low-income households. But because of gender-based constraints,
burdens and responsibilities, in the Dominican Republic as in
many countries, more than credit is required if women are to
make real progress in lifting their families out of poverty.
more
Social Market Development and Social Mobilization in the Value
Chain of the Construction Industry
Inês
Magalhães and Anaclaudia Rossbach
For the first time, there is widespread
growth in the consumer market due to an increase in the income
of a social segment traditionally excluded from the formal
markets. An indication appears in the major newspapers of a
trend amongst some private sector executives to invest in or
start businesses to reach out to the niche market characterized
by low income communities. The dynamics in the value chain of
the construction industry have been underway since the late
1980s when the squatter settlements set up in the 1970s
underwent a spontaneous urban development with the replacement
of dwelling houses made of inadequate construction materials
with brick houses, and upper floors.
more
Understanding Asian Cities: A Synthesis of the Findings from
Eight City Case Studies
David Satterthwaite
Asia's urban centers house around 1.5 billion
people. A quarter of the world's population and around half its
urban population. By 2025, around a third of the world's total
population is likely to live in Asia's urban centers. Thus, how
these centers function and serve their populations has great
significance for a large part of the world's population.
Asian urban centers also have
most of the world's urban poverty, most of its 'slum and
squatter settlement' population and most of the urban population
that lacks adequate provision for water, sanitation, drainage
and good quality health care and schools.
more
How to
unlock these markets addressing the issue of land tenure
Market-Based Models for Land Development for the
Low/Moderate-Income Majority
Bruce Ferguson
Hybrid value chains provide a tool to
analyze, improve, and create affordable housing projects and
products. Nowhere is the need and opportunity greater than in
land development. Virtually
all net growth of 2.6 billion in world population between now
and 2050 is projected to occur in emerging-country cities. The
majority of these new households will earn low or moderate
incomes.
more
Putting the “Housing” Back into Housing Finance for the Poor:
The Case of Guatemala
Irene Vance
In housing microfinance (HMF) circles it was
envisaged that the unmet demand for housing would be met by a
merging of the finance gap. Banks and mortgage lenders would go
down market by making smaller loans to a lower-income clientele.
Microfinance institutions would expand the size of loans and
target clientele for their housing credits somewhat upwards.
Over the last decade, however, HMF appears to have grown mostly
through microfinance institutions creating a home improvement
product and, to a lesser extent, making modestly larger loans
for new home construction and purchase. more
How to mobilize financing for these
markets
Housing Microfinance: Is the Glass Half Empty or Half Full?
Bruce Ferguson
Donors, governments, microfinance networks,
and foundations have promoted housing microfinance (“HMF”) for a
decade. Considerable operational experience has accrued on this
practice over this time. Meanwhile, many emerging economies
have grown rapidly, which has changed housing markets and the
context for HMF. The moment, then, is auspicious for a
re-examination of housing microfinance and its record.
more
Capital-Market Funding of Affordable Housing Finance in Emerging
Countries: The Business Case
James Magowan
Families are moving to cities
with scant resources but with an entrepreneurial spirit and a
strong desire for the habitat essential for a modern life –
shelter, secure tenure to property, water, drainage, sanitation,
and electricity. A key challenge, then, is to connect capital
markets with low-income, rapidly-urbanizing populations to
improve their habitat and living standards. These families need
the basic financial products and services that most households
in developed markets enjoy: short-term and long-term savings
vehicles, credit instruments, insurance products, and property
rights.
more
Finance for Low-Income Housing and Community Development
Diana Mitlin
There
has been much innovation in finance to support housing,
infrastructure, and community development for low-income groups
over the last 15 years. Much of this works in informal
settlements, supporting negotiations for land tenure security,
house construction and improvements, and often improved
provision for water and sanitation. Most schemes combine
savings, loans and subsidies.
more
How to
innovate business models
Housing the Poor by Engaging the Private and Citizen Sectors:
Social Innovations and “Hybrid Value Chains”
Stephanie Schmidt and Valeria Budinich
The most important players in
low-income housing delivery are the poor themselves. Faced with
almost no formal options, they use a variety of resourceful,
incremental, informal, and often illegal means to meet their
shelter needs. But two new types of actors are emerging to
support this effort: the citizen sector has experienced
unparalleled growth and it has resulted in numerous bottom-up
social innovations and in active involvement of community groups
in housing initiatives; and, on the other hand, although most
large businesses in the housing sector still consider low-income
populations to be an insignificant or unattractive business
segment, an increasing number of visionary business leaders have
started leading the way to serve these markets profitably and
with social impact.
more
Bringing Low-Income Consumers into the Market in Colombia: Home
Improvements that Make a Difference
Roberto Gutiérrez
Ana Delia Ibarra, a 40 year-old
mother of three, is one of 80,000 Community Mothers who work in
poor neighborhoods in the cities of Colombia. Back in 1986,
when President Virgilio Barco created the Community Homes
day-care program, many of these women were already organized to
care for children — their own and those of other mothers. Ana
was able to join the program in 1996 because she had her own
house, a high school diploma, and experience with children.
In early 2006, a Bogotá Health Department visitor said she would
have to tile the bathroom and kitchen for “hygienic reasons.”
Ana didn’t have the income to upgrade her home. In February 2006
a social worker arrived to Ana’s Community Mothers cooperative
with an offer. Ceramics of Colombia (Colcerámica), a branch of
the Corona Company founded in 1952, invited them to participate
in a project to improve their housing.
more
How to
create an enabling environment for private initiatives in urban
development
Private Sector Involvement in Slum Upgrading
Judy Baker and Kim McClain
The wide array of relationships
the private sector has had to slum upgrading and the many
innovative mechanisms that have been piloted to encourage these
can be described as a mélange of diverse responses to the many
different contexts in which slums exist. There are a number of
challenges and opportunities in working in low income areas
which have been addressed in many different ways. Key issues
include the environment for private sector activity, some of the
main barriers facing the private sector, as well as the
opportunities for both private sector and slums to benefit from
engagement.
more
The
Millennium Cities Initiative: A Comprehensive Approach to
Reducing Urban Poverty and Generating Sustainable Prosperity
Susan Blaustein
In recent years official
development assistance has trended toward sectoral support,
filling pressing needs in the domains of public health, water
and sanitation, education, or governance. With this approach,
donors are able to see and monitor progress in their chosen
areas. One unhappy consequence of this explicitly segmented
approach is that the notion of the urban region as an integrated
organism, requiring a full, coordinated diet of multi-sector
interventions to ensure its ongoing economic, social, and
environmental health, has faded into the background. Strangely,
and somewhat incoherently, this tendency coincides with the
global embrace of the Millennium Development Goals (MDGs), a set
of fundamental objectives adopted by the United Nations and
aimed at improving access to such fundamental human rights as
health, education, clean water and sanitation, gender equality,
environmental protection, and sustainable economic development.
As the limited success of even the best sector-focused
development projects have revealed, the MDGs can be fully
achieved only in concert.
more
ABOUT THE AUTHORS
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