NEIGHBOURHOOD UPGRADING AND SHELTER

SECTOR PROJECT INDONESIA

Oswar Mungkasa (Bappenas-Indonesia)
Dialog II on FINANCING SLUM UPGRADING
th
19 Session UN Habitat Governing Council Conference
Nairobi, May 07, 2003
 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 of
40%
 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 house
currently produced in the market.
- Almost all of these people are living in informal
areas and are experiencing a deterioration in the
level of services and infrastructure provided by
local government
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.
Lesson Learned
 Kampung/Village Improvement Programme
(KIP)
– The beneficiary include the middle-income
population
– Not to be regarded as sustainable.
– Top-down planning
– Limited at addressing the public infrastructure,
not land, housing or community development
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 income
household.
– Housing provided in stages, or built
incrementally can be affordable
– Community or collective action can help reduce
the price of land and infrastructure
Lesson Learned (cont.)
– Revolving fund must fully recovery their costs
in order to be self-sustaining
 Neighbourhood Upgrading and Shelter Sector
Project (NUSSP)

 Strategy
– A comprehensive approach to the upgrading
of neighborhoods and the improvement of
housing 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.
Strategy (cont.)
 Principle
Participatory; enabling and empowering the
community members to participate in and benefit
from all aspects of the project
Demand-driven;
Transparent - allowing all members of the
community access to the decision making
processes.
 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 and
empower communities and cities to engage more
actively in participatory processes that address the
housing needs of the poor.
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.
 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 through
micro-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.
 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 generation
activities especially the creation of work facilities.
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
 Thank You