The challenge of the last few years: planning against poverty, microfinance

1165 THE CHALLENGE OF THE LAST FEW YEARS: PLANNING AGAINST POVERTY, MICROFINANCE Giuseppe Carta Prof at University of Palermo Faculty of Architecture Viale Campania, 14 – PA Palermo 90144 Italy [email protected] +39 091521553 Key words: Soul, Cohesion, Urban, Policies. Abstract “Nisi est in intellectu quod prius non fuerit in sensu”, John Locke, 1690. The last ten years have witnessed a heightened interest in infrastructure in both developed and developing countries, with emphasis on the financial crisis in developed countries, and the recurring attention on growth and poverty reduction. An edition of the UN Report underlines the choices available to policymakers across the range of economic, social, cultural and political challenges that are needed to bridge the urban divide. The term “inequality” has many different meanings. Shortly we describe how an indicator of economic well-being is distributed over a particular population. The coefficient or index is commonly used for measuring the grade of difference in size, income, wealth, costs, etc. Gini’s Coefficient (1921). Obviously the index only considers one aspect of difference, that of the distribution of income. The effect of social services which are administered directly, as for example, the Health Service and Education, even though they are extremely important for a substantial equality of rights and opportunities, is not taken into account. As a group of eminent planning experts recognized in the Global Report on Human Settlements 2009: “Among the most significant challenges that urban planning has to address in the next few decades are increasing poverty and inequality, as well as the rapidly expanding urban sector.” Urbanization, therefore, does indeed play a positive role in overall poverty reduction, particularly where supported by well-adapted policies. The challenge of the last few years: planning against poverty, microfinance “Nisi est in intellectu quod prius non fuerit in sensu”, John Locke, 1690. The last ten years have witnessed a heightened interest in infrastructure in both developed and developing countries, with emphasis on the financial crisis in developed countries, and the recurring attention on growth and poverty reduction in developing countries. Other 1166 characteristics describe infrastructure as essentially public goods. Increasingly, the meaning of infrastructure has been shifting from one focusing on physical fixed assets such as roads, airports, sea ports, telecommunications systems, water distribution systems and sanitation. It now often embodies notions such as knowledge bases (Button, 2002). In general infrastructure can be categorized into ‘hard’ infrastructure and ‘soft’ infrastructure. The former refers to physical structures or facilities that support the society and economy, such as transport (ports, roads and railways); energy (electricity, electrical grids, gas and oil pipelines); telecommunications (telephone and internet); and, basic utilities (water supply, hospitals and health clinics, schools, irrigation, etc.). The latter supports the development and operation of hard infrastructure, such as policy and institutional frameworks; governance mechanisms; systems and procedures; and transparency of financing and procurement systems. Broadly defined, therefore, infrastructure refers to all basic inputs for the proper functioning of the economy. In spite of this, there are two categories economic and social infrastructure, adopted in the ‘Millennium Declaration, 19902015, where 48 quantifiable indicators are set out. The most relevant interactions on current urban issues take place with Reports of the United Nations. It is the venue for national government agencies, local authorities, the academe, civil society and private sector actors from all over the world to find synergies and explore collaboration. The UN addressed the urban divide, noting that much of the world is simultaneously trending toward increased urbanization, leading to the creation of hypersegregated cities due to poor urban management practices. An edition of the UN Report underlines the choices available to policymakers across the range of economic, social, cultural and political challenges that are needed to bridge the urban divide. It charts a new course of action, with the steps and levers needed to achieve a more inclusive city, emphasizing the need for comprehensive and integrated responses that go beyond short-term perspective. Indeed over the last 20 years, many urban areas have experienced dramatic growth, as a result of the rapid population growth, and the world’s economy has been transformed by a combination of rapid technological and political change. An estimated three billion people – virtually half of the world’s total population now live in urban settlements 1. And, while cities and towns command an increasingly dominant role in the global economy as centres of both production and consumption, an uncontrolled and rapid urban growth in particular in the developing world is hampering the capacity of most cities to provide adequate services for their citizens. Generally, it has been understood that the growth in most parts of the developing world has been driven mainly by rural migration. 1 In October 2012, the World Urban Forum in Napoli (UN-Habitat and Commission on Human Settlements) the Commission requested “to promote a merger of the Urban Environment Forum and the International Forum on Urban Poverty”. The World Urban Forum was the premier conference on cities, as well as the major global gathering for actors concerned with the planning, governance and management of urban areas. 1167 However, in this process, the rural-urban migration can no longer respond to all the recent changes and transformations which have taken place in the world’s cities. Beyond the rural - urban migration waves, an emerging trend shows that intra-urban migrations, and the processes of “reclassification”, which consists of a gradual transformation of several rural areas into new urban centres contribute to the aggravation of the urban living standards for the most vulnerable portions of the population in several world’s cities. Indeed, the emergence of new global issues and forces, including high levels of internal and trans national migration, globalization, climate change, rising urban insecurity and crime, human-caused disasters and conflicts, and rising informality within cities are interrelated with the internal dynamic of growth of cities themselves. Economic infrastructure is also part of an economy’s capital stock used to facilitate economic production, or serve as inputs to production (e.g. electricity, roads, and ports). This helps to produce items that are consumed by households (e.g. water, sanitation and electricity). Social infrastructure, on the other hand, encompasses services such as health, education and recreation. It has a direct impact on the quality of life with the attendant positive effects on efficient use of national resources and on poverty alleviation2. The “right to the city” has evolved over the past two centuries as a challenge to the exclusionary development and marginalization that are rampant in cities today. More than a new legalistic device, the right to the city is the expression of the deep yearnings of dwellers for effective recognition of their various rights. The concept has been deployed in various ways across regions, countries and cities of the world. In some places it has been used as a theoretical and political framework focusing on enforcement, empowerment, participation, self-determination and various forms of human rights protection at the city level. Some developing countries have made significant efforts to close the urban divide as part of a less specific “rights-based” approach, or only recognizing some particular aspects of the right to the city. UN policy analysis shows that more often than not processes do not match because they fail to acknowledge the linkages among the dimensions of the inclusive city – economic, social, political, and cultural. Admittedly, cities will, time and again, adopt new rules in a bid to address some exclusion related issues; but these fail to spell out specific goal and sustained processes. The most important factors that prevent cities from bridging the urban divide, include: 1) poor coordination among various tiers of government. Today, more and more authorities share the same basic philosophy: bringing government within the reach of ordinary people through enhanced mutual engagement. The physical space is becoming a political space in terms of systems of representation and participation and in this sense is a fundamental aspect of local democracy. 2) absence of scientific data for informed policy choices. Only those cities able to embrace different patterns to address inequalities and inefficiencies will be able to provide better lives for their residents, while limiting ecological damage. The future of cities will depend on which models can be devised and implemented to build a new type of city. 2 M. Carta, Pianificare la complessità, Palermo 1990. 1168 3) Exclusion of marginalized groups and discrimination of minorities; the Urban Divide can be characterized by various forms of inclusion/exclusion, integration/marginalization, wealth/ poverty, equality/inequality. Those on the wrong side of the divide are excluded from the benefits of urban expansion and prosperity. It is not surprising that a policy analysis survey perceived urban reforms as serving primarily the interests of the rich, with politicians and civil servants coming next. The urban poor stand to share only a minimal extent, if at all, in any benefits accruing from urbanization and related reforms. This imbalance is very much influenced by man 's attitudes and values, and particularly by the inadequacies of traditional methods of formulating targets. There are also external influences arising from pressure groups – the private property - propaganda and media. When these functions are considered in a balanced and interconnected way, optimum solutions should emerge, which not only make the best use of available resources at the proper time, but should encourage a 'confident' response from the community. Social divisions can permeate interactions amongst individuals even in the absence of significant ethnic, racial or other factors of segregation. The Millennium Development Goal was widely adopted, namely in 2015 to reduce by half the proportion of people living in extreme poverty. But quite what this target might mean is obscured by the bewildering ambiguity with which the term ‘poverty’ is used, and by the pecuniary indicators proposed to monitor it. Poverty often appears as an elusive concept, especially from the perspectives of policy makers in developing countries. The best definition of poverty remains a different argument. Perhaps the only point of general agreement is that people who live in poverty must be in a state of deprivation; that is, a state in which their standard of living falls below minimum acceptable standards. In general, poverty is a condition that is experienced over time and is the outcome of a process. While many are born into poverty and remain in it, others experience the condition at one or more stages of their life that deprive people of their human rights and result in inequitable and fragmented societies. The Human Development Report (2001) notes that 70 percent of the world’s poor are female. The 2000/2001 World Development Report (World Bank, 2001) identifies three broad dimensions of poverty relating to lack of income, insecurity and lack of political voice. The Oxford Poverty and Human Development Initiative recently unveiled an innovative new “multidimensional” measure of people living in poverty, known as the Multidimensional Poverty Index or MPI. The studies reviewed all look at infrastructure’s contribution to economic growth rather than specifically poverty and inequality. Some evidence suggests that certain types of infrastructure service provision, such as roads and transport, have a potential contribution to agricultural output, and that infrastructure improvements (in electricity supply, transport and telecommunications) in small towns contribute significantly to industrial growth and employment. 1169 On the whole, the evidence shows that public investment on infrastructure, especially on rural roads, improves local community and market development 3. This study suggests that, while infrastructure investment needs to be very substantial and must be supported by factors such as improvement in social infrastructure so as to promote rapid reductions in poverty, high levels of personal and political corruption, facilitated by weak systems, have hindered a demand-led approach, investment choices and encouraged neglect of maintenance. Too often, there have been negative rather than positive consequences for poor people, including environmental damage. We live in a new urban era with most of humanity now living in towns and cities. Global poverty is moving into cities, mostly in developing countries, in a process we call the urbanisation of poverty. The world’s slums are growing as are the global urban populations. Indeed, this is one of the greatest challenges we face in the new millennium. The links between microfinance and the Millennium Development Goals must be emphasised because both spheres overlap in the crucial domain of worldwide poverty reduction. The overlap is such that microfinance can open up for the poor. If microfinance is to accelerate Millennium Goal achievement, the degree and nature of donor and public sector support for microfinance must change. Microfinance providers do need to recoup operational costs, but this does not prevent them from using subsidies for the more vulnerable poor and market. The Millennium Development Goals has enabled the United Nations to claim a central role in international approaches. As a measure of poverty, the Millennium Goals are a compromise, but they serve to highlight the many dimensions that poverty can take. One can argue that the Goals do not do justice to the differences between rural and urban poverty or to the deprivations that beset millions of refugees and homeless people in the world. While the ultimate goal is to eradicate all extreme poverty, the immediate target is to halve the number of people in extreme poverty by 2015 compared with 1990. For example, while the world today produces more than enough to feed everyone. Social security has a role here, especially with regard to underweight pre-school and school age children. Fortunately, more than one generation of experience with microfinance is now available across the globe on which institutions can call to ensure that microfinance loans are not only pro-poor, but accessible and suited to their needs. This is especially so among the urban poor who have few opportunities to grow their own food. However, among the rural poor higher farm-gate prices are a boon. Microfinance has enabled even the poorest agricultural households to reap the benefits of higher farm gate prices, financing the value chains that connect poor rural households with new markets. This kind of trend is consistent with reduced unemployment and more opportunities for the extreme poor to find better-paid jobs in less risky areas of production. The literature on extreme poverty is not as abundant or extensive as that on poverty in general. The needs of 3 For example, rehabilitation of rural roads raises male agricultural wages and aggregate crop indices in poor villages of Bangladesh. Likewise, in Vietnam public investment in infrastructure has resulted in an increase in the availability of food, the completion rates of primary school and the wages of agricultural workers. 1170 those at the bottom of the poverty pyramid are not materially different from those of the poor in general. In reality, those needs and circumstances are different in important ways, particularly the way they manage money and deal with risk. The concept of "adequate housing" is slowly but surely becoming internationally accepted as a basis for policies and programmes aimed at addressing the needs of low-income communities. The section presents concepts essential to understanding low-income housing, and explores the reasons behind the serious lack of decent, affordable housing in cities –and hence the problem of urban slums by examining alternative strategies about what to do about existing slum conditions and informal settlements, and how to avoid future slums through the production of new housing. Finally, the guide examines the main considerations needed to address the improvement of informal settlements and the production of adequate and affordable low-income housing on a city-wide scale. Government and policy makers need to quickly enhance their understanding of low-income housing issues in cities in particular, because the housing situations and needs of rural communities are often quite different from those of city dwellers. Productive dynamic demands understanding of what is going on in cities and thoughtful policy responses to these developments. Our key messages involved in urban planning and development are : 1. Urbanization is both understandable and manageable. 2. Sustainable urban development solutions exist, but they require trust, dialogue and new institutions. 3. Success can only come from pursuing the iterative cycle of acting-learning that drives innovative governments. Examples of such practices can be seen in areas such as land, housing and livelihoods. Patterns of urbanization Between 2000 and 2030, Africa's urban population – as example - will increase from 294 million to 742 million. This is a daunting prospect, given that most African states are currently failing to deal with the needs of their urban populations. Growth and migration - rural-to-urban migration accounts far only one-quarter. In other words, the bulk of urban growth comes from natural population growth within cities, a reality which undermines the policy migration. A common misconception is that urbanization implies an explosion of mega-cities (cities with more than seven million people). We have seen that the urban poor are the most important actors involved in providing shelter in African cities and towns, despite the absence of government support and investment. Of course, because their houses are constructed without the supporting infrastructures such as access to water, sanitation and energy, they are insufficient and inadequate to represent anything resembling the kind of housing that is implied by the universal right, as set out in Article 25 of the Universal Declaration of Human Rights. The central challenge facing governments and managers is to recognize and appreciate the efforts of the urban poor, and build on their investments to progressively solve the shelter crisis. 1171 Informal settlements contain entire vibrant local economies, with their own informal housing and land markets and their own diverse social and cultural groupings, while conditions in some settlements may indeed be squalid, unhealthy, impoverished and socially excluding. Governments, and in particular national services, need to draw on this knowledge to establish the numbers of people living in the settlement, their living conditions, their needs and aspirations -all vital information which must shape plans that will affect the settlement. Once this understanding has been reached, it must be related to four key aspects of development: - It is overcrowded or characterized by extremely high density of dwellings and population. - Its residents have insecure land tenure and may be evicted. - Its residents experience high levels of poverty and social exclusion. A slum household is defined as a group of individuals living under the same roof lacking one or more of the following condition: access to improved water; access to improved sanitation facilities; sufficient living area (not more than three people sharing the same room); structural quality and durability of dwellings; and security of tenure. Defining slums by household-level, however, does not fully capture the degree of deprivation experienced by a given household or slum community, or their specific needs -a dimension that is important. Gentrification At the same time, the restrictions put in place to ensure the preservation of the historic character limit the degree to which properties can be altered and thus impose a cost to their owners. We argue that with positive heritage effects, the policy benefits the owners by removing uncertainty regarding the future of the neighbourhood. At the margin, costs and benefits of designation will offset each other, resulting in a zero impact on property value. At all other locations in neighbourhood the effect would be positive. Empirical analysis of the determinants allowing owners’ interests play in the designation process against alternative motivations for designation, e.g. preventing decline or redevelopment. This analysis goes further in connecting the spatial outcome of a political bargaining process to one of the most striking contemporary urban phenomena: gentrification, that introduces our theoretical model of heritage designations and the institutional setting. In the long-run there is a probability that at any location owners (re)develop their property causing a deterioration in internal heritage from the initial endowment . Such deterioration implies a fall in the external quantity of heritage everywhere in the city. While at any location x the internal heritage is under the full control of the owner, the external heritage at all locations can be expressed as an expected value determined by the probability of heritage deterioration across the neighbourhood. We provide an explanation of the structure of an urban agglomeration, describing where firms in different sectors have decided to locate their activities, ranging from service supply to manufacturing products. Second, we consider a model formulation that implies that agglomeration economies are associated with a disproportionate expansion of jobs in knowledge-intensive producer services and household services. Moreover, as the diversity of household services in an agglomeration increases, new households are attracted to the 1172 agglomeration, which implies that urban agglomeration stimulates expansion of both labour supply and job demand. In summary, sectors are attracted to locate and expand in urban areas with higher than average supply potential, and when such sectors grow they stimulate additional service-producing firms to operate in the same urban area. When density gets higher the growth in certain areas may come to a halt. One may remark that the supply capacity of business services is measured empirically by observing the number of jobs which may considered as a crude measure. An alternative would be to weigh jobs by using information about wage levels for different jobs. Microfinance Governments should be encouraged to adopt policies that enable the housing sector to work. Governments have at their disposal major instruments that address demand-side and supplyside constraints, and improve the institutional framework of the housing sector as a whole as a vital tool in disclosing these constraints and providing governments with the necessary information to take policy decisions. Demand-side instruments are: 1) developing property rights: ensuring that rights to own and exchange housing are established and enforced, ensuring land rights and regularization of insecure tenure; 2) developing mortgage finance: creating the establishment of competitive mortgage lending institutions, and fostering innovative arrangements to provide greater access to finance by the poor, which includes micro-credit and micro-financing for housing and land acquisition; 3) rationalizing subsidies: ensuring that subsidy programs are of an appropriate scale, measurable, and transparent, preferably focusing on the demand side and avoid distorting housing markets. Supply-side instruments are: 1) providing infrastructure for residential land development: coordinating the agencies responsible for provision of residential infrastructure (roads, drainage, water, sewerage, and electricity) for efficient development of urban planning instruments. 2) organizing the building industry: creating greater competition in the building industry, removal and use of local building materials, promoting the establishment of lab testing and quality control, supporting green technologies and low-carbon practices. These instruments are to be supported and guided by developing the institutional framework: strengthening institutions which can oversee and manage the performance of the sector as a whole; bringing together all the major public agencies, private sector, and representatives of nongovernmental organizations, policies and programs which benefit the poor and elicit their participation. Such institutional framework should enforce transparency in housing markets, establish monitoring and indicators and regular updates on the performance of the housing sector and the property market. Priorities for use of these instruments, however, vary across countries; priorities are to develop market oriented systems of property rights, facilitate the housing supply and enhance industrial competition. 1173 One form of change is for local governments to coordinate effectively with central and state or provincial level authorities and vice versa. Inclusive policies for cities should focus more on aspects that could be integrated into formal municipal practices; such as the informal economy, social capital and informal institutional arrangements, including affordable land delivery and housing systems. The cost indices will always reveal the implication of developing any given land unit in relation to the land which appears to be the cheapest within the surveyed area. These indices, however, should not alone determine a planning solution directly, but rather provide a 'basis for choice' in the formulation itself. When such a basis is formulated, it becomes relatively a simple exercise to modify some of the parameters and to calculate how this would affect the cost of development. There is also a difference in the character of the costs involved between the second group of factors and the other three groups, where the costs tend to be fixed and to have a 'passive' character reflecting existing features of the analysed area. The planner can exercise no influence upon them; they are dependent variables. Housing finance includes mortgage and construction loans. These are typically offered by commercial banks and building societies, which demand a lien on land (i.e., the right to keep possession until the debt is discharged. The vast majority of urban poor (in Africa or in Asia) have no access to any financial instruments, and no alternative but to finance their houses through informal mechanisms. These include mainly personal savings, small loans from relatives, friends or microfinance institutions. The poor are denied access to formal housing finance due to lack of collateral resulting from the quality and/or legal status of their housing, limited incomes or uncertain employment status. Potential improvements to current housing finance systems include the following: 1Reform of land regulations, property rights and land markets must allow private ownership, leasehold and transactions on open land markets; 2Stronger tax bases for municipalities, putting them in a better position and access to capital markets; 3Encouraging greater private investment and finance in urban infrastructure and services, whether through guarantee schemes including public-private partnerships with international financial institutions and private operators and/or investors; 4Promotion of housing finance through microfinance institutions and housing cooperatives who know how to reach out to low-income urban communities and whose repayment can attract private and donor funding; 5Urban poverty can have implications for other nations, apart from emigration flows. Deep deprivation weakens national capacities to combat organized crime, human trafficking, armed conflict, terrorism, social unrest and the spread of diseases. As a group of eminent planning experts recognized in the Global Report on Human Settlements 2009: “Among the most significant challenges that urban planning has to address in the next few decades are increasing poverty and inequality, as well as the rapidly expanding urban sector.” Evidence also indicates an inverse relationship between the degree of urbanization