Urban Poor Fund International
What is the Urban Poor Fund International (UPFI)?
The Urban Poor Fund International is a SDI subsidiary, governed by Federation leaders, that provides capital to member national urban poor funds, who are affiliated to SDI. They in turn provide capital to savings federations undertaking important urban improvement and housing projects.
The Fund is established on the proposition that the poor are central actors in urban development and poverty eradication and are best able to decide and co-manage their own urban improvement programs. Giving the poor direct control of capital enables them to negotiate as an acknowledged potential partner with formal bodies such as government and banks.
SDI created the Urban Poor Fund International, in order to have a platform to access funds at the international level. When Federations strike deals at the national level, it can take time to receive funds from national government, or certain regulations may hold up the implementation of projects. UPFI can help bridge these funds in order to strengthen the hand of the Federations to negotiate and overcome these challenges. We can refer to this kind of role of the UPFI as “patient capital.”
UPFI funds can also be used as “venture capital.” In many cases it funds projects that can help create precedents that change approaches to urban challenges. When Federations motivate for funds from UPFI, and when projects are evaluated once they are implemented, there are four basic criteria involved:
(1) Does the project create political impact? For example, does it contribute to policy change?
(2) Does the project leverage further funds from external actors, especially the State?
(3) Does the project have a repayment mechanism and/or encourage savings?
(4) Does the project demonstrate a precedent that can be taken to larger scale?
How does UPFI invest?
The autonomy of SDI affiliates is enhanced by the liquidity and cash availability of UPFI and its affiliated national-level urban poor funds. Different federations have different expectations of capital recovery, so in the aggregate, the Fund makes net cash outflows. These are matched by inflows from donors to UPFI. To assure this, the Fund manages itself via a capital allocation strategy whereby the mix of distributions will be adjusted based on repayment results and available ongoing inflows.
Recovery of capital/ cash will flow from fund recipients back to national-level urban poor funds, not be expatriated back to UPFI. This is to ensure that the national federations have enough capital to leverage resources from local, provincial or national Governments. It also eliminates international currency challenges. The end result will be an increasing number of national level urban poor funds that are autonomous and self-sustaining (with top-up inflows).
There are two streams of funding from UPFI: capital for projects, and technical assistance .
Though this money funds local projects, it also builds a much stronger international platform. UPFI funds go to individual country urban poor funds. At the same time, it makes Federations accountable to an international agenda, and there must be common purpose around the wider politics and approaches that Federations use. The governance structure of UPFI ensures this. The council of all mature federations, which currently includes 14 countries, approves the allocations of UPFI for each country, and evaluates the fund‘s progress. In 2010, the fund underwent an external review that then received extensive discussion within the board and council of SDI.
So what does this look like in practice?
By the end of its third year of existence in 2010, UPFI had:
— funded the building of over 4,000 homes,
— secured tenure for 30,000 families,
— used USD6.3 million for over 100 projects in 16 countries.
— Examples of policy changes achieved through UPFI-funded projects include: reductions in minimum plot sizes; changes in building regulation to enable low-cost materials and/or designs; land sharing with the original land owner; allowing community groups to build for themselves using state housing subsidies; invitations to joint committees for improving informal settlements; the first time provision of emergency relief to urban communities.
SDI has also used the UPFI to pursue patrons of international standing. The patrons of UPFI are Archbishop Desmond Tutu and Mary Robinson, who have helped lend a moral weight to the fund‘s work. Further, the board of governors of the UPFI is constituted of Ministers from South Africa, India, Sri Lanka, Uganda, Brazil, Norway and Sweden and the Executive Director of UN Habitat. This has facilitated consistent engagement between these individual governments and SDI. It has also provided a platform for SDI to advocate for further inclusion in international venues and forums, such as the Cities Alliance and the United Nations, whose members include the States represented on the UPFI board.
History of the Fund
From 2001 to October 2007, SDI had been operating small capital funds through bilateral donations from private foundations (principally Misereor, Cordaid, the Big Lottery, Allachy Trust and Sigrid Rausing Trust). Capital through-flow from SDI to its national affiliates during this period exceeded $5,000,000.
In October 2007 the Fund was seeded with a further US$5,000,000 capital grant from the Gates Foundation, and an accompanying US$5,000,000 grant to expand the secretariat and to provide assistance to Fund recipients.
UPFI entered a new phase in 2011. In addition to its funding of individual projects at the country level, it has secured further capital to fund many projects in seven cities throughout the SDI network. This is to build "learning centers" throughout the world by demonstrating people-led solutions to urban development challenges that have actually gone to a large scale within individual cities. Further, the development of UPFI has convinced private donors in the United States and Scandinavian country donors to join a basket fund to coordinate their financial support of SDI‘s process.