Slum Upgrading Facility: Lessons on how to use guarantees to address risk and access commercial loans for slum upgrading

It is estimated that up to 1 billion people live in slums in the cities of the world – one sixth of humanity – and that the numbers are rising. The UN-HABITAT Slum Upgrading Facility Pilot Programme was established in 2004 to examine ways in which innovative finance mechanisms can help address this problem. The Slum Upgrading Facility is a technical cooperation and seed capital facility with a central purpose: to test and develop new financial instruments and methods for expanding private sector finance and public sector involvement in slum upgrading on a large scale. It is funded by the governments of the United Kingdom, Norway and Sweden.

The Slum Upgrading Facility (SUF) operates under the premise that slums can be upgraded successfully when slum dwellers are involved in the planning and design of upgrading projects and able to work collaboratively with a range of other key stakeholders. Slum Upgrading Facility works with local actors to make slum upgrading projects “bankable” – that is, attractive to retail banks, property developers, housing finance institutions, service providers, micro-finance institutions, and utility companies. Slum Upgrading Facility has pilot projects in Ghana, Indonesia, Sri Lanka and Tanzania, where various approaches are being tested to support the purpose of the Pilot Programme.