Constrained Opportunities in Slum Economies - Decision Intelligence Document Search Cycle 2 - Rockefeller ...
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Decision Intelligence Document
Constrained Opportunities in
Slum Economies
Search Cycle 2
November, 2013
Problem Statement and Key Messages
Slum economies play a critical role in fulfilling slum dwellers’ livelihood and consumption needs, while also making
important contributions to the growing urban economies in developing countries. However, the economic opportunities of
slum dwellers are constrained by significant barriers, including unsupportive – and in some cases, hostile – municipal
environments, which fail to protect informal workers’ rights and provide sufficient infrastructure in slums; information
asymmetries in the labor market that prevent equitable access to jobs; and insufficient access to resources (for example,
skills, finance, and markets) that enable growth. These barriers constrain the income generation and economic mobility of
slum dwellers, and limit access to affordable goods and services within slums.
Key Messages
1. Slum economies support the day‐to‐day product, service, and 4. Across geographies, there are emerging areas of dynamism
livelihood needs of the 830 million slum dwellers in developing around solutions that can address these challenges. These
countries. Slum economies also make important contributions include the increasing availability of slum data to inform urban
to broader urban economies, representing a large share of the decision making, private sector engagement with slum dwellers
informal labor force, providing urban services (e.g., waste as consumers and in value chains, and improved slum dweller
collection), and producing goods for local and export markets. connectivity to economic opportunities.
2. Despite their importance, slum economies are negatively 5. A number of actors are implementing solutions that address the
impacted by entrenched economic, political, and social systems challenges and opportunities in slum economies. However,
in developing countries, resulting in limited economic many are not targeting slum economies specifically, instead
opportunity and mobility for slum dwellers. These constraints focusing on the closely related perspectives of informal
are shaped by a complex and interrelated set of root causes that employment, the urban labor market, or slum upgrading. This
include social isolation, lack of legal power, and insecure access suggests that interventions in this space likely require
to public and private property. partnering with a range of organizations with broader focus
areas, working with them to more specifically target slum
3. The challenges associated with slum economies are increasingly
economy issues where possible.
pressing. Looking ahead, as slum populations are projected to
continue to grow, slum economies may play an increasingly 6. To demonstrate opportunities in this space, two high‐level
important role in serving slum dwellers’ needs and providing approaches have been considered: i) directly reduce barriers to
livelihood opportunities. Potential slum economy contributions slum dwellers’ economic advancement; or ii) increase
to livelihoods are particularly important in Sub‐Saharan Africa appreciation of slum economies. These two approaches imply
where youth comprise a larger share of the urban population. trade‐offs in terms of likely reach, depth of impact, and risks.
1
Definitions of Key Terms and Concepts
Term Definition
Slum An urban or peri‐urban neighborhood where more than half of all households live in slum conditions, as defined by
UN‐HABITAT
Informal Employment A job lacking, in law or in practice, basic social or legal protections or employment benefits, as defined by the
International Labour Organization; may occur in the formal sector, informal sector, or households
Informal Worker A person engaged in informal employment, as defined above
Own‐account Worker A person who is self‐employed without hired employees; may have unpaid family members working for him/her
Industrial Outworker A person who carries out paid work on behalf of an outside employer, most commonly from his/her home
Informal Enterprise Unincorporated unit (i.e., not constituted as a separate legal entity of its owner) that produces goods or services for
sale or barter; generally small, unregistered (i.e., not registered under specific forms of national legislation), has
unregistered employees, and/or does not maintain a complete set of accounts
Slum‐based Business A business maintaining primary operations in a slum; may serve slum dwellers or greater urban populations
Slum Economy Slum‐based businesses, slum dwellers engaged in wage work (both inside and outside of the slum), and the broader
network of economic actors and institutions (for example, suppliers and consumers) that participate in and enable
this economic activity
Harvey Ball Key
“Very High” “Moderate” “None”
[Organization]† Indicates organization with a past or existing Rockefeller Foundation relationship
2
Problem Assessment
What you will find in this section:
• An explanation of how this problem affects the daily lives of the poor or otherwise vulnerable.
• A description of the broad scope and scale of the problem, including graphic representations that
demonstrate its nature and urgency.
• An identification and analysis of the root causes of the problem and the system failures that cause
or exacerbate it.
• A survey of the prevailing perspectives on the problem and which groups or institutions tend to
hold them.
3
What is a slum economy?
Slum economies are comprised of slum‐based businesses and workers and the complex network of economic actors
and institutions that participate in and enable this economic activity.
Slum based‐businesses and workers include:
Slum‐based
• Slum‐based businesses – employers and
Businesses
own‐account workers.
and
• Wage earning slum dwellers – employment
Workers
inside or outside of the slum.
Slum‐based Businesses
Defined as economic actors directly engaging
and Workers
with slum‐based businesses and workers:
• Employing slum dwellers – employment
Adjacent may be based inside or outside of the slum.
Economic • Engaging in slum economy supply chains –
Actors includes supplying inputs to or purchasing
from self‐employed slum dwellers.
Adjacent Economic Actors • End consumers based inside and outside of
the slum.
Defined as other actors that support and
enable the slum economy by:
Enabling Actors Enabling • Providing supporting goods and services
Actors such as finance and equipment.
• Influencing the business environment (e.g.,
policy makers, infrastructure providers).
4
What is the impact on the lives of poor or
vulnerable people?
Impact on the Lives of the Poor or Vulnerable !
Nearly all slum dwellers are engaged in informal employment, sustaining poverty and reducing resilience among poor slum households.
• The majority of poor slum‐dwellers are engaged in informal employment, which is linked to lower resilience. For example, studies indicate that
average earnings in most forms of informal employment are lower than those for formal employment, limiting slum dwellers’ ability to accrue
savings and absorb future shocks. Without job protections, informal workers are typically the first to lose their jobs during downturns.1, 2
Lower profits experienced by slum‐based businesses further decrease poor slum dwellers’ income.
• The unique challenges faced by slum‐based businesses, such as lack of physical addresses and poor information about non‐slum markets, often
generate a reliance on middlemen. These middlemen can receive as much as 60% of the businesses’ profits, decreasing the earnings available to
business owners and employees, many of whom are poor.3
• Due to their small size and informal status, slum‐based micro‐enterprises are typically not served by traditional financial institutions. Instead, many
of these entrepreneurs are forced to borrow from moneylenders who charge exorbitant interest rates, limiting profits and growth.
Barriers to slum‐based business growth reduce the availability of goods and services for poor slum dwellers, increasing real and opportunity costs.
• Slums are often characterized by insufficient service provision from the public and private formal sectors. For example, infrastructure availability is
significantly lower in slums as compared to broader cities, with access rates in slums often comparable to or lower than those in rural areas.4, 5
Inadequate infrastructure can reduce economic productivity by increasing the time required to access basic services and resources (e.g., water
collection outside of the slum) and by shortening the workday (e.g., due to lack of light and electricity).
• Slum‐based enterprises are important suppliers of goods and services to slum populations. For example, slum‐based kiranas (small grocery stores)
in India provide slum dwellers not only with convenience, but often interest‐free credit and smaller, more affordable packages of goods (e.g., in
Dharavi, unpackaged lentils and rice are available for half the price charged in other parts of Bombay).5 Social enterprises are also increasingly
entering slum markets to provide water, sanitation, and other basic services. However, slum‐based businesses often face barriers, including limited
access to finance, markets, and information, that constrain their ability to expand reach and to offer even lower prices.
Certain vulnerable populations, including women and youth, are disproportionately affected by these issues.
• Women: Women are generally more likely than men to be informally employed.6 Within the informal economy, women typically have lower
income and a higher risk of poverty than men. This is largely driven by their overrepresentation as own‐account workers and industrial outworkers,
informal worker segments that experience lower average earnings.1 Women also tend to have lower average education levels and greater
household and childcare responsibilities relative to men, further constraining their economic opportunities.7
• Youth: Urban youth are two to three times more likely than other groups to be unemployed.7 For example, the unemployment rate for youth (15‐
24 years old) in Nairobi slums is 46%, more than twice as high than other groups.8 Youth inability to secure sufficient, steady employment can
create sentiments of disillusionment and social exclusion, often leading to increased crime, conflict, and violence.9, 10
5What is the scale and scope of the problem?
Why is the problem pressing?
Slum economies are critical sources of employment, products, and services for 830 million slum dwellers worldwide,
as well as important drivers of urban economic growth.
Scale: Why It Is Important Scope: Global Relevance
Slum economies support the day‐to‐day needs of more than 830 million Seventy percent of the world’s 830 million slum dwellers live in Sub‐
slum dwellers, representing over 30% of developing countries’ urban Saharan Africa (200 million), South Asia (191 million), and East Asia (190
population, and are the primary source of employment for the estimated million); this population is youngest and growing fastest in Sub‐Saharan
400‐580 million working slum dwellers. Nearly all of this employment is Africa.
informal, taking place both inside and outside of the slum.1,2 • Between 2000 and 2010, the global slum dweller population increased by
• More than half of informal workers are engaged in informal self‐ more than 60 million (nearly 10%), primarily driven by a net 55 million
employment, ranging from one‐person enterprises to businesses (38%) increase in Sub‐Saharan Africa, where slum dwellers now comprise
employing hired labor. Regardless of size, these informal enterprises face approximately 60% of the region’s urban population.7
numerous barriers that limit scale, including unsupportive policies, and
lack of access to finance, markets, and skills. The remainder are engaged The employment compositions of slum economies vary across countries.
in informal wage employment at formal and informal enterprises, and • Among non‐agricultural informal workers, of whom a significant share live
generally susceptible to low wages, poor working conditions, and other in slums, self‐employment is most prevalent in Sub‐Saharan Africa,
forms of exploitation. accounting for approximately 2/3 of total informal employment.
• Slum economy composition also varies based on slums’ expectations of
While the economic value of slum economies is typically small in the the state, and availability of local resources. For example, as compared to
context of cities’ total output – for example, Dharavi’s estimated $600M‐ Southeast Asia, South Asian slums are typically characterized by larger
$1B in annual output represents less than 0.5% of Mumbai’s GDP – these gaps in state‐led provision of basic services, spurring relatively high levels
figures fail to reflect the full extent to which slum economies contribute to of entrepreneurship to meet slum dwellers’ basic needs.
the growth and vitality of broader urban economies.
The composition of a slum economy is also affected by slum
• Slum dwellers comprise a significant share – as much as 90% in some
characteristics, including size, location, and permanence of settlement;
countries – of the urban informal work force.3*
despite some inward‐facing activity in large slums, most slum economic
• Slum economies also provide important urban services. For example,
activity targets outside consumers.8
waste pickers, many of whom are slum dwellers, are estimated to perform
• With viable internal markets, up to 40% of residents in large slums can
50‐100% of waste collection activities in most developing countries.4 Auto‐
find employment serving other slum dwellers’ needs. However, most slum
rickshaw drivers, often living in slums, serve 10‐20% of daily motorized
dwellers residing in smaller slums rely on outward‐facing activity.
road transport trips in Bangalore, Mumbai, Pune, and Rajkot, India.5
• Slums easily accessible to city centers offer ready access to outside and
• In many slums, slum‐based businesses produce goods for local and export
outward‐facing employment and market opportunities.
markets. For example, Dharavi houses an estimated 5,000 leather shops
• Residents of slums on the urban periphery lack easy access to city center
that produce goods for Indian and export markets.6
resources and are more likely to be self‐employed, engaged by
middlemen, and incur higher costs and barriers to doing business.
*Note: According to experts, slum dwellers’ share of the urban workforce corresponds to their share of the total urban population; slum dwellers account for a
relatively higher share of informal employment.
6What is the scale and scope of the problem?
Slum population growth by region
Between 2000 and 2010, the net slum dweller population increased by ~10% to nearly 830 million slum dwellers,
representing more than 30% of urban populations in developing countries.
% of Urban Population Living in Slums 90%
Slum Population, 2000‐2010 (millions of slum dwellers)
2000
2010
+2%
+38% 274 279
‐2%
‐4% 200 194 191
145
115 111
Latin America Sub‐Saharan South Asia East and
Africa Southeast Asia
Note: 830 million estimate also includes small slum populations in North Africa, West Asia, and Oceania; Slum dweller population is net, including total
number of new slum dwellers less those that moved out of slum conditions. Data source is UN‐HABITAT. 7What is the scale and scope of the problem?
Additional slum economy defining factors
Other factors, for example slum size and location relative to the city center, also affect slum dwellers’ economic
opportunities and slum economy composition.
Slum size
Large: Mid‐size: Small:
>100,000 households Neighborhood‐sized slums As few as 8‐10 households
• Benefit from both large internal • Greater need to pursue economic • Greatest need to pursue economic
markets (estimated to support opportunities outside of slum, but opportunities outside of slum, but
livelihoods of up to 40% of benefit from close proximity to benefit from close proximity to
Metro residents) and closer proximity to informal wage work opportunities in informal wage work opportunities
Core: non‐slum employment urban centers in urban centers
Located in opportunities and markets
or close to • Example slums: Lunga Lunga • Example slums: Pavement Dwellers
city centers • Example slums: Dharavi (Mumbai), (Nairobi), Kisenyi (Kampala), North (Dhaka), Cortiços (Sao Paolo),
Sadr City (Baghdad), Amukoko Cemetery (Manila) Conventillos (Buenos Aires)
(Lagos)
Slum location
Rising real estate values in metro core areas may imply higher risks of slum razing or relocation
• Large internal markets support • Greater need to pursue economic • Greatest need to pursue economic
livelihoods for many residents; opportunities outside of slum, and opportunities outside of slum, and
however for those pursuing poor access to city centers increases poor access to city centers
Peri‐urban: economic opportunities outside of transport costs for informal workers increases transport costs for
Located slum, poor access to city centers and exploitation risk by middlemen informal workers
close to or increases transport costs and for slum‐based businesses • Example slums: Invasões (Rio de
just beyond exploitation risk by middlemen • Example slums: Annawadi Janeiro), Ngozi Mine squatters
city limits • Example slums: Heliopolis (Sao (Mumbai), Mahwa Aser (Sana’a), (Bulawayo)
Paulo), Cité Soleil (Port‐au‐Prince), Kennedy Road (Durban)
Manshiyat Naser (Cairo)
Newer slums prevalent in peri‐urban areas more likely to lack access to infrastructure, hampering productivity
8What is the urgency of the problem?
As slum populations grow, slum economies will continue to play an increasingly important role in meeting the
livelihood and consumption needs of slum dwellers. In many countries, the youth bulge will also magnify slum
economies’ role in generating livelihood opportunities and mitigating broader urban social risks.
Historical and Projected Slum and Urban Growth1 Slum economies will be an increasingly important source of urban employment,
Millions of Slum Dwellers and Others Living in Urban Areas employing up to 630 million slum dwellers by 2020.2
• Urban slum populations will continue to rely heavily on informal slum economies
Slum dwellers for employment, as the formal sector will be increasingly unable to provide
Other urban residents 3,271 sufficient opportunities. For example, in 2011, Nairobi’s informal sector created six
times more jobs than the formal sector.3
The “youth bulge” in many developing countries, particularly in Africa, will magnify
889 slum economies’ importance in providing livelihood opportunities.
2,601 • Nearly three billion people globally – half of the world’s population – are under
age 25, and the majority live in developing country cities.4 Youth thus represent a
significant proportion of the developing world’s potential labor force, particularly
828 in Africa, where youth account for more than 30% of the working age population.5
1,977 • Experts emphasize that youth can and should be a significant driver of urban
economic development, yet are far more vulnerable than adults to under‐ or
unemployment.5 This represents not only a wasted economic opportunity, but a
767 looming social cost for cities as unemployed urban youth are at higher risk for
mental health issues, drug abuse, and involvement in violent or illicit activity.6
2,382 As slum growth outpaces government ability to expand the provision of basic
services, slum economies may also play a bigger role in filling this gap.
1,774 • Without significant changes to municipalities’ approach to basic infrastructure and
service provision, urbanization will continue to outpace government capacity to
1,211 provide adequate infrastructure and services in urban areas. For example, the
urban population lacking access to improved sanitation services in Africa is
expected to double from 150 million to 300 million by 2020.7
• Increasingly insufficient access to basic services can restrict slum dwellers’
economic productivity and perpetuate the likelihood of health, economic and
2000 2010 2020 environmental crises, threatening slum and urban resilience.
9What are the root causes at play? What systems
failures are causing or exacerbating the problem?
The political, economic, and social systems prevalent in developing countries fail to adequately support slum
economies, constraining economic opportunities for slum dwellers.
System Failures: Underlying constraints that exacerbate the problem
Political System Economic System Social System
Due to limited capacity, poor The abundance of low‐cost labor in Due to ingrained social norms and
coordination, persistent corruption, slums often supports the growth of challenges to self‐organization, slum
and misaligned incentives, developing country economies, limiting dwellers lack voice and influence
institutions fail to foster inclusive urban decision maker incentives to among employers, supply chain
enabling environments and, in some reduce inequalities or to promote slum actors, policymakers and other
cases, deliberately constrain worker access to more equitable urban stakeholders.
slum economies. economic opportunities.
Root Causes: Main forces that directly contribute to the problem
Lack of Legal Power Insecure Public & Private Property Rights Social Isolation
Slum‐based informal workers are often Whether private homes or public roads, slum Non‐slum dwellers typically have negative
ineligible for formal legal protections and dwellers often lack secure access to the views of slum environments and perceive
often lack political voice and power, spaces in which they conduct business. This slum dwellers as “outside” the mainstream
increasing their susceptibility to exploitation insecurity discourages long‐term investment, urban population, sustaining inequitable
by both employers and regulators. reducing economic productivity. access to opportunities and resources.
Inadequate Infrastructure Insufficient Access to Finance, Skills, Poor Information Availability
Slum dwellers typically lack sufficient access and Market Linkages Little data is available about slum economy
to basic infrastructure and services, Slum dwellers often lack access to formal dynamics and contributions. Consequently,
including electricity, water, and sanitation, finance, literacy and skills, and linkages to policymakers and urban planners typically
reducing the time and capacity available for non‐slum markets, limiting both employment make decisions inconsiderate of and often
productive economic activity. and enterprise growth opportunities. harmful to slum economies.
Fundamental root causes
10What are the prevailing perspectives
on this problem?
Three major prevailing perspectives emphasize different barriers to slum economy development, though nearly all
stakeholders acknowledge that municipal policies, investments, and in many cases, inaction, are significant
contributors to the problem.
“Municipalities fail to implement policies and make investments supportive of slum economies.”
• Due to corruption, misaligned incentives, and poor information availability, developing country municipalities
typically fail to consider slum economies and their contributions in policy, infrastructure investment, or urban
Unsupportive and planning decisions.
• Municipalities also often believe that slums and the informal economy hamper, rather than support, urban growth.
hostile municipalities Consequently, urban planners’ visions for “world class cities” typically exclude slum economies, leading to actively
hostile local policies and decisions.
• Nearly all stakeholders agree that municipalities have generally failed to foster enabling environments for slum
economies.
“Labor market inefficiencies in many urban economies, including overly abundant low‐cost labor, insufficient job
availability, and information asymmetries, sustain poor working conditions for slum dwellers.”
• In most cities, the supply of unskilled labor exceeds the availability of formal low‐skill jobs, resulting in an abundance
Inequitable and of informal, low‐cost labor in slums. Many urban companies benefit from this imbalance as they can employ informal
slum‐based workers at low cost. As a result, employers and policymakers often lack incentives to address this gap
inefficient labor and improve informal worker rights, sustaining the economic vulnerability of slum dwellers.
markets • Slum dwellers and employers often lack information required to identify employment opportunities or potential
employees, and to establish mutual trust. This information asymmetry prevents slum dwellers from accessing
improved jobs, often increasing competition for low‐skill work.
• Economists, multilaterals, and increasingly, social enterprises and businesses promote this view.
“Slum dwellers lack access to the resources required to improve their economic opportunities.”
• Slum‐based businesses typically lack sufficient access to physical infrastructure, markets, finance, skills, and other
Lack of access to resources, inhibiting growth and scale. These disadvantages stem in part from slums’ social and often physical
infrastructure and isolation from city centers of commerce and enterprise.
• Slum‐based workers often lack access to training and therefore have fewer skills, limiting the types of employment
other enabling available. For some slum workers, particularly those in peri‐urban slums, poor physical connectivity to city centers
business inputs (e.g., insufficient or poor quality roads) further restricts employment opportunities and time available for productive
economic activity.
• NGOs and academics are proponents of this perspective.
11Who are the most relevant stakeholders?
While municipal governments have the greatest influence through their control over slum and broader urban policies
and investment decisions, they often lack the incentive to make choices that benefit slum economies.
Municipal governments have very strong influence, as
Higher Municipal they make and implement policy and planning decisions
Government1 that affect slum economies, for example, those related to
informal worker policies and infrastructure investments.
However due to bureaucracy, corruption, and misaligned
incentives, municipalities and urban planners often make
National decisions that deliberately constrain slum economies.
Slum Economies
Government
Influence Over
Multi‐ Multilaterals, NGOs and social enterprises often
Private Sector
laterals undertake initiatives that circumvent government
bureaucracy, directly working with slum‐based workers
NGOs and enterprises to improve economic outcomes. While
multilaterals and NGOs sometimes also work to influence
government policy and investment decisions to benefit
Social slum economies, their ability to address constraints
Enterprises related to the enabling environment are limited and
ultimately dependent on buy‐in from municipalities and
national governments.
Lower
Lower Higher Stakeholders that directly influence urban policy and planning
Incentive to Improve
Slum Economies Stakeholders that engage directly with slum‐based workers
and enterprises
1 Municipal governments are often working in partnership with urban planners who have similar influence and incentives.
12Dynamism Assessment
What you will find in this section:
• Descriptions of the three areas of dynamism that demonstrate movement towards solutions
in the space.
• An analysis of each of the areas of dynamism, including a judgment of their relative strength
and a description of the evidence that supports it.
• Descriptions of what would need to happen to reach potential tipping points, which could be
near‐term, longer‐term, or even non‐existent.
• An analysis of the potential risks or uncertainties in the space that could inhibit
transformative change.
13What areas of dynamism demonstrate movement
towards a solution in the space?
While overall dynamism in the slum economies problem space is low to moderate, relatively stronger dynamism
around the increased availability of slum data and increased private sector engagement in slums present
opportunities to shape interventions that improve slum economy outcomes.
Increasing Availability of Slum Data to Private Sector Engagement with Slum Improved Slum Dweller Connectivity to
Inform Urban Decision‐making Dwellers as Consumers and Workers Economic Opportunities
Technology advancements and uptake are Private sector enterprises, ranging from The informal sector is an increasingly
enabling a better understanding of multi‐national corporations (MNCs) to social significant driver of economic output in
traditionally hard‐to‐reach populations in enterprises, are progressively engaging slum developing countries. Given that the majority
developing countries, including the urban dwellers as both consumers and participants of urban informal workers live in slums,
poor. Researchers are increasingly leveraging in their value chains, including as distributors, efforts are underway to improve linkages
these technologies, including geographic franchisees, or direct employees. As between slum and broader urban economies.
information systems (GIS), global positioning developed markets reach maturity, MNCs, in In particular, different models have emerged
systems (GPS), and mobile, to collect data particular, are quickly moving to sell products to connect urban informal workers with
about slums and slum dwellers. To increase and services to low‐income customers, employers, ranging from technology‐enabled
the usability of this data by urban including slum dwellers. Additionally, as platforms that leverage mobile technology
stakeholders (e.g., urban planners, urban populations grow and governments are prevalent among slum dwellers, to traditional
municipalities, private sector), academics and unable to keep up with their basic needs skill bridging programs focused on reducing
researchers are also developing new (e.g., water, sanitation, electricity), social information asymmetries between potential
analytical tools and approaches. As data enterprises are moving to fill basic service employers and informal employees.
about slums improves and government and supply gaps in slums. While the risk of Municipalities are also slowly beginning to
donor resources become more constrained, negative unintended consequences exists, support slum dwellers and informal workers
multilaterals, NGOs, and slowly, private sector engagement in slums can help by creating jobs and improving the physical
governments, are beginning to realize the to improve access to goods and services, and connectivity of slums to broader urban
potential of data to inform important thus free slum dweller time for productive environments. These improved linkages can
decisions that affect slum economies, such as economic activity. Moreover, to facilitate reduce slum dwellers’ isolation and
those regarding potential slum infrastructure entry into slums, some private companies are disempowerment and thus improve their
upgrades, or choices between in‐situ slum also beginning to adopt innovative business economic prospects.
upgrading and slum re‐location. models that create employment.
14Dynamism: Increasing Availability of Slum Data to
Inform Urban Decision‐making
Area of Dynamism: Increasing availability of slum data to inform urban decision making
Increasing collection of data More innovative analysis and Increasing government uptake of
Driver about slums, leveraging new tools widespread dissemination of slum data, slum data to inform policy and
and technologies aiming to support decision makers investment decisions
Relative
Strength
Geographic Data collection occurring globally, and most More sophisticated data analysis occurring Examples of government uptake of data more
Notes prominently, in well‐established slums in worldwide; driven by global players seeking to prevalent in Latin America and Africa.
primary cities. facilitate cross‐regional comparisons.
Signals • Nairobi‐based Spatial Collective uses • The Gates Foundation has funded Slum • With support from civil society and
hand‐held GPS devices to collect detailed Dwellers International (SDI) and The Santa research organizations, Rio de Janeiro’s
data about slums. The organization Fe Institute† to expand the scientific study Municipal Secretary of Housing is using
recently collected data on behalf of social of slums. Building upon SDI’s existing census‐based classifications to plan favela
enterprise Living Goods to help inform the collection of local‐level slum data, the upgrade interventions, with the aim of
feasibility of four new products in project will aggregate, standardize, and improving living conditions for up to
Nairobi’s slums. disseminate data about slums to urban 320,000 households by 2020.
• The Center for Environmental Planning decision makers. • In 2011, the mayor of Sekondi–Takoradi in
and Technology (CEPT) is supporting the • In partnership with Google, SDI has also Ghana used data from the city’s first
Ahmedabad Municipal Corporation in developed a platform integrating data poverty atlas to prepare the city’s Medium
India to develop a GIS‐based information collected by slum communities with Term Development Plan. The poverty atlas
system on slums, with the goal of Google maps, improving its usability for was created with support from Global
informing urban planning and policy governments. Communities† and the Sekondi–Takoradi
decisions. • The Global Open Data Initiative helps Metropolitan Assembly.
• Using location and communication data developing countries to build open data
from mobile phones to study slums in management systems, including data
Kenya, the Santa Fe Institute† highlights about slums, to improve governments’
the opportunity to utilize large‐scale data decision making capabilities and
to better understand the economic, social, accountability.
and migratory dynamics of slums globally.
Expected STEADY GROWTH. Development ACCELERATING. Increasing availability of slum STAGNANT. Donor and NGO efforts to foster
Trajectory practitioners’ focus on urbanization and data creates more opportunities for data‐informed decision making may conflict
advancements in technology allow for innovative analysis and dissemination. with other interests among urban planners
continued growth of slum data collection. and governments.
15Dynamism: Private Sector Engagement With Slum
Dwellers as Consumers and Workers
Area of Dynamism: Private sector engagement with slum dwellers as consumers and workers
Growing corporate efforts to capture Growing private sector adoption of Increased private sector adoption of
Driver lower‐income consumer segments, decentralized service models to fill innovative models that engage slum
including those in slums basic needs gaps in slums dwellers along value chain
Relative
Strength
Geographic Private engagement of slum dwellers as
Tend to focus on larger and slightly higher‐ Private sector adoption of decentralized
Notes employees, distributors, and franchisees seen
income slums. service models emerging globally.
primarily in India and Africa.
Signals • In response to rising slum dweller incomes • Over the past five years, several social • Coca‐Cola’s micro distribution center
and demand for local goods and services, enterprises (e.g., Sanergy, Sarvajal) have (MDC) model employs local entrepreneurs
several private companies have emerged to supply off‐grid water and as franchisees in Africa to reach new
established branches in urban Brazil’s sanitation to slum dwellers, offering both consumer segments. Originally piloted in
favelas, for example, appliance retailer employment opportunities and 1999 with 10 MDCs in Ethiopia, today
Casas Bahia in Rio de Janeiro and retail convenient, time‐saving access to services. Coca‐Cola operates >3,000 MDCs in East
bank Bradeso in São Paolo. • Small‐scale private service providers Africa, employing ~13,500 people.
• In Dharavi, Nestlé sells packets of Maggi (SPSPs) are increasingly expanding basic • Nestlé’s “My Own Business” model
noodles for nine cents, a lower price point service access for poor urban and peri‐ recruits, trains, and employs local
than that charged in the rest of Mumbai. urban populations; for example, operators to manage teams of 8‐10 street
• Mobile telecom companies (e.g., Tigo, Aguateros in Paraguay provides potable vendors selling Nescafé products in
MTN, Vodafone) target low‐income water to ~500k mostly poor peri‐urban Central and West Africa.
consumers with “pay‐as‐you‐go” residents through independent wells and • Pollinate Energy trains and engages local
strategies, and engage small, slum‐based distribution networks1. micro‐entrepreneurs to sell solar home
retailers to expand sales of their products systems in slums in Bangalore, India.
and services in urban developing markets.
Expected ACCELERATING. Corporations increasingly STEADY GROWTH. Growing gap between ACCELERATING. Companies increasingly
Trajectory seek to move into new, under‐penetrated municipal supply and demand, but significant seeking effective ways to move into under‐
markets, particularly as developed markets challenges to scale likely to persist (e.g., penetrated markets; market‐based
become more saturated. hostile municipalities, difficulty of promoting approaches to development gaining support
slum dweller behavior change). from multilaterals and donors.
1 In the absence of sufficient competition or an explicitly social mission, SPSPs may engage in unfair pricing. 16Dynamism: Improved Slum Dweller Connectivity to
Economic Opportunities
Area of Dynamism: Improved slum dweller connectivity to economic opportunities
Increased physical connectivity of
Emergence of interventions to improve
slums to urban areas, reducing isolation Growing municipal accommodation and
Driver urban informal worker access to
and improving slum dweller access engagement of informal workers1
employment opportunities
to employment
Relative
Strength
Geographic Interventions tend to focus on slums in mega‐ Municipal‐led interventions predominantly
Predominantly seen in Latin America and
Notes cities in South Asia and Africa, often in seen in Latin America, employed as a means
South Asia.
countries with high mobile penetration rates. of reducing slums’ isolation and urban crime.
Signals • Several initiatives leverage technology to • In 2011, the city of Medellin, Colombia • In recent years, national governments
connect informal workers with improved opened an escalator connecting slums to have introduced policies to protect the
job opportunities. For example, India‐ the center of the city, reducing slum rights of urban informal workers, such as
based LabourNet uses an online platform dwellers’ commute and freeing time up the Street Vendors (Protection of
to connect informal laborers with for economic activity, as well as Livelihood & Regulation of Street Vending)
potential employers. Founded in 2005, the contributing to the city’s broader plans to Bill in India (passed in September 2013)
organization serves >40,000 workers reduce crime and poverty. and a law to extend rights and benefits to
today. • The government of Rio de Janeiro home‐based workers in Pakistan (draft
• Traditional, non‐technology‐based provides slum dwellers with free finalized in September 2013).
programs (e.g., India‐based Saath, South transportation via cable car from hillside • Informal waste pickers are being
Africa‐based Harambee) also offer training slums to the rest of the city, enabling increasingly integrated into municipal
and placement services to match informal easier access to employment waste systems, as evidenced by cases in
workers with employment opportunities. opportunities outside of the slums. Belo Horizonte, Brazil; Pune, India; and
Buenos Aires, Argentina.
Expected ACCELERATING. Experts assert that ACCELERATING. Other cities interested in STAGNANT. Governments’ pursuit of “world‐
Trajectory connectivity platforms are ripe for replication similar connectivity innovations to reduce class cities” rather than “inclusive cities,” as
and scale, supported by their ability to crime, as demonstrated by officials from well as persistent corruption and cronyism
leverage technology and circumvent Washington and Johannesburg visiting the remain barriers to further advancement in
government bureaucracy, as well as Medellin escalator. this area.
potentially expand reach to slums further
from city centers.
1 Despite positive examples, the overall picture of informal worker accommodation and engagement remains mixed. 17What potential positive tipping points are
emerging?
Positive tipping point
Hybrid cities, in which informal economies are directly integrated into
city planning and priorities, become a widely acceptable vision for
urban development.
Aspirational Future State:
This would happen if: National and local
• Political change: Municipal agencies are less siloed, more efficient, and governments actively
incentivized to protect and support informal slum economies. support slum economies,
• Political change: National and local governments reject the current, reducing slum dweller
non‐inclusive vision of “world‐class cities.” isolation, harassment,
• Market‐led change: Increased private sector engagement with slums and legal vulnerability.
puts pressure on municipalities and urban planners to accommodate
and support slum economies.
• Social change: Slum‐based workers and businesses are well‐organized,
enabling them to have a voice in municipal decision making.
Long‐term
(>10 years)
Today: Many national and local
governments pursue a vision of
“world‐class cities” that exclude
informal slum economies.
18What are potential risks surrounding the
dynamism in this space?
The entrenched interests of governments, slum lords, and other actors in the slum economy ecosystem may restrict
the potential of slum economy interventions to drive systemic change.
Greatest risk
Municipality incentives to pursue visions of “world‐class” cities and maximize the value of urban real estate may
GOVERNMENTS MAY override their support for slum economies, threatening the sustainability of potential interventions.
DISRUPT OR FAIL TO • Municipalities can help to facilitate implementation, ensure sustainability, and maximize impact of some potential
SUPPORT SLUM interventions. However, municipalities often view slum economies as an impediment rather than a critical
contributor to urban development, restricting willingness to support these efforts.
ECONOMY
• Furthermore, as urban real estate becomes more scarce, urban areas inhabited by slum dwellers often represent
INTERVENTIONS an increasing opportunity cost to cities. Consequently, municipalities may elect to relocate slum dwellers to make
way for private real estate development, disrupting existing slum economy activity and any ongoing interventions.
CORRUPTION WITHIN Significant levels of corruption exist within slum economies and the economic and political systems which
support them, potentially undermining intervention impact or leading to inequitable intervention outcomes.
SLUM ECONOMIES
• Corrupt officials and individuals (e.g., slum lords) often benefit from barriers faced by slum workers and
MAY LEAD TO businesses (for example by extracting bribes from unregistered street vendors), and therefore, may intentionally
INEQUITABLE block external efforts to overcome these challenges.
INTERVENTION • Given the relative power of corrupt officials and individuals in slum economies, slum economy interventions may
OUTCOMES inadvertently benefit these parties, reducing benefits to poor or vulnerable people within slums.
Increased integration between slum and broader urban economies may increase slum dwellers’ exposure to
INTEGRATION formal sector economic downturns and risk of exploitation, potentially decreasing slum dwellers’ resilience.
BETWEEN SLUM AND • Increased linkages between the informal slum economy and non‐slum businesses, particularly those in the formal
BROADER URBAN sector, could increase slum dwellers’ susceptibility to negative outcomes associated with formal sector economic
ECONOMIES MAY downturns, for example job loss, wage reduction, or decreased benefits.
DECREASE SLUM • While enhanced connectivity with non‐slum employers can expand employment prospects for slum dwellers,
DWELLER RESILIENCE connection to non‐equitable employers may heighten risks of exploitation, for example, through unfair wages or
poor working conditions, thus sustaining slum dwellers’ marginalization and poor economic resilience.
INCREASED PRIVATE Due to unintended consequences and potentially misaligned incentives, increased private sector engagement
SECTOR ENGAGEMENT with slum economies may yield negative economic and social impacts on slum‐based workers and communities.
WITH SLUMS MAY • While private sector entry into slums may create jobs for slum dwellers, power imbalances and private enterprise
efforts to maximize profits may increase risks of slum‐based worker exploitation.
YIELD NEGATIVE
• Supporting engagement of private enterprises in slums may also result in negative externalities for slum
ECONOMIC AND communities. For example, supporting the entry of a fast food chain into a slum may create employment, but also
SOCIAL IMPACTS reduce business for slum‐based street vendors and increase consumption of unhealthy food.
19What are uncertainties surrounding the
dynamism in this space?
Several uncertainties, particularly the effect of peri‐urban expansion on slum economy dynamics and evolving data
availability, could also negatively affect the potential impact of interventions in this space.
Greatest uncertainty
Increasing demand for urban real estate will likely concentrate future slum growth in urban peripheral areas,
EFFECT OF CHANGING potentially straining integration between slum and greater urban economies.
SPATIAL DYNAMICS • Studies and experts note that urban center slums tend to have better access to economic opportunities.
ON SLUM AND URBAN However, as urban real estate prices rise and urban centers become more densely populated, slum population
growth is more likely to be concentrated in peri‐urban areas.
ECONOMY
INTEGRATION • Increased slum dweller concentration in urban peripheries, away from city centers of commerce, may threaten
advancements in slum economy connectivity to urban economies.
Due to the informal and often transient nature of slum dwellers, consistent, credible data on slum economies is
INTERVENTION currently limited, potentially restricting the abilities of funders and policymakers to make informed decisions.
CAPABILITIES IN LIGHT • While NGOs and slum organizations are increasingly collecting data on slum communities and economies,
current efforts are typically localized, often constrained (e.g., by lack of buy‐in from local communities, support
OF CURRENTLY from municipalities, funding), and may not always align with decision makers’ needs.
LIMITED SLUM • Although efforts are underway to improve the availability of high‐quality, credible slum data at a local and global
ECONOMY DATA level, their timing and potential effectiveness in informing intervention design is not yet clear.
The interrelated nature of challenges facing slum dwellers, including physical, economic, and social conditions,
ABILITY TO INTERVENE may limit the feasibility or effectiveness of interventions that specifically target slum economies.
EXCLUSIVELY AROUND • Experts emphasize that successful slum economy development will require a holistic approach that
acknowledges the inter‐related nature of slum dweller challenges. For example, initiatives specifically targeting
ECONOMIC ACTIVITY improved economic activity may only be successful in tandem with improvements in infrastructure or health.
OF SLUM DWELLERS • To‐date, most slum‐based interventions have focused on slum upgrading or increasing access to basic
infrastructure and social services, including electricity, safe water, and healthcare.
The diverse characteristics of slum populations and the nature of private sector engagement in slums may limit
EFFECT OF SLUM funders’ ability to ensure that the benefits of slum economy interventions accrue to the most poor or
ECONOMY vulnerable.
INTERVENTIONS ON • While many slum dwellers are poor, some non‐poor live in slums and are active participants in slum economies.
THE MOST POOR OR As a result, it may be difficult to target the poor or vulnerable as primary beneficiaries of interventions.
VULNERABLE • In particular, interventions focused on private sector engagement with slum economies may only create
entrepreneurial job opportunities that require more education and experience, thus excluding the poorest
segments. 20What the Evidence Suggests
• There is overall a low to moderate degree of dynamism around solutions in the space. This is
particularly true for solutions that require engagement or change on the part of national
governments and municipalities. Two areas of dynamism demonstrate relatively stronger
potential: 1) Increasing availability of slum data to inform urban decision making; and 2)
Private sector engagement with slum dwellers as consumers and workers.
• There are no imminent tipping points on the horizon. In the long term, large‐scale change to
a tipping point could be driven by a widespread urban planning shift towards hybrid cities
that support both informal slum and formal economies. The realization of this tipping point
overwhelmingly depends on the motivations, capacity, and capabilities of municipal
governments.
• The biggest risks to success in this space include potential government disruption or failure to
support slum economy interventions, and the possibility that corrupt individuals may capture
benefits intended for poor slum dwellers.
• The key uncertainties to consider include the effects of rapid slum growth in urban peripheral
areas on the integration of slum and urban economies, and the implications of undertaking
slum economy interventions based on what is currently very limited data.
21Preliminary View of Solution Spaces
What you will find in this section:
• An overview of the most prevalent current approaches to addressing this problem.
• A snapshot of the existing evidence on the success or failure of these approaches.
• Stories highlighting some of the exciting and interesting innovations uncovered by the Search.
• An analysis of both the current patterns of innovation and the potential for future innovation in
this space.
22What are the dominant approaches and
solution spaces?
The dominant approaches to addressing slum economy challenges either focus broadly on making urban
planning and policy approaches more inclusive, or seek to directly address the economic‐related challenges of
individual slum dwellers.
Organizing slum dwellers and informal workers can empower groups to demand economic rights and equitable
Community organizing for access to livelihood opportunities: This approach represents a more traditional “bottom‐up” approach
(sometimes called a “rights‐based approach”) to overcoming barriers in slum economies by empowering citizens
equitable access to to demand rights, including fair wages, equitable employment opportunities, and safe working conditions. Most
economic opportunities organizations target either informal workers or slum dwellers more broadly but may not be explicitly focused on
improving slum economies.
Creating policies and strengthening institutions that promote and protect the economic wellbeing of slum
Changing policies and dwellers can improve livelihoods: This approach focuses on strengthening existing systems by working with
institutions to better government and policy makers (e.g., municipal and national governments) to enact policies and develop
protect and enable institutions that protect and empower slum dwellers. Though these approaches may not explicitly focus on slum
economies, interventions in this area can have direct impact on slum dweller livelihoods by offering greater legal
slum dwellers protection, safer working conditions, and better wages.
Improving the flow of information to match workers with jobs, promoting development of skills, and creating
Promoting access to new jobs through inclusive business models can improve livelihoods and contribute to economic mobility for
quality jobs to increase slum dwellers: Solutions are emerging that connect unemployed urban populations with work opportunities, train
economic mobility workers to develop skills necessary to find gainful employment, or expand inclusive business models to employ
poorer populations, resulting in more and better employment opportunities for poor slum dwellers.
Improving access to Making business resources available in slums can spur growth of slum‐based enterprises and improve resilience
resources to foster of the self‐employed: Some interventions are focusing on improving self‐employed slum dwellers’ access to
enterprise growth and finance, markets, skills, infrastructure, and other resources in order to improve livelihoods through business
resilience of the growth and/or increased profits. Innovative business models are also emerging that empower slum dwellers to
create micro‐enterprises or operate micro‐franchises on behalf of larger businesses or brands.
self‐employed
Focused more broadly on making urban planning and policy Directly target specific economic‐related challenges of
approaches more inclusive; established approaches that are typically individual slum dwellers; emerging solutions that are typically
non‐specific to slum economies and occurring at a larger scale more fragmented between different regions
23Where is there evidence for success or failure? (1/2)
Evidence of success and failure is largely anecdotal, as few rigorous evaluations have been conducted across the
solution spaces, particularly for interventions narrowly focused on slum economies.
Approach Observations Illustrative Evidence of Success Illustrative Evidence of Failure
Community • Several examples of advocacy WIEGO† and the Asociación de Street Vendors in Durban: After many
Organizing and community organizing Recicladores de Bogotá (ARB): ARB, a years of lobbying, the Self‐Employed
approaches successfully bringing network of waste pickers supported by Women’s Union (SEWU) and the Informal
about positive policy changes, WIEGO, filed a lawsuit and negotiated Trade Management Board won passage of
particularly at the municipality with the city to have waste pickers a 2001 policy supporting street vendors
level. formally included in the municipal waste through registration and site allocation.
• However, a frequently noted management system. Recicladores are However when city management changed
challenge is reversal of now paid as public service providers. in 2004, the policy was removed. Despite
achievements when local According to WIEGO, the first 790 waste well‐organized efforts, a clear success
government changes. pickers to participate saw their earnings quickly became a failure.
increase 2‐3 times.
Policies and • Limited evidence for success or ILO’s Domestic Workers Convention: National Policy on Urban Street Vendors
Institutions failure of approaches that work Binding international law as of September in India: In India, a national policy (unlike
directly with institutions to 2013, Convention 189 extends basic labor a bill) is merely a statement of intent with
change policies and approaches, rights to domestic workers, many of no legal weight. As of 2011, only seven of
though anecdotal evidence whom live in slums. Some ILO member 28 states had adopted the policy. The
suggests large global initiatives states have already adopted new laws policy focused largely on spatial issues and
can induce political action at the that reduce domestic worker vulnerability failed to address many social issues facing
national level. by improving working conditions, legal street vendors. Since its passage in 2004,
• Many policies enacted to protect protections, and wage requirements. over 1 million vendors have been
slum dwellers and workers go While Convention 189 and national displaced and many have been victims of
unenforced due to lack of regulatory changes have not been police brutality. However, in September
political will or institutional evaluated, early adoption is promising. 2013, India’s Parliament passed a national
capacity. bill offering stronger legal protections for
street vendors.
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