Research Brief
The Politics of Urban Poverty Reduction

Foreign aid has been slow to react to the challenge of urbanization, but must do so if it is to be an effective force going forward. In the WIDER Working Paper ‘Improving Donor Support for Urban Poverty Reduction: A focus on South Asia’ Nicola Banks argues that if a donor’s urban poverty reduction is to be successful, a two pronged approach is required. Donors must both aim to improve municipal government so that it has the capacity to successfully implement reforms, and find ways to help the urban poor mobilize and become central actors in their own development and poverty reduction.

The politics of urban poverty

The year 2008 marked the point at which, for the first time, more than half the world’s population lived in cities and towns. It is further estimated that the urban populations of Asia and Africa will more than double over the period between 2000 and 2030. For those involved in foreign aid urbanization represents a distinct challenge which has at its core a basic conflict. On the one hand urbanization is a key driver of economic growth and thus acts a catalyst for poverty reduction at a national level. On the other hand as urbanization increases so does the rate of urban poverty.

For decades poverty reduction almost exclusively meant rural poverty reduction and consequently our understanding of the distinct dimensions and vulnerabilities of the urban poor is less defined. Banks suggests that if development aid is to deal more effectively with the growing issue of urban poverty, then it is essential to understand both its causes and what actually constitutes poverty in an urban environment.

Identifying exactly what urban poverty looks like is not easy to do. Banks points out that traditional definitions of poverty based on income level often fail in urban contexts. The urban poor often face high monthly rental and food costs, and as such may not be poor according to their income, but may be forced to live in sub-standard housing.

Poor living, poor health

Banks points out that many of the poorest informal settlements lack legal ownership of the land on which they are based and that the threat of eviction makes it very difficult for anyone to invest in improving them. Furthermore, the process of genuine reform with regard to housing is often a long and slow one which takes at least a decade to make significant progress. The issue of land and housing not only means that the urban poor require a higher income in order to escape poverty, but also presents a barrier to investing in housing improvement.

This housing insecurity often leads to the urban poor suffering from poor access to basic services. Service providers are prevented from bringing legal services to the poorest areas by the precarious nature of such settlements. Consequently many of the urban poor have to obtain water and electricity illegally, which is generally expensive and unreliable.

Banks points out that the poor living conditions also mean that the urban poor often face greater health problems than their rural counterparts. A lack of access to services, lack of sanitation and garbage disposal facilities, overcrowding and poor ventilation are common in poor urban communities. Health problems are further exacerbated by low levels of immunization and the lack of access to affordable health care. However, efforts to improve health outcomes by increasing access to healthcare fail to address the underlying causes outline above.

Banks argues that the underlying problems she has identified can only be addressed by changing the relationship between the urban poor and the state. Improving infrastructure won't help the poorest if politics dictates that the benefits accrue to the better off. Increasing access to healthcare will not address the poor living conditions which are the underlying cause. A successful urban poverty reduction strategy needs to focus on the political and social aspects of poverty.

Challenging the political exclusion of the urban poor

For Banks then, it is political resistance that is the major factor which makes tackling urban poverty harder than tackling its rural counterpart. Urban poverty reduction, by its very nature, poses a challenge to existing political relations as it seeks to recognize and legalize the urban poor. To improve this situation Bank suggests that donors need to adopt a two-pronged approach. Aid should be used both to encourage municipal and national governments to be more accountable and responsive to their low-income residents, and to encourage the mobilization of the urban poor so that they can act together for their own interests.

However, achieving both recognition of the urban poor, and providing them with the funding necessary for them to carry out political activities requires small amounts of funding over long periods of time. This kind of funding goes against the normal donor preference for providing funding and technical assistance for short-term projects with observable outcomes. Furthermore engaging directly with the urban poor is not something donors typically do, they instead channel funds through national and local governments. Consequently donor-funded projects can only be as effective as the intermediary organizations they fund. In order to remedy this situation Banks suggests that donors should increasingly look to new channels through which funds can be channelled to the urban poor.

Alternative funding channels for challenging political exclusion

As Banks points out a number of alternative channels already exists, and have been used effectively by individual donors seeking to address urban poverty. Aside from simply providing municipal governments with financial and technical support, Banks identifies three further kinds of institution through which donors can channel money to low-income urban communities; the Cities Alliance, Northern NGOs, and urban poor funds.

The Cities Alliance, formed in 1999, provides an institutional framework through which donors can coordinate efforts to tackle urban poverty. It is a coalition of 24 members including the World Bank, the European Union and 16 donor partners. It focuses on two key objectives, supporting the development of City Development Strategies, and slum upgrading. Banks points out that this leads to the Cities alliance focus being more long-term than that of most donors, and thus makes it better equipped to support the systemic change that is required to reduce urban poverty.

Northern NGOs and urban poor initiatives both use funds to support local NGOs with close connections to the urban poor. These NGOs are typically involved in projects such as upgrading housing, improving infrastructure, and improving access to land. Banks points out that channelling money through Northern NGOs and urban poor funds provides two benefits to donors. First, it overcomes the political obstacles associated with direct funding of political movements, and as such allows them to channel funds to the urban poor without jeopardizing relationships with other stakeholders. Second, as already mentioned, urban poverty reduction requires small amounts of money over the long term. By channelling money through such institutions donors can avoid having to worry about providing funds at the appropriate times, and can instead leave the matter of distribution to the NGOs and urban poor funds.

Banks concludes that over the years donors have begun to recognize that a successful urban poverty reduction strategy needs to put the urban poor at front and center. New channels for funding local urban poverty movements have emerged to allow donors to overcome the obstacles associated with financing such movements directly. For Banks, the main roadblock in the way of aid having a greater impact on poverty reduction is that spending on urban poverty reduction still accounts for a small portion of overall donor funding. Going forward donors need to provide urban poverty with greater attention, higher priority, and increased funding.