Many community-based activities rely on the existence of community-level savings groups, as these savings groups may allow the communities access to other loan sources, with their savings being used as a contribution to the loan. For example, in Thailand, communities wishing to apply for a Baan Mankong loan need active savings groups, not only to allow for a 10% downpayment on the loan by each household, but also to demonstrate the community's commitment to upgrading activities.
City Development Funds (CDF) take these savings groups one step further. They are a way of connecting these savings groups to allow for larger scale projects on a wider city level, rather than just community by community. The CDF functions as a network linking the different communities in a town, city or province, and representatives of each community will serve on the CDF committee.
In Cambodia, CDFs have been in existence for a number of years, as they serve as the channel through which loans from the national-level Urban Poor Development Fund (UPDF) can be disbursed. Most cities have their own CDF (or, in the case of Phnom Penh, each district) and these CDFs link the various poor communities in that city, and it is with the CDF that the authorities will cooperate and liaise with.
In Thailand, CDFs are a newer phenomenon, and only two CDFs exist so far: in Bang Khen district of Bangkok, home of the Bang Bua canal communities; and in Chum Pae town, which is in the North East of Thailand. The impetus for the creation of these CDFs was the realisation that the communities could not always rely on government funding for their upgrading projects, as demonstrated by CODI's shortfall in funds in 2008. Hence, CDFs give the communities a measure of financial independence: Bang Bua's CDF connects the savings groups of 15 communities, with total savings of 1.45 million baht (though the savings of each group remain separate).
Bang Khen's communities have been strongly networked for over a decade, with their collective activities starting over a project to improve the quality of the canal water along which they lived. When some communities started Baan Mankong upgrading in 2004, others were spurred on to start (or re-start) savings groups. At this point, other communities in Bang Khen municipality which were not located along the canal, joined the Bang Bua canal network, so that it became the Bang Khen community network, and the basis for the Bang Khen City Development Fund.
As part of the Baan Mankong process, a district-wide survey of the housing problems faced by the district's urban poor was carried out by the network, in collaboration with Sripathum University. This mapping exercise allowed for the identification of all the persons in need of secure housing, potential threats to existing communities such as infrastructure projects, and types of land tenure already in place.
When CODI's budget constraints hampered the continuation of Baan Mankong, the communities formed a CDF. Member communities can take on loans, at an interest rate of 4%, of which 1% will go towards management costs, 1% will go towards the community's welfare fund, and 2% will go back into the CDF. This is the same rate as charged by CODI for Baan Mankong loans. The CDF is administered in a very community-centered manner: representatives from each of the 15 communities take part in decision-making with regard to loans. When allocating loans, communities which have demonstrated true participation will be favoured, rather than those where the community leaders take all the decisions. When a loan is granted, it is in the name of the community committee, not the individual who needs the loan, and the loan is repaid by monthly bank transfers from the committee, not in cash. The individuals who took out the loan then repay the committee on a monthly basis, in cash. This model suits households which usually do not have access to formal financial institutions. Because the money is the CDF is used as a revolving fund, this presents an incentive for residents to repay the loan regularly and promptly, so that others can benefit. Additionally, the money in the fund comes from their contributions, and therefore they may feel more responsibility over it than the government money which comes through CODI loans.
In Bang Bua community, the CDF has helped to fund "welfare" homes for two elderly and infirm households. A third home is on the way for a resident who wants to build a home on a sliver of land at the extremity of the community - this was not part of the Baan Mankong plan but is now possible with the CDF.
In Roon Mai Pattana community, two households have taken CDF loans to build new homes. In this community where Baan Mankong upgrading is not yet taking place, the CDF can serve as a tool to spur on interest in upgrading, by demonstrating through individual projects that upgrading is possible. An added advantage of taking a CDF loan is that the bureaucracy required is far less than for CODI loans. This is important not only when making loan applications, but also when they are disbursed: when it takes as little as 23 days to build a house, the fact that the CDF loan is disbursed in one lump sum is advantageous, compared to the CODI's three-stage release of the loan, as it allows for immediate and full payment of construction workers and housing materials.
The beauty of CDFs is that they encourage communities within an area to work together and take a wider view of the problems and solutions, sharing their problems and liaising with other stakeholders. Because the Bang Khen network of communities was already strong due to its various canal-based projects, it was an obvious candidate to start a CDF and take some independence from CODI in upgrading projects.
The members of the Bang Khen network clearly see the CDF as a flexible tool that can push forward improvements in housing conditions, on a smaller and more independent scale than Baan Mankong, which requires bureaucratic procedures as well as the readiness of the whole community to participate. This can be useful in demonstrating to more reticent community members the merits of upgrading, and hence speeding up the process.
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