Introduction :

Community-Led Infrastructure Financing Facility (CLIFF) is an alternative financing facility that was a concept that emerged out of the findings of a research project called "Bridging the Finance Gap." This study was undertaken by SPARC, other members of the Slum Dwellers International and Homeless International, a UK based NGO. It sought to articulate how some organisations of the poor had actually managed not only to develop interesting and diverse project portfolios but also to access funds to implement them. Furthermore, it analysed why the incentives created by financial experts to pull formal and commercial financial institutions into pro-poor lending had been largely unsuccessful. The insight that emerged from these findings was that mainstream institutions understand very little about housing and infrastructure investment and finance for the poor. In fact, what tends to happen is that the urban poor have both the capacity and entrepreneurial aspirations to undertake such projects and do so at a great risk to themselves (and which they bear alone). However, once poor communities' initiatives are successful, other institutions and organisations, which have until then been waiting at the sidelines, jump in to derive insights and learn from these processes.

As a consequence of these findings, the UK government's Department For International Development (DFID), which had invested in this research, agreed to develop CLIFF and finance it through Cities Alliance, a consortium of international donors. CLIFF in its first phase provides grants, guarantees and bridge funds to local communities to help strengthen and scale up what the federations is already doing. A global CLIFF facility is managed by Homeless International and Nirman hosts the first "local" CLIFF for the Alliance in India.

Goals :

Nirman is hosting CLIFF with a number of strategic goals in mind.

First, to develop new ways that international donor agencies can understand and support communities of the poor and share the risks of exploring new financial investments and innovations. Furthermore, it is hoped that this process will also challenge the existing financing procedures within these organisations which inhibit real risk taking and are consequently unable to produce substantial social change.

Second, to develop innovative, realistic and sustainable strategies that communities can own and which can be scaled up to upgrade slums. Therefore, the aim of CLIFF is to take on a wide spectrum of activities and simultaneously create opportunities for the poor to learn from these processes so that they can leverage these experiences to seek greater ownership of future projects. Documentation throughout this process is given great importance so that all aspects of learning can be captured, and what is gained in knowledge, insights, skills and organisation, is not usurped by the financials.

And lastly to develop new partnerships with city governments by demonstrating that community-managed projects are more effective and workable. It is hoped that documenting non utilisation, un-strategic utilisation or mis-utilisation of subsidies will strengthen dialogues with state government for better access to their funds. Finally it will provide a contract to those projects presently being undertaken for the poor in which the poor and their organisations are consumer whist in these projects they are driving development.

The Current Situation :

When the CLIFF process was initiated, SPARC and Homeless International decided to select a spectrum of housing and infrastructure projects that highlighted the wide range of activities that the federation is involved in, and then choose those (larger) projects which could later be financed by a blend of subsidies, loans and community contributions.

As of November 2003, seven projects have received bridge funding worth nearly 25 crores from CLIFF. Another project for the construction of over 400 tenements in Pune is also being considered to receive bridge funding.

Why Nirman was chosen to host CLIFF :

The Alliance has been involved in housing and infrastructure activities for nearly two decades. CLIFF will help strengthen this process, and will also help other donors to pledge more resources to the various financial tools.

For Nirman, housing CLIFF will be an important and crucial learning experience. Since the organisation itself is still at a very early stage of its institutional development, CLIFF will provide a valuable opportunity to formalise the highly sophisticated and evolved yet non-formal management methods which the Alliance has developed. It will be an chance to create systems that can fulfil external requirements of formal documentation and controls, and simultaneously retain the flexibility and strategic sustainability of the present portfolio.

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