At the heart of innovative financing explored by Nirman is the "blending" of different types of financing because no one kind works for poor communities. Thus, the projects that Nirman undertakes are financed in a variety of ways and in a number of combinations. These include loans from formal and non-formal financing agencies, grants, guarentees, bridge funds and revolving funds from donors, contracts and subsidies from the government, and community contributions.

To date, the Alliance has utilized its existing revolving funds, guarantees and project funds to develop a diverse portfolio of projects. It has also devised ingenious methods to balance pace and scale of funding. Internally Nirman will seek to document this and help the federation leadership, which initiates the recommendations, to reflect on how these choices are made and why.

This exploration process is vital to undertake before formalising and establishing project management protocols formally. The focus is to strengthen what is already working and is strategic and to suggest possible alternatives to support and further refine and develop fuzzy and unclear areas/or potential weaknesses.

Nirman's financial statements have specific ledger heads for projects and project specific disbursement, monitoring federation, review and planning. All documentation will be done formally at Nirman, but groups involved will maintain the books as well.

Indian Financial Institutions :

The Alliance has worked with HUDCO, Citibank and UTI before hosting CLIFF. In fact, one of the functions of CLIFF is to continue to explore and built upon existing relationships and to dialogue with and include more financial institutions in lending to the poor.

Initially the basis of the dialogue with the Reseve Bank of India was to examine whether Nirman could get an exemption from FCRA to manage the separate accounts that Cities Alliance and Homeless International wanted Nirman to handle. However, the Alliance was later informed that the Government of India had stopped such permissions for NGOs. Nirman will continue to seek changes through the Department of Economic affairs and, as Nirman's project portfolio develops, the Alliance hopes to explore a dialogue with the Reserve Bank on how lending in the housing sector can be more accessible to organisations of the poor.

Nirman also plans, after a year of CLIFF functioning, to seek an appointment with the Governor and Deputy Governor of Reserve Bank and examine whether and how the RBI can encourage other banks to finance community-managed construction projects as part of their priority sector lending requirements.

Loans are given to SPARC-NIRMAN by Financial Institutions such as Citibank and HUDCO. The loan is usually a tripartite agreement between poor communities, the NGO and the lending institution. Usually SPARC-NIRMAN borrows this money at a low interest rate of 10% - 15% and lends it out to communities at 12% extra to cover its transaction costs. The collateral that is put down is usually 10% of the loan amount, and this is covered by the particular community's contribution.

Grants are given by donors to SPARC-NIRMAN to cover our general expenses and core administration costs.

Guarentees are often demanded by financial institutions and governments as an assurance that the loan amount will be returned or the work will be completed. UK Based Homeless International and also the UTI Bank of India have been two such guarantors to formal institutions.

Bridge Funds are required for SPARC-NIRMAN's work because processing loans, contracts, and subsidies is often subject to bureaucratic delays. Thus, pre-financing is required to start on a project while waiting for the entire amount to come in. A revolving fund is created of money received from Selavip, Cordaid, Miserior, Homeless International and other donors which lends out money to projects and receives interest upon repayment. The idea is for the revolving fund to keep expanding, so that more and more projects can be simultaneously initiated.

Revolving Funds are the same as Bridge Funds.

Donors : The Alliance has many donors: These include Miserior, Cordaid, Homeless International, Selavip, Ford Foundation, IIED Rausing, CAF-Citibank, DPU, Pilot Light, IYSH, IIED-Ford, UNCH and others.

Contracts are usually assigned to SPARC for infrastructure, resettlement and housing projects. To date, a number of state, city and local authorities have contracted the Alliance. Our largest contracts include the BMC's 44-crore Mumbai Slum Sanitation Project and the MMRDA's Mumbai Urban Transportation Project to resettle and rehabilitate over 10,000 households along the railway tracks.

Usually SPARC subcontracts this work either to community and Mahila Milan leaders or to formal contractors, or to a combination of both. Again, in the first stages of construction, a certain amount has to be available to kick-start programmes in the form of security deposits, margin money for guarantees and insurance. All this comes from our Bridge or Revolving Funds.

Subsidies are given by central, state or local bodies to assist poor communities. For example, the Ministry of Labour and Urban Development gives a Rs. 50,000 subsidy for bidi workers to build homes in Sholapur. Other housing subsidy schemes include the Valmiki Ambedkar Yojana (VAMBY) and the Lok Awas Yojna (LAY).

Community Contributions are savings that poor communities that belong to the federation have to pay towards their housing and infrastructure needs. They are used to subsidize a project, stand in as collateral for a loan, prove commitment to maintaining community assets and to repay loans.