Rebuilding the Fund

by James Tayler

By Benjamin Bradlow and Louise Cobbett, SDI Secratariat 

Though the past decade has been traumatic for Zimbabweans of all socioeconomic stripes, the urban poor likely have borne the greatest burden of hyperinflation, high rates of HIV/AIDS, political instability, corruption, and state-directed violence. Leaders and ordinary members of the Zimbabwean Homeless People’s Federation can all speak of their own or a close comrade’s experience with violence, sickness, and worsening poverty over this time period. For a federation built on the base of daily savings, hyperinflation was a challenge to the foundations of the organization. Unsurprisingly, then, Patience Mudimu, coordinator of Dialogue on Shelter, says that hyperinflation — when many bank accounts became worthless — has revealed the true meaning of daily savings for organized communities of the urban poor: “Federation is saying that ‘we are not mobilizing savings schemes, but mobilizing groups of savers around their own issues.”

Mobilization since the early months of 2009 has picked up at a fast rate. Since February 2009, says Mudimu, 10,000 families have been mobilized to begin saving. Political space has opened up since the post-election violence of 2008. At that time, the federation saw a city like Bindura as a no-go city for its mobilization activities. “It was such a morale boost to be able to mobilize in that area,” Mudimu said. The Global Political Agreement governs a shaky coalition government. While the minister of housing and social amenities is from MDC, the minister of local government is from ZANU-PF. In both ministries, high up officials from opposing parties work to undermine their counterparts. Federation co-ordinator Davious Muvindi says that high poverty rates, difficulty accessing currency under the new regime of dollarization and randification, have focused the federation on both what is affordable and politically feasible. “One way that we are trying to de-politicize our process is to advocate for fairer rules about land allocation in urban areas,” he said.

As a federation built on savings and an associated urban poor fund, called the Gungano Fund, it has had to adapt to such unique circumstances. The new currency regime has limited, uncertain potential for developing creative finance mechanisms of the urban poor.  About 30 federation coordinators, bookkeepers, Gungano coordinators, and staff of ZHPF support NGO Dialogue on Shelter, met on 29 and 30 January in Harare to reflect on the experience of the federation rituals for community organization during this time, and to plan for potentially rocky waters ahead. What follows is an account of the main areas of discussion. While general strategic areas were identified by the end of the meeting, most conclusions were postponed until leaders could go back to identify the true feelings of the grassroots of the federation nationwide concerning the agenda that emerged by the end of the two-day meeting in Harare.


The reports given on the first day support highlighted the lack of jobs. Many federation members are surviving on street vending or subsistence farming and selling any excess food as a means to save. However, they are not getting as much money from it as they had hoped, and the seasons are not as regular. Gungano is currently getting only a 15% return on its loans.

SDI council and board has set a maximum of $1000 for housing loans that come through its Urban Poor Fund International finance facility. But the experience of neighbors such as Namibia indicates that $1000 is too much. On average, a house costs Namibians $2000 to build. In the Namibian experience, only a third of the federation members take such large loans. This has caused the Namibians to examine what people can afford and then try build accordingly. They are currently giving loans for $600 for incremental construction. A similar case is in Kenya, where a shortage of land in cities like Nairobi meant that federation members were building multi-storey structures. Loans for full structures have been unaffordable, and a new loan system from the Kenyan urban poor fund, Akiba Mashinayi Trust, has focused on loaning no more than $600 to purchase land and build up to the foundation or floor slab level. The federation found that they were spending most of their time worrying about loans.

When it comes to affordability, the ZHPF has an information gap. Delegates to the meeting in Harare agreed that there is a need for a national federation survey to find out the average and variable construction costs, as well as what people in these different regions can afford, especially according to loan repayment data. Federation coordinator Sazini Ndlovu suggested that for most members, a loan repayment of $10 a month would be difficult, but within the realm of possibility. Based on this, Diana Mitlin of IIED said that according to her rough calculations, a 4-year-loan of $400 at 1% interest would be the maximum affordable loan, or $450 at 0.5% interest. Either way, she noted, the interest payments that were concerning some delegates should not be seen as the most important issue. Affordability of the actual capital loan needs to be the focus of how the Gungano loan process is restructured.

The Zimbabwean federation is also seeking to engage local governments around the issuance of urban poor fund loans. Though local governments are cash-strapped — Mudimu described their relationship to the national government as “hand-to-mouth” with little capital investment going to housing and infrastructure — they can still assist in donating land and/or services to augment or even help refund Gungano loans to projects under their local authority.

Fund Structure 

ZHPF delegates examined the possibility of decentralizing the fund to regional accounts, which exists to varying degrees in the operations of urban poor funds within the SDI network. Most agreed that saving scheme members would feel more obliged to repay their Gungano loans if they came from what was perceived as a more localized / regionalized initiative. It would encourage a sense of ownership throughout the entire process and federation members would be able to see how the lack of repayment impacts their neighbors. A good example is the anomalous high repayment rate in Gwanda. Federation members there have set some of their own rules for repayments. The ZHPF expects to begin a series of exchanges with Gwanda to learn from the way they have managed their fund so successfully in a situation of extreme unemployment, even for Zimbabwe.

Decentralization carries its own pitfalls. There is the possibility that the federation would start to move in different directions because of decisions made at a regional level and the different speeds at which decisions are taken. This idea was also tabled at meetings surrounding the federation’s tenth anniversary in 2008, but was ultimately rejected on the basis that it would take longer to access the savings. The forum rejected the centralization of daily savings, and was agreeable to the notion of decentralizing the Gungano Fund.

Ultimately, the assembled took a decision to create city-wide funds drawn from $1-per-month savings in 3 regions as a trial run. By keeping the accounts regional, it would enable the federation to lobby the appropriate local authorities at that scale. The federation would be able to demonstrate their savings at the regional level and would be in a better position to leverage support and likely land / services from local authorities. The trial will start with Bulawayo / Gwanda, Kariba and Masvingo. It should be clear that proposals for housing construction would continue to be directed at the national level of Gungano.

Business Loans

Small business and income-generation loans have varying effects in the SDI network. Some allow for subsistence but offer little opportunity for growth. Other such loans have served as the basis for thriving businesses. Delegates were strongly in support of continuing loans for income-generation, but emphasized that recipients should be trained with the appropriate skills. In such a high unemployment environment, self-employment through such loans has particular relevance.

Some of the problems included members getting half-way through a project, losing interest, asking to be trained in something else, and applying for a second loan. Not only is the Gungano Fund being depleted but it leaves people constantly stressed and demoralizedThe fund is now targeting those who have experience with their own businesses. They also found that the amount of capital is too little to help the business grow and are now trying to identify projects with a bigger scope and them fund accordingly.

The federation has tried to solve these problems by giving loans to savings groups rather than individuals. However they found that they would individualize the group loans. This means the $500 loan that is given to a savings group of 5, they will split it 5 ways. Rather than spending entire $100 on a income generating venture, a member will invest only $30 for produce and spend the rest of the $70 on housing construction. They still expect the produce to finance the loan repayment, which is unrealistic.

There are success stories. Some delegates reported that the money they got through Gungano uplifted them, and their businesses are prospering through the loans.  There are examples of people who are repaying their loans and are still left with profit. Those in the market towns, where there is a high demand for produce, are doing very well. However, in the more rural areas, it is much harder to forge a successful business, and whilst business risks tend to be minimized in urban areas, it is a very difficult economic environment within Zimbabwe for business to succeed. 

Relationships with Local Authorities

The ZHPF has been engaged with a number of local authorities in the past year, and has a footprint in almost all of the urban local authorities in the country. The federation is encouraging exchanges between the local authorities, with whom they have a good relationship, and newer local authorities with whom they have had promising engagements. Enumerations have been found to be particular useful to local authorities and therefore an opportunity to strengthen such relationships.

Meeting delegates agreed that the ZHPF must make itself relevant to local authority. A particular focus of the coming year is on city-wide profiling — including a profile of Harare planned to begin in June — and using the information as a way to address the local authority. Such information can be vital in working towards securing land tenure and services at the scale at which local authorities work. Assuming that the political climate continues to become more stable, the local authority will need such information to claim resources from the national government.

Though the federation is very united internally, they are agreeing, with the encouragement of Dialogue on Shelter, to emphasize that the federation is fighting for everyone and not just one place or group of people. The point of working on these local authority relationships is for the federation to demonstrate their relevance at city-wide scale. Informal settlement profiling can be used to develop coordinated pilot projects planned in conjunction with local authorities, that can lead to wider redirection of resources to the urban poor at actionable scale.


The Zimbabwean federation has been struggling with beneficiaries refusing to repay their loans once they have received housing. This places the federation in a difficult position as they are fighting to house people, and it would expose a great contradiction to evict someone. After lengthy and heated discussions it was decided that the Zimbabwean federation is decidedly unwilling to pursue repossessions.

In order to try deal with the problem, there is a need for a binding agreement with members, and that they must understand the ramifications of their loan defaults for other federation members. The federation is going to focus on proper vetting of those allocated the land to ensure defaults occur less frequently.

In addition, ZHPF is planning to concentrate on “remobilizing” members. It is better to reignite the passion for the federation than to try evict someone. Throughout the SDI network, some individuals try to take advantage of the system. But individual actions will not destroy the federation as a whole. The key is to have strong systems in place to deal with such problems when they arise. As one federation member, Chipo Matafi, said, “We are a federation. It’s like a mother, sometimes there will be arguments, but ultimately you cannot stop looking after your child.”