Delivering Livelihood Opportunities For People In Low Income Settlement Area

Delivering Livelihood Opportunities is a major challeng in many parts of the globe. Poverty remained major problem across Indonesian cities. As a matter of fact, a great proportion of poor city inhabitants reside in informal settlement or other low income settlement areas. Consequently, poverty reduction approach undertaken should emphasize on such particular city areas.This paper is relevant to the urgent need in improving livelihood and delivering income opportunities in low income or informal settlement area.

Why Improving Livelihood?

It is believed that access of livelihood is so highly important as it is the opportunity for the community to earn income. And income means opportunity for better education and ability to pay basic services. It also means access to skill development, health care and social amenities.

‘De Facto’ Rule of The Game

Inhabitants that reside in low income settlement area or so called ‘slum’ normally face major problem of lack of access to basic service (Helmsing 2003) and sub-standard settlements condition that is normally highly over-crowded. It is also revealed that the poor faces problem of isolation, in term of physical, economic and institutional. These poor housing conditions are basically not suitable for income generating activities (Helmsing 2003)
Development actors not only have to deal with different social layer and community groups, but also have to highly take into account specific circumstances in slum area or other low income settlements. The situation surely very much differs than those in ‘formal city’. This referred to the slum environment’s fluid character and high degree of uncertainties. The poor often has to pay additional cost and deals with greater risk of “physical insecurity and health risk”, particularly in terms of disease, theft and violence (Helmsing 2003). The area is also prone to conflict due to scarce resource and economic hardship. In effect, development actors have to understand ‘de facto rule of the game’. This means, the situation where informal sphere is the dominant needs to be carefully tackled. Other example, development actors to some extent might also need to wisely deal with drug-lord.

Delivering Livelihood Opportunities

The basic idea is to deliver viable livelihood in order to enhance economic prospect for the poor which reside in low income areas. This demands effective measures to extend the economic activity, improve productivity and competitiveness of economic activity in such a particular area, namely home-based entrepreneur, micro enterprises or even informal sector operator. Livelihood strategy is basically a set of process to overcome economic constraints. And the decision regarding option of livelihood strategy depends on the prevailing development, poverty and livelihood. Considering the fact that development is a highly complex process, the decision also depends on the power relation and political struggle in a particular socio-economic and institutional realm (Bebbington 1999).

Improving economic assets : Securing inhabitant’s access to livelihood

The idea of livelihood viability corresponds with access to resources, there are number of measures could be undertaken in this respect : (i) address the problem faced by household which has lacked access to resource (ii) increase the return of such resource over which the household still has control and (iii) develop institutional capacity framework to ensure that such resource is equally accessible (Bebbington 1999)
This also in accordance with ‘improving productive economic assets’, which can be explained in terms of ownership and access to economic assets. This notion should also be linked with poverty indicator, thus be able to benefit the poor in creating their own path in addressing the problem of poverty (WorldBank 2000 cited in Ellis, Kutengule et al 2003). The role of supportive institutional environment is significant, and it needs to be able to convert those productive asset into ‘ready to use assets’, hence improving the livability of the poor (Moser 1998)
It is argued that assets underpinning viable livelihood, so they need to be transformed into a (Bebbington 1999):
• Consumption level, which is also a key indicator of poverty reduction
• Improved living condition
• Better collective capacity of the community, this involves social capital in terms of social and kin network
• Adequate capacity of the key participant to maintain their assets base

Consequently, an effective public action is required to undertake this ‘asset transformation’ (Sen 1999)
The notion of creating local safety nets is thus highly relevant. This is crucial in addressing vulnerability of the poor inhabitants in dealing with any kind of economic shocks. It helps them overcoming financial insecurity for creating better livelihood foundation. For instance: developing ‘formation of saving and credit groups to meet income emergencies’ (Helmsing 2003)

The significance of ‘in-depth approach’

Many argued that the most preferred approach in undertaking development intervention in such a low income settlement is so called ‘in depth approach’. It deals with a particular and well defined area, namely slum, informal settlement and other low income areas. As a result the development intervention delivered could be more comprehensive and emphasizing on local institutional process. Following are some other advantages of implementing ‘in depth approach’ of livelihood strategy in low income area:
o the political will to help to poor could be more focusely delivered
o projects delivered could emphasize on using local resource: workers and materials
o to ensure including poorest of the poor in the approach initiated
o underpins the notion of ‘administrative arrangement of the community, by the community and for the community’
o could more deeply involved local informal leader, as the process need to go underneath the formal structure
o be able to go beyond merely based on statistical figures, get into the real circumstances on the ground

Genuine Dialogue and Healthier Partnership with the Poor Inhabitants

“Into the heart of the local people”

Many believe that the poor is in fact hard-worker. Street vendors get up really early in the morning to sell food and vegetables. Scavengers dealing with rubbish until late at night. Many of the poor actually work round the clock. They are indeed survivors. They deal with economic hardship and day to day survival strategies, face the risk being chasen even beaten by the ‘Satpol PP’. The benefit of genuine dialogue is thus obvious. Hence, the poor community and the government officials be able to share different perspective, exchanging positive values and learn form each other’s experience.

Not only need to be provided with basic need, poor inhabitants that reside in many low income settlements also need to be heard. Their voice has to be proactively responded. On the other hand, development practitioners need to understand the situation from community’s point of view. In effect, the skill to effectively communicate with them became urgent. The importance of genuine dialogue between local institution and the low income communities thus emerged. By doing so, the development practitioner be able to know what really happen in the ground, learn what the issue are. They then could understand how the community do things and deal with their survival strategy. So, they could reveal how the community functions.

Community should not work alone in improving their livelihood. Addressing the problem of economic and institutional isolation that normally faced by the poor is crucial, however, it is not adequate. Rather community should play major role in developing healthier partnership with broader institutions. This in line with the idea that ‘success is critically dependent on the simultaneous complementary investments by other economic agents’ (Helmsing 2003). Get support from capable NGO and CBO or even private sector thus is an obvious advantage in this sense. It is about strengthening social capital with the poor: ability to work together and developing network. So that they could collectively addressing crucial problems faced by the community. Decent pattern of partnership allow them to be able to withdraw resource from different source. This notion should be in line with improvement of self reliance, meaning , in the long term breaking the dependency and strengthening local control.

Improving home-based enterprises and supporting informal economic activity

The primary idea is to generate further economic activity through strengthening the local based entrepreneur. Provide them with windows of opportunity through connection with formal external market. This notion is a key foundation for a more self reliance local economy and in line with the concept of ‘improving productive economic assets’, as mentioned before.

In this light, the importance of so called ‘home-based enterprises’ thus emerged, as it plays a central role in addressing poverty in many localities. It is attributed to the fact that “per-capita incomes in households with home based enterprises were 22% higher than those of household without home based enterprises.” (Moser 1998). This affirms that the improvement home-based enterprises is strongly interrelated with the development of self employment economic activities by the poor.

It is noted that the capacity of formal institutions in creating jobs for the poor is considerably weak (BPS 1993 cited in Noer Effendi 1997). Consequently, the importance of self employed informal economic activity has emerge (Ellis and Mdoe 2003). Informal sectors of the economy should no longer be seen as marginal as they are reckoned as the primary source of income for most of low income city inhabitants. They are, in fact, the dominant. Due to its significant role, current institutional arrangement needs to support such informal sector. Their economic prospect should be enhanced. For example, provide them with decent space, improving access to their supplier or provide them with practical knowledge.

Such home-based enterprises, micro enterprises, and informal sectors of the economy however also need to deal with market forces and focus on profit seeking. This inline with the notion that economic development approach has shifted away from public sector to market led growth. The benefit of market forces should be equally distributed. In this sense, such home-based enterprises and informal economic activity need to improve their access to external market. Rather than merely, for instance, being street vendor, selling their goods in the street and waiting for the people passes by. Some measures that relevant with this idea: the provision of market information and improving their information access. So that such small scale enterprises could also have information about supply and demand and how is the implication of prices. Concerning street vendor selling food, there should be simple and affordable system to ensure its cleanliness.
The significance of developing association of micro enterprises and informal sector operator thus emerged. This notion is in accordance with the value of and networking and collaboration. The idea is, if they work together as a group, the process will be more effective and their productivity will increase. This surely much better, rather than do it individually and competing each other for scarce resource. Such a pattern of collaboration very much helps in organizing the organization, building vertical and horizontal linkage, so that they could helping each other, for instance collectively dealing with financial problem. The value of collective efficiency, where resource could be obtained from many sources should also be taken into account. Concerning the need to improve productivity and efficiency, partnership with private sector is also crucial. By doing so, such home-based and micro enterprises could have better production outcome, they then can fix the quality product as well as achieved product standard required.

Additionally, business development service plays a central role for the development of micro enterprises, namely in undertaking training activities, functions as pool of activity, pool of information, centre for knowledge management and so on. Such supporting services may be provided by local institutions that capable of providing technical guidance (Helmsing 2001 cited in Helmsing 2003)
The process of capacity building, namely human capital development and knowledge dissemination, obviously play a central role. This notion is discussed later on, in the following paragraphs.

Delivering basic service and physical infrastructure

It is believed that decent physical infrastructure is one of a key ingredients in delivering viable livelihood for low income inhabitants. The key thing is to overcome the implication of lack of access to basic service and physical facilities. Delivering construction projects of basic service provision is fundamental, and this has to emphasize the use of local workers and local materials. Construction of basic service would also generate further multiplier effects.

In addition of clean water, electricity and decent road network, an effective livelihood approach surely needs supporting buildings. One may need to construct new ones, or due to budget constraints, home spaces, which normally illegal, will do. A multi purpose community building could also be used. Moreover, access to appropriate tools and equipment as well as to affordable source of energy are also crucial, for instance electricity supply. The use of pre-paid card system may needed in this case.

Improving transport service, particularly in terms of high quality public transport, is also fundamental. It increases productivity of small scale enterprises. The key rationale is to strengthening access between poor community and market or other income opportunities, as well as to their place of work. Transportation system that is within their reach, and surely affordable, means opportunity of prospect in selling goods. It is needed to help them obtain goods from and to the market.
Applying appropriate technology is, however, important. Many problems could be solved by technology. The key thing is to ensure that technology applied is the most suitable for them, thus value added needed could be delivered. Affordability is also a key issue in this respect.

Micro credit provision : Climbing the first ladder of development

Many scholars argued that the provision of micro credit is a crucial component for a more viable livelihood of the low income inhabitants. Such a micro credit scheme that specifically targeting the poor and micro enterprises is a reflection of political commitment to serve the poor. The relevant financial institution thus should shift its approach, so they are not only focus on the middle and upper income of the community groups.

The basic idea is to tackle market imperfection and give them opportunities in climbing the first ladder of development (Sach 2005). This micro credit provision can take form of either an individual or group lending system and should avoid ‘loan sharks’. Therefore, the scheme should apply reasonable interest rate. It would be much better if ‘profit sharing principle’ could be applied . This notion is in accordance with syari’ah principle, of which demands mutual trust, commitment for working together and transparency. The borrower has to be encouraged to spend money on productive activity, rather than simply by new TV, DVD player or fridge. By doing so, the money borrowed is valued as their micro investment that in turn may deliver economic return for their household.

Given the fact that such micro credit provision should focus on the need of the poor, it thus has to serve a particular target groups, namely home-based enterprises, informal sector, street vendors, warung, even ojek, pedicab driver and so on . Opening wider economic access for them is surely a ‘no easy task’. Organization has to consider the fact that they normally do not have steady income, instead, they deal with day to day survival strategies. Yet most of them do not have any formal administrative documents, for instance KK nor KTP.

Consequently, a more innovative approach that differed from the conventional bank is highly needed. The significance of strategic framework thus also emerged, meaning the approach of such a formal micro credit provision needs to be tailored and flexible, to account for changing socio-economic situation or even institutional aspects. Accordingly, the problem of the absence of collateral among poor family also need to be tackled . A simpler procedure is a must, so it would be much easier for the poor and other common citizen to deal with it. This may demands innovative documentation system, a more pro-poor administrative arrangement.

Last but not least is the gender issue. The micro credit provision should focus on women as they are normally alienated. It is revealed that women normally have to deal with triple burden. Meaning, in addition of their reproductive role and responsibility to look after their children, women also bear responsibilities to generate income for their household and they are also required to take care of social networking and surrounding community’s activity (Helmsing 2003). In this sense, delivering micro credit to women headed household is a significant measure for the household’s better economic prospect. This situation would be very much different if such credit given to man. As man are normally involved in local politics. It is also often the case, once they get credit, they just washed away the money, as they get drunk and are gambling.

Grameen Bank’s experience in micro credit provision

One has to learn from Grameen Bank’s experience, it is actually the best practice in the realm of micro credit provision. The bank’s achievement in delivering economic base for the poor and strengthening the poor’s foundation of productive assets are indeed outstanding. Its distinctive and creative approach lied in the fact that Grameen Bank does not require any collaterals, or credit check for loan approval (Bhatt 1997). Rather the approach highly valued network of trust and reciprocity, of which actually the nature of ‘social capital.’ The bank’s borrowers are organized in a small group, consisted of 5-8 persons, the process of working together and strengthening each other on such small group is thus nurtured. Collective responsibility is thus developed and, in turn, the value of “collective insurance mechanism” emerged. Meaning there is a guarantee within the group, the wealthier of the group supports the poorer. This process enables them to survive and improve their circumstances, thus largely contributes to the sustainability of the system.

Role of knowledge and human capital development

Knowledge dissemination and human capital development are surely key ingredients in ensuring a more sustainable livelihood strategy. This notion, which referred to life skill and practical knowledge, is also inline with the need in improving their ‘absorptive capacity” of above-mentioned micro credit provision (Van Horen 2002)

Capacity Building surely has to be undertaken on a continue basis. The key idea in this respect is an economically useful skill that could underpin their day to day economic activity. Kind of formal training may not suitable in this sense, as it has to involve a great deal of informal sphere. Some argued that vocational training is more appropriate. To what extent the current approach of BLK (Balai Latihan Kerja) could address this need remained a question.

Such a knowledge development may refer to development of practical business management skill, financial management – merely to support their cashflow knowledge – as well as technical skill, for instance in applying up to date technology. In many cases it even requires negotiation skill, especially for those informal leader and informal sector operator. This skill is particularly useful in countering eviction measures initiated by government.

Knowledge development should also focus on delivering the benefit of IT, of which a key instrument in knowledge dissemination. The benefit of IT should be equally distributed, for instance in the case of Hyderabad in India where slum areas are connected each other with internet

Security of tenure

Given the fact that the poor heavily depends on their house or shanty in living their day to day survival. Yet, its sub-standard housing condition as well as the status of such a land makes them vulnerable. It is clear that the notion of security of tenure directly interrelated with their home-based income earning activities. It corresponds with their willing to invest in their own property, in order to underpinning their productive assets.

Adequate measure is obviously needed in addressing security of tenure for the poorer inhabitants. Integration with informal realm is obviously important. This may be a complicated process, may also not. The provision of security of tenure doesn’t have to be a freehold title. It could also take form of guarantee from the government that they won’t be evicted, or basic service provision. The key thing is that local government agencies have to deliver certain degree of ‘sense of security’ for inhabitants in such low income areas.

Institutional Aspect

As the performance of local government is weak, one unfortunately cannot expect major role of local government in delivering income for inhabitants in low income settlements. The need for institutional and governance reform is obvious, and gradual change has to be emphasized in order to avoid political resistance.

Having said supporting the informal sector is fundamental, ‘anti informal sector’ policies thus have to be removed. Yet what the government normally do is to turn them to formal, which not only squeeze them but also inhibited their income opportunities. Even worse, numerous measures have been undertaken to ‘eliminate’ them. Informal sector operators are in many cases beaten and put in jail. This may also referred to eviction, that normally ends up with violence incidents. A waste of energy, as it is clear that eviction is very much far from effective. We never going to rid them anyway and they will always exists.

In dealing with rapid changing socio-economic circumstances as well as tackling the fluidity of informality, regulatory framework should be made adaptive. Accordingly, institutional arrangement also need to be flexible and use different approach in dealing with various issues. The key idea is to tailor the working framework to the specific problem

Jakarta, February 2, 2008

Romi Romadhoni, MDP

He is an urban planner and sociopreneur, and can be reached at m.romadhoni@gmail.com and twitter : @romi_mr

References

Bebbington, A (1999).” Capitals and capabilities: A framework for analyzing peasant viability, rural livelihood and poverty.” World Development 27(12): 2021-2044
Bhatt,N. (1997).”Microenterprise development and the entrepreneurial poor: including the excluded.” Public Administration and Development 17: 371-386
Ellis, F.,M.Kutengule, et al (2003).”Livelihood and rural poverty reduction in Malawi. “ World Development 31 (9): 1495-1510
Helmsing (2003).”Local economic development: New generations of actors;policies and instruments for Africa.” Public Administration and Development (23): 67-76
Moser, C.O.N (1998).” The asset vulnerability framework: Reassessing urban poverty reduction strategies.” World Development 26(1) : 1-19
Noer Effendi, T (1992). Urban growth, informal sector and poverty.” The Indonesian Journal of Geography 29(73) : 1-15
Sach ,Jeffrey (2005).”The end of poverty: How we can make it happen in our lifetime.” London. Penguin Group
Sen,Amartya (1999). “Development as Freedom”. New York, Anchor Books.
Van Horen (2002).”Planning for institutional capacity building in war-torn areas: The case of Jaffna, Sri Lanka.” Habitat International 26(1): 113-128

Delivering Livelihood Opportunities For People In Low Income Settlement Area