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Carrying It Out
Income Generation

To improve the economic well-being of communities is a fundamental goal. This section includes suggestions for supporting informal economies, guidelines for organizations promoting entrepreneurship, a discussion of employment generation opportunities in upgrading programs, and ends with a story on community savings groups.

Supporting Informal Sector Economies

Excerpt from:
Entrepreneurship for the Poor, by Malcolm Harper (London: Intermediate Technology Publications, in association with GTZ, 1984) 114-5. The book is an aid for those setting up entrepreneurship programs.

The vital role that informal sector-economics plays in the survival of low-income households must not be ignored. Small businesses thrive in “uncontrolled” settlements. However, as these settlements are upgraded or the occupants are relocated, they often become subject to restrictive legislation on trading.

To allow informal businesses to continue, programs should consider the following:

  • Locate industries or other sources of employment close to low-income residential areas, or vice versa in the case of resettlement.
  • Minimize transportation costs to low-income earners. Support the growth of private and small-scale transport options, creating more jobs, lowering transport costs, and facilitating labor mobility.
  • Allow trading and small-scale industries to continue operating in upgrading and resettlement areas, without restrictive controls.
  • Provide credit to small enterprises on easy terms.
  • Allow businesses in residential premises.
  • Encourage local government to introduce labor-intensive methods for some of their own operations. E.g., the collection of garbage could be preformed with pushcarts, trash could be picked and sorted for recyling, and so on. (See also: Community Contracting)

Guidelines for Organizations Promoting Entrepreneurship

“The following guidelines for small enterprise assistance organizations were suggested by the Director of the Xavier Institute of Social Service in Ranchi, India; they are equally relevant for any work with small-scale enterprises, such as credit, extension or marketing services, but they seem particularly appropriate for institutions involved in the highly personal and individual business of entrepreneurship development:

  • Make decisions locally, accept that “it's up to you”.
  • Be self-accountable, avoid having to account for every penny.
  • Take measured and calculated risks when necessary, and be ready to take responsibility for possible failure.
  • Innovate, do not wait for others to show the way.
  • Be market orientated, evaluate your work by the demand for your services and their ultimate results.
  • Believe in the small scale entrepreneurs, have faith that they will succeed.
  • Concentrate on a limited, specific target group. Know them, and concentrate on them.
  • Be consequential, that is, dare to take all the necessary steps to achieve your objectives.
  • Be open, be ready to be helped, and to help, and ignore formal institutional barriers when necessary.
  • Take the blame; do not say “it's their fault”.
  • Recognize that your strength comes from inside you, be clear as to what your objectives are.
  • Stay small. Do not overstretch your institution, do what you can do.” (Harper 107)

Employment Generation Programs that
Increase Income and Effective Demand

Excerpt from:
Shelter, Infrastructure, and Services for the Poor in Developing Countries: Some Policy Options. UNCHS (Habitat). (Nairobi: UNCHS (Habitat), 1987) 14.

Although there is often an inadequate supply of basic services for the urban poor, the solution many not be entirely on the supply side. A more effective solution may be found in raising the low levels of effective demand among the poor by raising their incomes. One effective way that governments can increase the access of the poor to urban services is to promote employment-generation programs that allow the poor to raise their income sufficiently to create greater effective demand for public services and obtain them through a variety of sources.

The policy option can be implemented by designing service improvement programs to generate as much employment as possible for the beneficiaries of those services. The basic services strategy of UNICEF, for example, attempts to make improvement in way that will build the skills and raise the incomes of people - especially of women - living in the neighborhoods where the services will be delivered.

Neighborhood women can be trained, for example, to help run day-care and preschool centers, and community residents can be trained as para-professional health workers to staff neighborhood clinics or family planning centers.

Another option is to develop programs that increase the capacity of the informal sector to provide appropriate services, build low-cost housing, or provide construction materials for shelter and infrastructure. The informal sector is an important source of income for many of the urban poor in developing countries and with proper support could provide many basic services in low-income neighborhoods.

Employment can also be generated for the poor by developing service extension projects that include components for the participation of local small-scale industries, and offering assistance that will expand small-scale enterprises in and near poor neighborhoods. Community facilities such as clinics, hospitals, prenatal and childcare stations, and elementary schools, for example, could be planned so that they can use indigenous materials and components such as pipes, electrical accessories, cement blocks, bricks and lumber, which can easily be produced by small-scale enterprises in the area where the facilities will be constructed, and that use local contractors and labor.

The promotion of informal sector activities or at least the elimination of regulations and stifling restrictions could open up a source of income by which poor households can obtain the resources needed to engage in self-help service improvement projects.

Photo of a street vendor in Colombia
Street vendor in Colombia. Photo: E. Popko.

A Story:
Community Savings Groups

Excerpt from: Housing by People published by the Asian Coalition for Housing Rights, April, 1999, p 44.

Editors’ Note: Housing by People is a rich source for news about planning and development at the ground level. It is published by the Asian Coalition for Housing Rights, Somsook Boonyabanch, Secretariat, Maurice Leonhardt, TP. 73 Soi Sonthiwattana 4, Ladprao 110, Bangkok 10310, Thailand, Telephone: (662) 538 0919, Fax: (662) 539 9950, E-mail:

Cooperative Shops in Nepal: Members of slum communities in Kathmandu in the past two years have formed very successful community savings groups. A recent issue of Lumanti’s bilingual newsletter, “City Care” ran a story about five women's savings groups in the Patan area of Kathmandu which have used group loans from their collective savings to start cooperative businesses.

These small community enterprises have done much more than boosting their individual members’ incomes, but have strengthened management capacities and ultimately enlarged the credit pool. The Gyan savings group in the Khapinchhen area was the first to borrow from their savings to open a community provisions shop which sells soap, cigarettes, chocolates, instant noodles and sundries at fair prices to customers within their own settlement. The shop was a hit and the enterprise was a business success for the women who ran it. Other savings groups in the network watched the experiment and soon more cooperative shops opened. The Smriti and Ekata saving groups were next, with local shops selling milk, sugar and tea. The Pakriti savings group in Lonhla and the Mahila savings group followed with cooperatively managed outlets selling pulses, soap and provisions and various kinds of seasonal goods which are required for festivals and ceremonies.

These small community enterprises impact in many ways:

  • they boost their individual members' incomes
  • they strengthen management capacities
  • they enlarge the credit pool in the long term
  • they provide a firsthand model which builds confidence for other neighborhoods.
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