Background

Indonesia is a country of over 200 million people, with 48% of Indonesians living in urban areas.  Prior to the 1998 economic crisis, Indonesia had been remarkably successful in enabling the housing industry to meet the needs of the low income population.  However, since 1998, this has slowed down, and in Indonesia evictions of low income residents have occurred to make room for large-scale commercial developments.  Nevertheless the government at all levels is committed to housing and slum upgrading - the Kampung Improvement Programme (KIP) has achieved significant results in slum upgrading and infrastructure improvement.

For the fiscal years 2006 – 2010, Surakarta Municipality has been implementing a significant program for improving 6,612 substandard houses in the city, whereby each eligible house receives a grant of USD 223 to help pay for repairs and upgrades. The aim is that by the end of 2010 Surakarta (also known as Solo) will be a slum free city. 

Objectives

The upgrading project at Ketelan is part of the Municipality’s city-wide strategy. Building on the success and the lessons learnt from the upgrading of the pilot cluster in Kratonan, Ketelan is a much larger cluster with 43 substandard houses.

Implementation

With the help of SUF and the Municipality, the residents of this cluster have assessed their homes and identified a series of upgrades that they would like to implement. The upgrades within this cluster have been individually tailored to needs of each particular dwelling and the aspirations of its residents. As the municipal grant often does not cover the actual cost of the works required to upgrade most dwellings; this SUF scheme focuses upon gaining the additional funds required to complete the works through a commercial housing microloan. The commercial loan will be based on the household free cash-flow to secure the repayment. The improvement of settlement basic infrastructure has been funded by the Indonesia Central Bank, Water Company’s corporate social funds and the Solo municipality infrastructure improvement funds.  This is different to the mortgage based Kratonan pilot project, although both of them have secured free-hold land tenure.

Results

Expected results include tried and tested mechanisms for providing capital financing for slum upgrading in Indonesia and for the Ketelan community; the provision of housing and infrastructure upgrading; improved quality of life in participating communities, and; and leveraged private bank participation in slum upgrading projects.

Impact

Improved living conditions for the low-income community of Ketelan.