The Informal City


A number of services are delivered by the informal sector in Asian cities. This informal sector has a close link with the informal settlements. The most important function that the informal sector fulfills is the creation of jobs and employment. In most Asian cities over 50 per cent of jobs are generated in this sector and in certain cases they may be as high as 76 per cent1. With inflation and recession (in many countries both of these are in double figures) formal sector industries let out piece-meal work through small contractors to families in informal settlements. As such, they bye-pass laws related to the minimum wage, working hours and employment regulations. In addition, numerous small workshops and manufacturing units in the more established informal settlements produce consumer items for the city as a whole and for formal sector industry, and increasingly for its international partners. Also, surveys suggest that most skill development related to manufacturing, light industry and management of businesses is developed within the informal sector itself through apprenticeships. These skills are then transferred to the formal sector and upgraded if necessary. The major problem that informal businesses and manufacturing units face is the absence of credit and advice for the expansion of their work and production. Whenever they require funds they have to borrow at exorbitant rates of interest from the open market (so they borrow only small funds for short periods) or from the middlemen and contractors who exploit their labour2. Where funds at normal bank rates have been made available through NGOs, almost always without collateral, the informal business have expanded, generated jobs and faithfully paid back their loans. Without the labour force and the entrepreneurs of the informal city, most urban economics of Asian countries would collapse.

In many Asian cities, informal sector loans also finance transport. It is through such loans that the Karachi and Jakarta mini-buses, Manila jeepnis and Dhaka rickshaws are financed. These modes of transport are the backbone of the transport industry in these cities. The informal sector has invested billions in this process. The relationship between the financiers of these modes of transport, their owners, the police, and the transport department of the city is also informal and is not based on any larger transport plan. However, in all these cities there are transporter’s associations that constantly negotiate with government agencies so as to guard their gains and present their claims. They have an understanding of delivering transport to the poor at affordable rates which government agencies do not seem to have. Again, in cities such as Phnom Penh and Bangkok, there are informal motorcycle taxis that, in the absence of formal sector provisions, take care of the transport needs of the city.

In delivering land and housing the informal sector’s major problem is not the acquiring of land but of acquiring tenure security for the land that has been acquired. Even where the land can be purchased by people living on it, credit for land purchase is not available to the poor because they can offer no collateral and because they are not “loan-worthy”. However, housing quality has improved wherever de-jure and de-factor security of tenure is available. The vast majority of these houses are constructed by small building contractors or skilled masons (with support from the house owners) who live within the settlements and who often provide materials on loan and cash loans to their clients as well3.

Again, in almost all Third World Asian cities, residents of informal settlements organise to manage the solid waste disposal within their neighbourhoods even if there is no security of tenure. In addition, in most Asian cities there is a large informal sector which collects and recycles all inorganic solid waste. This generates considerable employment and takes care of the major problem related to the disposal of inorganic materials.

In many South and South-East Asian cities, the provision of warehousing and storage has not kept pace with the expansion of wholesaling and port activities. Here again, an informal sector provides these facilities and labour for them. Again, in most informal settlements health facilities are provided by informal private clinics, many of them practicing traditional medicine. Also, where government facilities are not available, schools are also opened by the informal sector and are surprisingly affordable to the residents4.


Over the last 20 years, the attitude of governments to informal settlements and practices has become one of comparative tolerance. Because of political expediency, informal settlements in almost all Asian cities now officially have a vote, councilors and services such as water, post offices, police stations, government clinics and schools. However, the standards for informal settlement developments are well below those for formal settlements.

In spite of these changes, the formal city residents and most planners continue to view informal settlements as parasites, drug-pushers, criminals and land grabbers. This perception has created difficulties in the implementation of many innovative government projects and prevented them from expanding into national programmes.

Some of the more important state programmes are the Community Mortgage Programme (CMP) in the Philippines; the Kumpung Improvement Programme (KIP) in Indonesia; the Katchi Abadi (squatter settlement) Improvement and Regularisation Programme (KAIRP) in Pakistan; and the Million Houses Programme (MHP) in Sri Lanka. In conceptual terms, the CMP is the most important of these programmes because it provides loans to the communities not only for building a house but also for acquiring land and infrastructure. The MHP was perhaps the more successful of these programmes but once political support to it was withdrawn, it could no longer operate effectively5.

It is not necessary to describe these programmes since their objectives and methodology are well known. However, apart from the MHP, the other three suffer from the same problems. One, that they are on too small a scale to make any difference to the over-all housing and settlement situation. Two, communities require technical advice and managerial support to access these programmes and to implement their part of it. Such support is not available from government institutions. In the rare cases where such support has been provided by NGOs and concerned professionals, a large measure of success has been achieved6. And three, state inputs regarding infrastructure have been poor in quality since contractors and their government supervisors do not consider work done for low income communities as important and communities do not have the expertise to supervise this work or the political power to prevent it being substandard.

Most Asian cities have some form of a master plan. However, in the planning process the representatives of the informal settlements and the informal sector service providers are never involved. Their point of view and their interests are not considered and the immense knowledge that they have on how the city really functions is not made use of. Consequently, most urban planning, physical, social or economic, is based on wrong assumptions, most of which are drawn from the First World planning experience.

As a result of the non-involvement of the informal city in city planning, insensitive projects that displace communities are constantly approved and often funded by international agencies. In addition, infrastructure development plans do not document or accept the work that has been done by the communities at their own cost. The powerful informal sector lobbies related to land, transport and solid waste, do not become a part of the plans related to their respective sectors. And the politician-bureaucrat-developer nexus is able to sabotage those aspects of development plans that are not in its interest.

The above process is aided by the fact that most planners and administrators are conventionally trained and do not have an understanding of and links with the informal city. Their main objective is to integrate the informal within the formal. If this happens (luckily it cannot) then the poorer sections of the city will not be able to afford the cost of urban services, and jobs for large sections of the urban population will not be generated.

  1. Karachi 76 per cent, Bombay 65, Jakarta 60. Quoted in Urban Housing Policies in a Changing Asian Context: City press/ACHR, Karachi, 1997
  2. Akhtar Hameed Khan: Orangi Pilot Project Programmes: OPP-RTI, Karachi 1994
  3. – Arif Hasan: Study on Karachi’s Fringe Areas: (unpublished), Karachi, 1988
    – Johan Silas: Housing in Surabaya
    –  Aromar Rav: in a paper presented at a PLAN Conference in Sri Lanka, 1994.
  4. Akhtar Hameed Khan: Orangi Pilot Project Programmes: OPP-RTI, Karachi, 1994
  5. Susil Sirivardana: An Analysis of Poverty Alleviation Through Community Based Programme in Sri Lanka: paper presented at the RWCBP-UPA Seminar at Kuala Lumpur, May 1994.
  6. Example, the ADB funded sewage project under the Karachi Special Development Plan in Orangi, 1994. See Arif Hasan: Working With Government: City Press, Karachi, 1997

One Comment

  1. you are legend bro. your research proved the only way to get my thesis done. i am from UET lahore. thanks again bro. i cant leave this site without thanking you.

    Posted December 8, 2019 at 3:02 am | PermalinkReply

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