Part 1: The Urban Poverty Challenge
Discussion Questions
A. Why focus on urban poverty? Are we leaving out rural people and communities
The following are comments made so far in response to the above questions:

• Urban poverty is significant, but rural poverty cannot be ignored.
• A focus on rural-urban linkages is important because rural and urban areas are linked economically and socially i.e. rural producers provide input, rural laborers find jobs through social networks based on their geographic and ethnic origin.
• Urban development can partly be understood as the development of services in cities, such as water and sanitation services. It is also the development of rural areas into “urban” areas, with proper infrastructure and systems capable of sustaining economic development and population growth.
• By developing urban areas, we are generally not requesting that resources be diverted from rural work, and ultimately we are serving many of the same people because of rural-urban migration, and support to rural communities in the form of urban workers.

B. What are the most critical challenges for the urban poor? Let’s break these down. Is it jobs? housing? crime? representation and democracy? land tenure?

• The World Bank projects that greater proportions of the world’s poor will live in urban areas as the twenty-first century progresses. While cities become more modern around the world, the growth of slums has led to pollution problems, unemployment, deficiency in basic services, and food security issues.
• One concern is over the flood of rural populations into urban slums, fueled by rural poverty, and in many cases, conflict. Many migrants are young. This need-based migration may have positive and negative implications on the urban poverty dynamic.
• On one hand, the influx of large amounts of needy, ethnically and regionally diverse populations into cities may make the urban environment less stable and development efforts more difficult. On the other hand, these migrants have shown resilience, flexibility, and a desire to improve their lives which are key elements to entrepreneurship.
• Former rural dwellers are no longer tied down by village traditions, and have far more opportunities in cities. New migrants need to find new skills and linkages, but may benefit from networks of former neighbors in cities, networks that could potentially create an interface for value chain development.
• Another problem is that basic services that the government provides for rural populations, such as schooling, are not provided for in urban areas. Consumer demand for food products often outstrips supply, leading to high prices. While economic opportunities are higher in cities, the cost of living is also higher, and families often have to spend a disproportionate amount of their income on goods and services that rural, agricultural regions get for relatively little.
• Women are often marginalized by slum development efforts that tend to focus on the most prominent entrepreneurs, which are usually men. This is a mistake, as many of the most forward-looking and productive entrepreneurs are women.
• Unless poor urban households are able to engage in growth oriented enterprises, as opposed to subsistence enterprises, conditions will likely not change sustainably. Growth oriented enterprises requires beneficial linkages in value chains. This can be pursued through formal channels, where wages, social protection, and productivity are higher, or through informal channels, which offer more flexible and community-oriented opportunities.
• A distinction must be made between different types of “urban” and different types of “poor”. Urban environments encompass both towns and cities. Towns act as connectors within rural areas, and often are areas of economic stagnation. Cities, on the other hand, are huge, cosmopolitan centers of opportunity, beacons to globalization. The poor, likewise, cannot be put into a homogenous group. Some poor communities are impoverished with very little opportunity to see economic gains; others are clearly in a period of movement out of poverty; still others are newly poor in countries or communities facing aggregate growth problems.

C. Key Opportunities for Today’s Cities to address these challenges has not been dealt with a lot.

Part 2: Urban Solutions
Discussion Questions
A. For urban development professionals, please comment on the summary of issues presented in chapter two, “Urban Development Strategies.” Are there major issues missing? Are there approaches, nuances or recent trends in thinking and practice you’d like to highlight? Please share challenges and success stories from your experience.
B. For enterprise / value chain specialists: what questions and comments do you have about approaches to urban development and urban issues? Please share your challenges and success stories in urban enterprise or local economic development, including value chain development.
C. Although the term is less widely used now, we still observe in cities a divide between the informal and the formal – in terms of settlements, rights, and economics. Some participants noted the importance of informal intermediaries and others the key role that informal social networks play in urban markets. Where should our emphasis be? Formalization or strengthening informal systems? When and how does Lagos become Seoul?
The following are comments made so far in response to the above questions

Urban Development themes that the think piece can benefit from:

• Role of government and the enabling environment as an important element of development as the informal sector primarily operates because many governments cannot extend their controls at the informal level.
• Finance and investment scenario needs to be looked at, particularly the role of national governments, private sector and international financing agencies.
• Challenges of value chain financing
• Governance and Representation, Environment and Local Economic Development are themes or issues that are cross cutting.

Other Issues discussed

• VC approach has strong potential for urban poverty alleviation – perhaps even more so than in rural settings

• Problem of exclusion is more serious than poverty as poverty is transient and exclusion is more long term. Development initiatives fail to recognize this and work on strategies that run the risk of reinforcing exclusion as they do not always link the poor to the markets and VCD has potential to address this.

• Informal sectors may not be formalized in their existing forms as governments and the large private sector does not recognize them and users do not trust them as providers of certain services.

• Different types of urban development communities of practice involve

-Urban development planners and architects
-Social development and employment promotion practitioners
-Business development community

• However there is little trust existing between these communities of practice and there is a need to talk to each other, complement each others roles and understand the legitimacy of individual approaches.

• Role of community based organizations and how can they be leveraged to get entry into the value chains.

• Different types of public private partnerships may take the following forms

a.Private sector naturally moving into the vaccum created by the public sector
b. Local governments and private sector working hand in hand
c. Governments contracting to the private sector

However, little trust exists between these communities of practice and each side regards the other as an obstacle rather than a partner. Therefore there is need to build trust between these players and facilitate meaningful communication.

Part 3: Value Chain Development and Challenges
Discussion Questions

A. Value Chain Development:
1) For enterprise/value chain specialists
Please comment on the summary of issues in chapter 3, “The Promise and Challenges of Value Chain Development.” Are there major issues missing? Are there approaches, nuances, or recent trends in thinking and practice you’d like to highlight? Please share challenges and success stories from your experience.

2) For urban development professionals: what questions and comments do you have about approaches to urban development and urban development issues?
The following are comments made so far in response to the above questions

Rural Urban linkages

• Urban value chains are closely linked to rural value chains through product flows, remittances, rural urban migration as well as environmental linkages with rural areas.
• Informal linkages have proven to be a key component of rural enterprise development programs. Because cities are far denser, it is likely that these linkages already exist, and therefore needs to be identified and understood by practitioners. While in rural areas, a key approach is to develop these linkages between value chains and actors,
• As practitioners there is a need to articulate and facilitate these linkages, look at the dynamics of the whole value chain and recognize the fact that some of the dynamics are determined by rural people though the ultimate users reside in urban areas
• Many value chains traverse urban boundaries – we need to focus on linkages. In practice many urban value chains and MSEs in urban areas are agro-based and involve food processing and trading. So, urban value chain development can have a rural impact as well.
• Need for urban services like water, sanitation etc. are some areas where exclusive urban value chains can function and here the role of the Government, private sector and civil society gains utmost importance.
• In the VC context there is also a need to look at the vulnerabilities of small business entrepreneurs as they are introduced into high risk business environments. Most migrants do not come with inherent skills and entrepreneurial abilities to compete in urban environments.
• Traditionally cheap labor and not skills remain the advantages of poor countries and as a result poor get relegated to low income, low entry barrier jobs. Pro-poor value chain development would need to integrate them into formal economy or value chains where productivity, wages and social protection gets progressively higher.
• Women have been traditionally restricted to low skilled petty trade and often do not involve in businesses that have a high turnaround. Also women who are left back in villages are considered passive players and not a major policy focus. In addition, many urban women are more socially mobile, more empowered, more entrepreneurial, which presents opportunities.
• Social Networks are important and do not get enough attention. Many transactional relations are based on characteristics like affinity, village, ethnicity and technical competence plays a role only at a later stage. While lack of social networks creates an entry barrier into new urban markets for many, their presence may be also an enabling factor or low cost channel to provide effective livelihood support. Thus there is a need to recognize the role of such networks and how they can be leveraged to improve the efficiency of the value chains.
• Informal linkages: what is the place and role of informal intermediaries vs. “lead firms”? When and how do we mobilize informal sector traders, vs. when and how do we link small enterprises to formal sector larger firms?
• VCD should also take into account the fact that economic dynamics vary between cities and towns as cities are hubs of opportunity but towns often tend to stagnate. It may be also useful to explore the relationship between spatial clustering and integration of producers into value chains as the value chain perspective directs the attention to buyers and markets from a local focus. VC promotion is also workable compared to other models, when buyers get involved early on in the market and follow a clear business and market logic, rather than operating with subsidies.
• There is a need to focus on growth of the market itself, the bottlenecks within and then identify what might be the challenges to including the private sector.

Some Solutions/Approaches to Urban Development

• A solution to solid waste management is seen in the case of Kudumbashree, a program in Kerala, India, where women are engaged in door to door household waste collection and transport to the fixed transit points. For collecting waste from the households, the entrepreneurs charge Rs 30/- per month from each household. The advantage of this model is that it can fill the existing gap of solid waste collection and segregation without any additional financial burden to the urban local bodies.
• There are also networks of informal sector recycling. In cities, waste related jobs provide employment to 2% of the urban population. It reduces waste by 25% by weight and waste collectors generate an income. Each material in waste (paper, plastics, metals etc.) has a separate value chain and end markets. The existing value chains are stable, has a definite financial price, which households receive from itinerant waste buyers and at each stage the value of materials increase. In comparison to high income countries, this system is totally private, where entrepreneurs invest and take the risks and benefits from the profit.
• Mercy Corps has initiated a program in Addis Ababa to create five businesses to manufacture cooking fuel briquettes from organic waste, which is gathered by small private companies. Organic waste is not well utilized, and so this is a way to use it, and turn it into profit for both briquette manufacturers and waste collectors.
• One broad urban development strategy is a metro or district-level development concept with participatory development planning where different sectors are represented (access to housing, water supply, road, electricity, health care, education, land tenure, etc.). Value chain development will be one of the strategies wherein the local government units adjacent will plan their competitive niche: warehousing (cheap land), manufacturing, processing, market, etc. With linkage to the rural areas, priority industry sector based on the availability of raw materials can be mapped out and nurtured to be competitive in the regional, national or global scale.
• Public markets and farmers markets provide vendors low cost outlets for products plus potentials for shared marketing and promotional programs. There is also legitimized street vending—offering vendors a legal, safe, and supportive environment for business. Working in these sectors requires strong collaboration with local government units and consumers, and different private stakeholders in the chain
• Urban places where people congregate such as festivals, parks and cultural sites are often bound with their own special regulations, and offers opportunities for pro-poor vending replete with quality standards, product development, food safety, and microfinance.
• Three key conditions in order to benefit small and micro businesses:

a. Creation of operational space for them with lesser policy intervention b. Provision of support through knowledge, technologies, information, and communication etc. c. Creation of safety nets.

B. Value Chain Development Challenges
Discussion Questions
General: What comments or questions do you have about the presentation on challenges to value chain development? What do you see as solution to some of these challenges? Is there a significant challenge missing? Key issues addressed in the paper: a. Sustainability and scale b. Impact assessment c. Poverty eradication
Urban value chain development: What comments or questions do you have about the presentation on challenges to value chain development? What do you see as solution to some of these challenges? Is there a significant challenge missing?

• Some of the challenges to incorporating Value Chain Finance (VCF) into VCD are: 1) Lack of knowledge about VCF models 2) financial institutions’ lack of understanding of value chains and value chain development 3)VCD practitioners’ lack of understanding of financial institutions’ perception of risks and how to engage them as partners 4) previous bad experiences with certain types of VCF discourage the pursuit of VCF arrangements 5) formalized VCF models that are present in developed economies are often inappropriate for the VCs or the legal /regulatory environments we are working in 6) no real community of practice around the specialized topic of VCF in VCD or as a sub-set of MF.

An example of VCF intervention: WOCCU is currently implementing a project in Peru that in part focuses on working with Peruvian credit unions to provide financing to value chains that have already received technical assistance. It was found that in some cases the producers didn’t have access to the financing they needed to follow-through with the suggestions made by the technical assistance providers. Lack of strong relationships of producers with suppliers, buyers, and other value chain actors has been a key challenge. In an effort to overcome these challenges, WOCCU is focusing on two key areas: 1) Accessing financing needs/opportunities and 2) Building relationships.

• One challenge is the way poor are impacted in the rural value chains compared to urban value chain. A way to maximize impact on the urban poor is through employment generation which is not only a function of the sector competitiveness and employment elasticity but also the available skill sets of the workforce. Therefore, one could argue that in urban value chain the work is perhaps more narrower in scope than the rural chain and also more complicated

• VCD Environment as a value chain risk: An efficient value chain is one that maintains reasonable equilibrium in the benefits so that each participant has the motivation and resources to stay in business and upgrade performance.

• There are three main types of risk for a company: regulatory risk, reputational risk, and supply risk. The behavior of the value chain is determined by a set of standards—the conditions that the participants set for doing business with one another like compliance with local laws and codes of good social and environmental practice to help mitigate risks. While such standards can make high demands on small-scale businesses in the short term and cause some to lose markets, eventually they drive upgrading of products and processes.

• VCD Challenge from potential funders: Why do publications site the same few cases repeatedly? Are there so few good programs? Is there so little data on programs?

Part Four: Synergy
Discussion Questions
A. How might a value-chain development lens help achieve urban development goals? Could it help organize efficient and sustainable delivery of key services like water and sanitation, housing and energy?
The following are comments made so far in response to the above questions

• One question is whether practitioners working in poverty alleviation are identifying the market systems that are operating in an urban environment or just at one factor/component in the market system/value chain.
• It is a challenge to figure out how the VC approach might be of help regarding provision of water and sanitation. Both public and private provision of these services has failed in the past and as these are natural monopolies, it may be difficult to address them through a VC approach.
• Construction and energy are organized as markets, and the value chain lens adds value in understanding how they work and how they can be made to work better for the poor. For energy, a value chain perspective can be combined with a materials flow perspective, which usually helps to identify inefficient use of materials. For construction, it helps to understand where the challenges lie in urban VC development. For e.g. a modern building is made of 10,000 different products, so mapping the value chain that leads to a finished building is a challenge.
• There are enormous synergies to be gained from intense interaction between urban development practitioners and VC development practitioners. Urban development practitioners have insight into the features that define urban quality, and that make cities work, that often escape the attention of practitioners from other fields. But urban development practitioners are not always aware of the evolution that the whole discussion on private sector development has taken over the past ten or 15 years, especially the improved understanding of market processes and who creates effective markets.
• VC and urban planning constructs are secondary to improving basic conditions of life like education, healthcare, nutrition and human rights. Some among the poor will be more ambitious to find remedies to their condition than others and it is market demand near the origins of a supply chain that will ignite the spark of initiative. Urban development professionals (public sector) and suppliers (private sector) work together in an ideal world to solve local problems. While thinking globally, it is important to act locally. eg. Citizens Development Corps, is working with the oil industry in Angola and Sudan, but building infrastructure, adding locations, businesses and workers take time though the model is scalable.
• One of the best ways to learn from past and current programs is finding out what their impact was, but getting an accurate understanding of the impact of a program on poor people is challenging, especially getting figures and information on the poverty reduction results of projects. Urban value chain development may have particular challenges because it is at the intersection of fields and impact on poor people may rely on a number of changes resulting from program activities.

B. What kinds of value chain development opportunities are presented by a deeper understanding of urban issues? Could linking with organizations that represent poor communities help improve governance and regulation of value chains? Could linkages with comprehensive city planning initiatives help mobilize more resources for and improve governance of high potential sectors? Does the provision of housing, infrastructure and human services represent a high potential market for urban microenterprises?
The following are comments made so far in response to the above questions

• In order to link with organizations that represent poor communities, there is a need to look at how the social regulations in the communities enforce the formal regulations of the laws, and standards and licenses. If the formal institutions which govern the chain are set up to support a dominant group, then the poorer communities are going to have a difficult time to having a voice in the governance system.
• An economic shock may open up opportunities for groups that traditionally do not benefit equitably from value chain activities. For instance, with the increase in oil prices worldwide the price of fertilizer is escalating. IDE-India has a project where they support lower castes in the production of worms for composting. The input costs are reduced and a space is open for an excluded caste to participate and benefit from a value chain activity.
• Religion, ethnicity and gender are types of social institutions which are embedded in how markets are regulated and operate.
• It is not the responsibility of development practitioners to set up systems to govern and allocate public goods. Public, Private and Civil society are the three pillars in a society and have their own roles to play and need to be held accountable to manage public goods?
• Private sector delivery of services illustrates how microenterprises can be utilized and may form an efficient mechanism for the delivery of public services compared to traditional large top down models.
• The WB’s reports highlight how many countries are hindering companies much more than they are promoting them. VC promotion is needed to develop specific opportunities and address market failure. VC promotion will only occasionally have a systemic impact and may not work where Government are not pro- businesses.