The United Nations (UN) estimate that the total population living in towns and cities will double by 2030 - 6 billion out of a population of nearly 9 billion could be living in urban areas. Now, with more than half the world's population being urbanised for the first time in recent history, it has become increasingly important to find ways of supporting community-based initiatives that address local needs. This is where the 'local funds' have emerged in order to challenge the traditional approaches of international agencies and national governments. Local funds can work equally in rural areas, but most experience with them is urban.

Local funds recognise the importance of community-based initiative, particularly when local government structures are weak, ineffective or corrupt. Local funds get money into the hands of people without depending on the usual controls that donors impose from managing the funds themselves, including lots of paperwork.

Local funds enable financial support to be made available through local organisations that know the area and can respond quickly.

Loosen the bureaucratic strings that tie up conventional aid and trust people to take the initiative by offering the incentive of a grant or loan. Move away from a culture which insists that groups have to have their own plans rubber stamped by professionals to ensure they are viable; and believe in local groups that are often more innovative in organising projects at a fraction of the cost.

Once people take charge of funds and manage both the planning and implementation of their own schemes they gain confidence along with the opportunity and chance to make their voices heard. This, in turn, helps break down barriers between 'ordinary' residents and public officials who may be surprised to be welcomed into slums they've avoided in the past. Funds also provide people with an incentive to play a meaningful role in local affairs, which ultimately helps improve governance.

Local funds have many advantages over conventional development aid in that they:

• reduce the time and cost of accessing resources;
• respond to the many needs of local communities;
• react quickly to changing local circumstances, particularly where negative change occurs rapidly, with disasters for example;
• support learning and provide information rooted in local contexts;
• provide support to groups of people who would not normally receive funds including the young and the elderly;
• can be distributed as grants or as loans, adding support to local saving groups that helps ensure local ownership and sustainability. Managing a revolving fund, for example, also allows communities to use limited funds over and over again;
• encourage transparency as the fund is assumed to 'belong' to the poor and those managing it must make sure that everyone knows about the fund, can get a chance to apply and knows what projects it has paid for; and
• encourage accountability: If money does go missing, local people will be the first to notice and blow the whistle. This is Downward accountability. Upward accountability comes from the managing organisation who is responsible for reporting to the donor.

This programme shows some of the ways in which local or community funds are being used practically, for community initiatives around the world:

Banking on the Barrio, Brazil - For women sex workers and petty traders to find a way off the streets of Fortaleza is virtually impossible when they have nowhere to live and no family to help. In Fortaleza, Banco des Palmas doesn't discriminate. The bank is run by local people for local people and even has its own credit card. Here, a loan for a room means the chance to break away from middlemen and change their lives.

Breaking Even, Zambia -
Rehabilitation may be an internationally agreed objective for prisoners but with crimes rates rising world-wide knowing what to do with increasing numbers of people in prison is a global issue. So when DFID's C3 fund was approached for monies which would increase prisoner skills and provide a much-needed local park it seemed a win-win project.

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Youth Rules - OK, United Kingdom -
London. A few minutes from up-market Notting Hill (location of Europe's largest carnival) the Paddington Youth Parliament meets to discuss how those on other side of tracks live. Determined not to be ignored by local politicians, they've told them their needs and are running their own funds for their own projects.

New Age, Thailand -
As people live longer the need for savings schemes to meet their needs is ever more acute. The 'elderly funds' in Thailand are part of a wider movement to provide people with loans for schemes that they design and run. In the Southern province of Satun a group of elderly locals have bought a small rubber plantation as a productive communal asset. As Muslims they couldn't set up a loan scheme since usury is a sin in Islam.

Return of the Drain Gang, Pakistan -
From the squatter districts of Karachi to the backstreets of Faisalabad the world famous Orangi Drain Gang has spread its knowledge of how to manage urban sewage works through use of a fund and now, an improving relationships with the local council.

TVE/ Practical Action gratefully acknowledge support for the HANDS ON programmes from the UK's Department for International Development (DFID), the European Commission (EC), the UN Foundation and UNDP/The Equator Initiative in collaboration with the Government of Canada, IDRC, IUCN, BrasilConnects and the Nature Conservancy.