Most people see the Dharavi slum, spread across 525 acres of prime real estate in the centre of Mumbai, as an unsanitary void of waste and extreme poverty, but it is in fact an informal “city within a city”, since it combines commercial, residential, and social elements within a single area. I use the term “Dharavi Paradox” because somehow a 1-billion-dollar economy, mixed-use development, low crime rate, strong sense of entrepreneurship, high rates of school attendance and strong social ties to co-exist in a slum with one lavatory for every 1,500 people and a population density of 869,565 people per square mile. Dharavi recycles almost 80% of Mumbai’s solid waste. Despite massive spending on waste management programs, developed countries like the US and UK manage to recycle only about 20% of their waste. Local politicians know that without Dharavi, Mumbai would be swimming in mountains of its own waste, which is why they are reluctant to completely redevelop the slum. They use Dharavi as a vote-bank before elections and make plenty of promises, but when they take office, Dharavi is forgotten. Exasperated residents take matters into their own hands, creating a form of self-regulation in the slum due to a strong sense of community. Crime rates in Dharavi are actually lower than the rest of Mumbai. A quote from the Guardian possibly reflects Dharavi’s essence most aptly - “Dharavi’s design is not an accident, it responds to the social ties and economic needs of the community”. This is the primary issue that government redevelopment schemes cannot address effectively. Essentially, the problem is a combination of politicians’ unwillingness to redevelop the slum, unsanitary conditions, high population density, and absence of infrastructure and service delivery. The real solution lies in preserving and enhancing Dharavi’s current layout, not in destroying and redeveloping it. The policy outlined below aims to enhance this design, improve living conditions and simultaneously enhance Dharavi’s commercial capacity. New redevelopment schemes are proposed every time a new government takes office. The current policy model, headed by the Slum Redevelopment Authority (SRA), is centred around redeveloping slums through a free market model. Licenses to redevelop a certain area of the slum are sold to the highest bidder, who then demolishes existing structures and builds high-rise towers in their place. Families with adequate documentation are relocated to the apartment building, and the remaining apartment buildings can be sold by the builder to cover costs. Most of the families whose homes were demolished were either unable or unwilling to move to the apartment. As is evident from the results, this model is highly problematic. In fact, a community called the Kolis have chosen to remove themselves from the Dharavi redevelopment project. They inhabit Dharavi’s Western edge, which is its most prosperous area, and live in houses that are twice the size of those being offered under the redevelopment scheme. Essentially, Dharavi’s entire structure is built around a sense of community, something that it lost when people are relocated to apartments. This is why residents have refused to relocate to apartments in the past. The sense of anonymity and alienation that residents feel when they are rehabilitated to high-rise towers will inevitably have impacts on productivity, and by extension, Dharavi’s economy. Despite terrible conditions, school enrolment in Dharavi is very high, which displays inhabitants’ ability to make investments in the future. By extension, they would manage credit well if they had access to it. However, they have been left out of India’s financial system since private-sector banks are unwilling to expose themselves to high-risk and public-sector banks are primarily structured around providing credit to farmers. To empower Dharavi’s residents, they must be included in the financial system through financial institutions like Community Development Funds (CDF). This is a model that has worked in Lima, Peru. In Lima, CDF’s gradually grew in size and influence, and were eventually able to play a role similar to that of a trade union. This allowed them to exert influence over relevant government policy. In a CDF, funds are allocated to selected members of a community who would then be able to provide credit directly to owners of Small and Medium Enterprises (SME’s). There are more than 5,000 businesses and 15,000 single-room factories in Dharavi, and access to credit would enable firms to scale their businesses and expand capacity. As for the funding for this scheme, the Maharashtra Government recently announced a redevelopment plan for Dharavi that is expected to cost 22,000 crores. If even 10% of these funds were allocated to CDF’s in each of Dharavi’s 12 sectors, each SME could receive substantial funding, enabling them to buy machinery, pay for electricity and gradually scale their business. The first step that must be taken to include residents in the financial system is providing basic property rights to all the inhabitants. As part of a recent redevelopment program, houses were demolished and replaced by high-rise towers in which each family was given an apartment. There was one catch. Households had to provide documents that proved that they had been living in the slum since before 2000. Most of the residents did not have this documentation. Incidentally, similar documentation is required to get a loan from a bank, so inhabitants are not eligible for loans since they don’t have official property rights. Providing inhabitants with documentation would empower residents and enable them to access the credit they need to grow their businesses. Once the requisite credit structures are in place, the true process of development can start. Instead of directly supplying infrastructure like toilets and ensuring water supply, the government could act as a facilitator by providing subsidies which would enable communities to pay for infrastructure. While credit to individuals would improve conditions at the household level, systemic change would occur through the CDF’s. CDF’s would act as a hybrid of a municipal body and a trade union and have their own funds in the long-term due to interest generated from the loans. It could use these funds along with its own influence over the government to pay for infrastructure and ensure better living conditions. In essence, this policy would facilitate sustainable economic growth without disrupting Dharavi’s current social structures. 1 billion people live in slums today, and that number could double due to rapid urbanisation if nothing is done about it. Merely providing infrastructure such as toilets, hospitals and schools directly would create logistical problems for the government and a sense of alienation and anonymity in the residents. A policy shift from a top-down, supply-driven policy to a bottom-up, demand-led approach to development would be better for three main reasons. First, it would empower residents, the people with the most comprehensive understanding of Dharavi, by giving them access to credit. Second, it would be much more cost-effective and ensure that the ‘returns on investment’, so to speak, are higher than the status quo. Finally, it would achieve the final goal of creating a sustainable and prosperous community with good sanitation, healthcare and education. Dharavi is already a model for sustainability and waste management. Implementing these policies could transform it into a model for slums all over India and the world.