Slum upgrading with community-managed microfinance: Towards progressive planning in Indonesia

•This research makes an analysis of community-managed microfinance in post-decentralization Indonesia.•It dissects the role and performance of CBOs in managing microfinance.•Despite considerable community autonomy and experience with physical upgrading, microfinance proved challenging.•Community autonomy alone does not yield effective community-management.•The institutional framework, program design, and community idiosyncrasies hampered community-managed microfinance.

This paper investigates the microfinance component of a community-managed slum upgrading program – the Comprehensive Kampung Improvement Project (CKIP) in Surabaya, Indonesia. CKIP marked a progressive planning turn in post-decentralization Indonesia, providing communities unprecedented autonomy in designing and implementing projects. This mixed-methods analysis finds that unfavorable institutional, program design, and contextual factors made managing microfinance challenging for communities despite their autonomy and rich experience with physical upgrading.