In a new TEDx Talk, which he gave last month in Germany, Satterthwaite tells the story of two innovative funds that have enabled low-income communities in more than 200 African and Asian cities to build and upgrade houses and improve water, sanitation and other important services.

They are exceptional cases of success, which could be replicated and scale-up massively if donors changed the way they operate.

Today, aid agencies and international development banks provide US$125 billion a year in aid to national governments in Africa, Asia and Latin America.

But as Satterthwaite explains, while donors justify their aid with images of poor communities, they rarely consult to those communities about the aid they will provide. Nor are the projects they fund accountable to the urban poor. The result is often bad projects that fail to meet local needs.

The other problem is that aid agencies were not set up to work at the local scale at which problems exist. To save staff costs, donors prefer to fund fewer large-scale projects than many smaller ones.

Satterthwaite shows that another way is possible. He describes how Urban Poor Fund International and the Asian Coalition for Community Action were set up to support slum or shack dwellers to drive their own development, with the funding and its use accountable to them.

The Urban Poor Fund International is managed by Slum/Shack Dwellers International, a network of more than 30 national slum/shack dweller federations. It has supported over 200,000 households to build or improve their homes and to get tenure of their house plot and hundreds of other initiatives. The Asian Coalition for Community Action (ACCA) has funded more than 1,000 community initiatives in 168 cities.

Both funds are affecting the way city governments work, empowering low-income communities to raise more funds and work in partnership with authorities to develop their settlements and improve living standards. There are now over 100 formal memorandums of understanding between federations and local governments. Thanks to ACCA there are now a hundred city-based funds that groups of savers from informal settlement co-manage with municipal governments.

Satterthwaite points out that the funds have achieved all of this with just US$35 million, a tiny sum when shared across so many countries, cities and communities.

"Imagine if just one per cent of aid — US$1 billion — was spent this way," he says. "We would truly transform our cities."