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World Bank’s 25 Years of Urban Development Lending

Source: Urban Upgrading: Service Delivery to the Urban Poor

The World Bank’s Previous Approaches

The World Bank approved its first loan in the urban sector in 1972. Since then, government and donor supported efforts to address urban development and urban poverty have largely been through low-cost investment projects in shelter and basic services, water supply, sanitation, and urban transport. These were later expanded to include various combinations of components including business support, health, nutrition, and education, housing finance, urban sector, municipal development and emergency projects with multiple executing agencies.

Protypes of First and Second Generation Urban Projects
  • Low cost housing (sites and services): large scale direct provision of housing to the poor. These programs secured land for urban development and strengthening of housing finance institutions; they are now a part of relocation and policy formulation.
  • Squatter/slum upgrading to improve the living conditions of the urban poor by providing basic infrastructure and service delivery, granting security of tenure, and bettering environmental circumstances where the poor live.
  • Early urban transport projects focused on rail, bus systems development, road construction, street paving and traffic management.
  • Municipal and urban lending with competitive access to infrastructure, urban services, capacity building and programs to change incentive structures for leadership and profesionalization at the city level.
  • Metropolitan regions and mega cities where large scale land, environmental and motorization issues require specialized application of technologies and integrated approaches.
  • Urban environmental problems (the brown agenda) that call for comprehensive pollution control, collection and treatment of wastes over a large area.
Current Approaches

Providing basic services to slums.

  • Squatter communities suffer from lack of basic services. Housing is desperately sub-standard, tenure insecure, and basic services such as water, sanitation, and waste collection practically do not exist, and are overlooked and excluded from the standard provision of city services.
  • Rapid growth makes the problem urgent. By 2015 there will be more urban than rural dwellers globally. Phenomenal growth makes the challenge of providing urban services urgent.
  • Social and economic problems abound in these communities. The costs of providing these essential services are affordable to the poorest country if done appropriately: about 0.2 % to 0.5% of gross domestic product (GDP) over a fifteen year period.
  • There are good models of how to effectively deliver services to slums. Governments and development agencies should make basic services available to the urban poor.
Lessons Learned From Over Two Decades of Urban Lending
  • Increasing recognition that the public sector cannot mobilize all the financial and institutional resources to solve the urban development challenge many countries are facing.
  • That markets and the private sector have a significant potential to contribute to productivity of cities and national growth.
  • That communities and households can and will have to contribute significantly to the provision of urban services and employment.
  • The poor can and do pay for basic services usually at rates significantly above higher income groups. Low income households exhibited a willingness to pay for services they valued presenting a feasible alternative to traditional subsidies.
  • The provision of basic infrastructure and tenure security can leverage sizable private investment in home construction and rejuvenated the local economy.
  • Social and human capital and not physical and financial inputs are the more limiting ingredients for development.
Characteristics of successful projects that benefited the urban poor
  • Met "effective demand" of target beneficiaries (i.e. Services that users are willing to pay).
  • Had beneficiary involvement, community decision making and participation in construction of infrastructure and in decision-making.
  • Had sustainable institutional arrangements to cover costs and to carry out required operation and maintenance: establishment of clear rules regarding the availability of resources, criteria for eligibility of public money recipients, and mechanisms for cost recovery. Residents paid for recurrent costs. Reform of local government finances permitted effective property taxation and user charges so as to finance wider replication of upgrading programs.
  • Created of incentives for agencies to respond to the poor.
  • Coordinated among the different sectoral and jurisdictional agencies.
  • Clarified the role of the private sector entities, NGOs and the communities.
  • Build strong partnerships: between public sector and the private, between, central and local government, and engaging the community.
  • Had political commitment and will. It has been estimated that getting services to the poor can be accomplished at a cost of between 0.2 to 0.5% of GDP over the next 15 years if the right policies are adopted.
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