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Getting Started: Project Context
What will be the scope and objectives: Project or Program? Basic services, economic development, social, education and health improvement?

Projects that address urban services for the poor are loosely grouped into three categories.

Three Families of Project Types

Excerpt from:
World Bank Experience with the Provision of Infrastructure Services for the Urban Poor. 1997. Kessides, Christine. The World Bank, Transportation, Water, and Urban Development, Report TWU-ORS. Washington, D.C.

Initial projects of the 1970s were an explicit effort to demonstrate that it was financially and economically feasible to provide services to the lowest income of the population. The first generation of projects included ‘sites and services’ - the provision of a minimum core house and infrastructure on vacant land for new settlements [Ed: a proactive approach] and slum upgrading. Upgrading typically included private or public latrines, water supply usually through standpipes, access roads and footpaths, street drainage, public lighting, solid waste collection and some community facilities, and usually granted some form of tenure regularization to already settled neighborhoods.

The early upgrading projects expanded further to include transport, business support and credit, employment and training, revenue-generating activities (markets, slaughterhouses), and even childcare. The additional interventions were seen as necessary to address the multiple dimensions of poverty and constraints to urban growth. This second generation of integrated urban development projects (often called ‘Christmas trees’ because of their many disparate components) fell out of fashion at the Bank in the mid-1980s. Their reputation suffered because some of the tangential activities were poorly prepared and did not command sufficient commitment from the expected beneficiaries or the counterparts. In addition, some of the projects involved a plethora of implementing agencies without an adequate structure for coordination or were simply too complex for the entities that were charged with execution.

These early “integrated” projects were characterized by a largely predefined package of investments, generally to pre-identified geographical areas mainly through central government agencies or special area development authorities.

Projects then shifted toward programmatic lending which are characterized by less predetermination of which services will be provided and where, and thus more open-ended and flexible. The institutional mechanism is a line of credit or grant fund that supports subproject proposals from municipalities or communities for a variety of investments, based on predefined criteria for eligibility.

In the mid-1980s the shift was toward programmatic water and sanitation projects. A more specialized and dedicated focus on accelerating water supply and sanitation improvements for the urban poor started in the 1990s in response to the low level of coverage and weak performance achieved by the traditional projects in peri-urban areas

The feature that distinguishes these projects from earlier water/sanitation lending is the emphasis on providing poor urban communities a choice of technical options for sanitation, with an array of costs and maintenance requirements. The intent is to transform the formal sector institutions so that the planning of service expansion is made responsive to the communities’ preferences and willingness to pay.

These projects have been slow to take-off and to encounter problems with local-level consultant supervision, procurement, and construction quality because the subprojects are highly decentralized and community-based in their inception and execution. In addition, more time and effort is required than planned at the onset to educate all parties to the project approach.

Features of Lending Instruments for Provision
of Infrastructure Services to Urban Poor
 

Characteristics

Types of projects/programs or project components
 

(A) "Integrated" urban development projects

(B) "Programmatic" urban projects

(C) "Programmatic" water/sanitation projects

Scope

Multisectoral

Multisectoral

Single-sector

Generic example

Slum upgrading

Municipal development or investment fund; other line-of-credit or grant transfer arrangements.

Periurban community-based water and/or sanitation project

Types of subprojects (investments supported)

Potable water, sanitation, solid waste disposal, storm drainage, roads, sidewalks, footpaths, street lighting, tenure regularization; sometimes also markets, other income-generating activities, clinics, schools.

 

Potable water, sanitation (liquid, sometimes solid waste), sometimes drainage

Process of subproject selection

Subprojects (interrelated set of investments for given neighborhood) identified, prepared, appraised and selected during project appraisal or by main project implementation team.

Subprojects proposed by sponsors (local govts., NGOs, CBOs) from menu of possibilities defined by eligibility criteria; selected by project funding unit during project implementation.

As for Type B. Subproject menu offers different technical options and service levels.

Targeting of beneficiaries

Geographic area identified based on poverty and service deficiencies

Eligibility for funding defined by poverty, service deficiencies, community size, etc., but approval of subprojects depends on evidence of beneficiary demand and commitment.

 

Financing of subprojects

Mainly grant transfer to local govt. or other implementing agency; local govt. may contribute 10-20% of investment costs; community contributes in kind, sometimes also 5-15% of investment costs in cash.

Similar to Type A, but with more loan element to local govts; grant sometimes transferred directly to local community; community usually required to make some cash contribution as specified share of investment costs.

Similar to Type B, but investment subsidy set as per capita cost ceiling, with community required to pay incremental costs of any service option chosen above this cost ceiling.

Cost recovery and O&M arrangements

Repayment expected through property taxes, tariffs and user charges for WSS components. Line agencies and local gvt. responsible for O&M.

As in Type (A), but more emphasis on formal community group taking responsibility for O&M of communal services.

Cost recovery from tariffs and user charges; responsibility placed on formal user groups for O&M of communal services, and on utility for networked services.

Roles of CBOs and NGOs

Communities consulted; NGOs in some cases mobilize communities.

Both active in subproject identification, preparation, implementation, cofinancing, and community mobilization.

 

Roles of private sector entrepreneurs

Mainly construction; in few case as area developers.

Construction; contract mgmt. and funds. mgmt; some scope for market-based fund mobilization.

Construction, O&M of communal services; privatized utilities for networked services.

Strengths & Weaknesses of Alternative Lending
Instruments for Infrastructure Services to Poor
 
 

Types of projects/programs or project components
 

(A) "Integrated" urban development projects

(B) "Programmatic" urban projects

(C) "Programmatic" water/sanitation projects

Main problem addressed (objective)

Targets infrastructure improvements to specific settlements with worst service and environmental deficiencies.

Provides funding for investments on competitive "first come, first served" basis, according to rules and eligibility criteria.

Tailors technical options and service levels to specific demands of low income (peri-)urban communities.

Additional advantages and benefits

Comprehensive, cross-sectoral coverage of service deficiencies in given geographic areas.

Flexibility -- can respond to shifts in demand and priorities of subproject sponsors and adapt criteria based on experience.

Permits direct, focused attention to service deficiencies in areas where utilities often unwilling or unable to extend services.
 

Reaches all residents, including poorest, within target neighborhoods.

Permits demand to be expressed across range of subsectors and service levels.

Permits detailed experimentation with alternative technical and institutional approaches within WSS sector.
 

On-the-spot coordination and planning of investments across sectors (re. installation of pipes, roadworks, drainage channels, etc.).

Encourages various intermediaries, incl. NGOs and community groups, to sponsor subprojects and implement in partnership with formal sector agencies.

Assists training & reorientation of intermediaries (formal and informal sector) in strategies of demand assessment and alternative technologies for WSS.
 

Creates high visibility improvements across targeted settlement area.

Supports decentralized authority to local govts. by providing funding for local investments/services prepared and prioritized by them.

Can address sectoral policy and institutional reform issues of WSS as well as specific service interventions targeted to poor communities.
   

Can set stage for eventual shift to funding local investments through financial market intermediaries

  
  
 

Types of projects/programs or project components
 

(A) "Integrated" urban development projects

(B) "Programmatic" urban projects

(C) "Programmatic" water/sanitation projects

Weaknesses, disadvantages, risks and problems

Trade-off between emphasis on comprehensive package of investments, and responsiveness to variations in community demands and priorities.

Approach biased against communities lacking capacity to identify priorities and prepare proposals.

Does not address communities' demands for non-WSS services.
 

Does not address linkages of infrastructure beyond neighborhood boundaries.

Does not address linkages among investments within neighborhoods of city, nor across sector networks (e.g., possible efficiencies of coordinating WSS, roadworks, resettlement, etc.).

  
 

Use of special implementation unit facilitates investment coordination, but local gvt. & sectoral agencies need to be involved for sustained O&M.

Sustainability of subprojects is only as good as the rules/criteria for determining demand and establishing responsibility of sponsoring agency for O&M.
 

Requires institutional capacity for selecting subprojects against criteria and supervising disparate subprojects.

  
     

Promotion of technically diverse, community-initiated WSS schemes within same service area poses challenge to utility to coordinate network hook-up and maintenance.

Design features to mitigate risks and protect benefits

Give communities choice in contents of investment package and detailed designs.

Establish independent, professional, central management unit and clear manual of procedures to ensure efficient, transparent and easily monitorable subproject selection, contracting and funding.

Incorporate change in policy & institutional (regulatory) environment of utilities to create incentives (and coverage targets if needed) to serve the poor as part of their regular business.
  

Give priority to neighborhoods with greater expression of demand and commitment to participate in planning, subproject design, and cost recovery.

Provide technical support and training/mobilization to strengthen communities' ability to identify demands and prepare viable subprojects.

  
 

Involve both municipalities and sectoral agencies in subproject planning, design, implementation and O&M.

In same or separate operations, strengthen institut'l capacity, revenue generation, creditworthiness, and planning/budgeting in local govts. and sectoral agencies to eventually access financial market for local investments.
 

Set clear, consistent rules for subproject eligibility and requirements for community copayment.

    
 

Subsidy element should leave incentive for beneficiaries to reveal WTP; for utilities to keep costs low; and to permit wide-scale replication.

    
 

Establish clear responsibilities and funding sources among municipalities, utilities, and communities, for respective components of infrastructure and services.

    
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