How to Finance Solid Waste Management –Starting from Results

October 30, 2014


Without adequate financing, cities can't improve services; but until they see improvements, citizens will not pay for them. Results-based-financing approaches can help. See slideshow

Josses Mugabi/World Bank

  • Cities are expected to produce 2.2 billion tons of solid waste annually by 2025; enough waste to equal the weight of one Great Pyramid of Giza, every day.
  • One of the greatest challenges that cities face in managing solid waste is a serious shortfall in the financing of this service.
  • A new report examines for the first time how to apply Results-Based-Financing to the municipal solid waste sector, through eight different pilot project designs that cover a full spectrum of circumstances and challenges.

October 30, 2014 -- Cities worldwide generated more than 1.3 billion tons of solid waste in 2010. As drivers of economic activity and recipients of millions of rural migrants every year, cities expect to see this number to grow to 2.2 billion tons annually by 2025 –the equivalent weight of the Great Pyramid of Giza, in trash, every single day.

This massive amount of waste critically affects public health, the environment, economic development and citizens’ quality of life.  Proper management of solid waste is achievable:  a range of tools and technologies already exist.  But the critical bottleneck lies in paying for them.  In many lower income countries, municipalities already spend 20% to 50% of their budgets on solid waste management, yet only manage to provide services for less than half their citizens. A related major concern lies in long-term sustainability in the sector, which requires greater efforts to reduce, reuse, recycle and overall avoid waste.

A new report by the World Bank and the Global Partnership of Output-Based Aid (GPOBA) titled Results-Based Financing for Municipal Solid Waste looks at how to apply a results-based-financing (RBF) approach to the municipal solid waste sector.  This is an innovative development finance tool that helps ensure that public funds are used efficiently and transparently.  Under this approach, achieving and verifying a set of explicit, pre-determined performance targets is a condition to receive payment for services or certain behaviors.

Where does results-based-financing help?

“Until recently, RBF principles and designs had not been widely used in the solid waste sector,” said Urban Specialist Farouk Banna, who, along with Urban Economist Marcus Lee, led the team that produced the report.  “Cities face huge challenges in solid waste management and service delivery.   Results-based-financing – where payments are tied to results – can play an important role in improving municipal solid waste services and outcomes.” Some of the advantages of this approach include:

  • Addressing some of the fundamental issues of the sector such as fee collection and behavior change toward recycling and source separation of organic waste;
  • Providing access to basic services for the poor and reducing the adverse impact of uncollected or inappropriately disposed waste among low income residents;
  • Increasing transparency and accountability in the use of public funds through an independent verification process.

With a global shortfall of US$40 billion in financing for the municipal solid waste sector, every investment counts.  Each city, however, needs to look at its particular context to wisely choose how to best spend its resources.

Different contexts, different priorities

“We looked at a wide range of projects and RBF designs,” said Banna. “We wanted to be comprehensive and inclusive of the variety of real-life waste scenarios that exist.” 

To accomplish this, the report presents eight case studies of results-based-financing design, grouped into three categories:

  1. Improving solid waste service delivery and fee collection

    This is an appropriate model for lower income countries where service delivery is poor or non-existent and where fee collection to support waste collection and disposal is a major challenge.  It is also a helpful model to jump start solid waste services in fragile and post-conflict situations where the private sector may be reluctant to enter. Cities in Nepal and the West Bank are covered here.

  2. Promoting source separation and recycling

    For middle income countries like China, Malaysia or Indonesia, where municipal solid waste collection rates are already high, government tends to focus on improving the financial and environmental sustainability of the sector.  RBF can be used to design projects that provide incentives to households for waste separation and recycling.

  3. Strengthening waste collection and transport in under-served communities

    This model is applicable to both low and middle income cities but is most relevant where the focus is to improve services in under-served and low income communities within cities, such as those examined in Tanzania, Jamaica and Mali.  These project designs could be integrated into community and slum upgrading projects.

In its diversity, the report aims to show that RBF can be applied to many other countries and city projects. The report also notes that although results-based-financing can be an effective tool to improve municipal solid waste management, it is not a panacea: rather, it is most effective when accompanied by complementary investments in infrastructure, policy reforms, and technical assistance.