The World Bank’s work in urban development aims to build sustainable cities and communities through an urbanization process that is green, inclusive, competitive, and resilient, contributing to the Sustainable Development Goal (SDG) No.11, to the implementation of the New Urban Agenda, as well as to the World Bank’s goals to end extreme poverty and boost shared prosperity.
The World Bank invests an average of $5 billion in planning and implementing lending projects on sustainable cities and communities every year to help cities meet the critical demands of urbanization. The active portfolio stands at 231 projects amounting to $33.9 billion, through a combination of instruments, including investment project financing, policy development loans, and Program-for-Results funding.
Specifically, the Bank adopts integrated approaches to transform the fundamental systems of cities, focusing on five priorities, as follows:
1. Enhance Planning System and Local Capacity for cities
The first key strategy is to help cities strengthen their planning systems and local capacities to better design, plan, and manage city assets and urban environments. In this context, the Bank provides cities with various diagnostic tools that enable informed planning decisions, as well as investments in urban infrastructure and service delivery.
2. Strengthen Fiscal and Financing Systems
The second strategy aims to maximize multiple financial resources for cities through enhancing fiscal and financial systems, to enable them to meet their infrastructure and service delivery financing and investment needs. Driven by sustained city growth and the need to adapt to and mitigate climate change, financing needs for urban infrastructure at a global level are estimated to be $4.5-5.4 trillion per year, including a 9-27% premium to make this infrastructure low-emission and resilient to climate change impacts. While most of this financing need is likely to be concentrated in developing countries, where historical infrastructure deficits are most pronounced, only a small fraction of the needed financing can be supplied by existing fiscal resources and development partners. Many cities face critical financial constraints to address their infrastructure challenges and make the needed investments.
The Bank is well-positioned to help cities expand access to finance from multiple sources, including private finance, but also to strengthen their fiscal capacities and systems that can be sustained in the long run. In addition to providing financing to cities and local governments, the Bank also works with them and national governments to strengthen the basic building blocks of sound city financing by strengthening institutional, fiscal, and regulatory systems. These include: own source revenue generation, including diversifying revenue sources; inter-governmental fiscal transfer systems, especially to regional and local governments in lagging regions which need more financing; improving financial management performance of municipalities and service delivery agencies; and creating an enabling environment for private sector participation and financing through appropriate regulatory frameworks.
3. Promote Territorial and Spatial Development
The third key element is to promote territorial development in developing countries and cities. Economic activities are concentrated in only a few places – only 1.5% of the world’s land is home to half of its production. This concentration is inevitable, and it is also desirable. The evidence suggests that prosperous and peaceful countries have been successful by bringing people and businesses closer to each other in cities, harnessing agglomeration economies to boost productivity, job creation, and economic growth.
The Bank’s work on territorial development looks at cities not only as individual entities, but also at the coordination between them at different scales: identifying priorities of lagging regions; connecting urban and rural spaces, and addressing spatial inequalities within cities, aiming to allow faster economic growth and linking people to better jobs.
4. Build Climate Smart and Urban resilience
With increasingly concentrated people and assets in cities, a complex range of growing shocks and stress imposes tremendous costs on the globe. Disasters disproportionately impact developing countries, which lose an average of 1% of GDP a year to disasters, compared to 0.1-0.3% in developed countries.
Poorer segments of the population are particularly vulnerable, since they tend to live in more hazardous settlements and lack the necessary safety nets to recover from economic or environmental shocks. Without inclusive and climate-informed urban development, climate change can push more than 100 million urban residents back into poverty by 2030.
The Bank focuses on improving cities’ capacity to adapt to a greater variety of changing conditions and to mitigate the impact of climate change through building infrastructure resilience, mobilizing capital, and financing at upstream climate strategy and analysis.
5. Invest in low-income, marginalized urban communities
The last key element is fostering more inclusive cities and addressing issues related to urban poverty, slums, and safe and resilient housing solutions for existing and new residents including those relocating due to forced displacement.
For decades, the World Bank has invested in upgrading informal settlement and neighborhoods with improved access to urban infrastructure and services. Targeted analytical work on the urban poor and comprehensive diagnostics mapping out physical, socio-economic and risk profiles of informal settlements have strengthened the World Bank’s advisory role and lending quality in the sector. To address the root causes of informal settlements, the World Bank pursues an integrated approach to the housing sector, operating along the entire value chain, including planning and building regulations, access to land, infrastructure, subsidies and financing, to build safe and inclusive cities.
Capacity building and technical assistance to promote and implement participatory and community-focused development approaches have proven to play a powerful role in addressing acute poverty, inequality and exclusions in cities while also contributing to the process of democratization and empowerment. In particular, the World Bank has mainstreamed and deepened gender inclusion in its urban operations and has promoted disability inclusion in line with leaving no one behind and building accessible cities for all.
Given that housing represents about 50-65% of all tangible assets in cities and the construction industry is an important part of many developing countries’ GDP and source of jobs, improving and retrofitting existing housing, building new housing and promoting rental markets in developing countries is critical to activate economic activities and boost economic growth.
The Global Program for Resilient Housing was established to respond to the urgency for investments in the identification and improvement of poor-quality housing; and investments in service delivery for at risk urban populations.
The five priorities are translated into six business lines and the climate change platform:
City management, governance, and finance
Land and geospatial
Resilience and disaster risk management
Sustainable city infrastructure and services
Territorial and spatial development
Urban poverty, inclusive cities, and housing
Cities and climate change
Last Updated: Oct 06,2022