Financing Municipal Water and Sanitation Services in Nairobi’s Informal Settlements

Aidan Coville,Paul J Gertler,Susumu Yoshida,Sebastian Galiani

doi:10.2139/ssrn.3878417

Abstract

We estimate the impacts of two interventions implemented as field experiments in informal settlements by Nairobi’s water and sanitation utility to improve revenue collection efficiency and last mile connection loan repayment: (i) face-to-face engagement between utility staff and customers to encourage payment and (ii) contract enforcement for service disconnection due to nonpayment in the form of transparent and credible disconnection notices. While we find no effect of the engagement, we find large effects of enforcement on payment. We also find no effect on access to water, perceptions of utility fairness or quality of service delivery, on the relationships between tenants and property owners, or on tenant mental well-being nine months after the intervention. To counterbalance the increase in payments, property owners increased rental income by renting out additional space. Taken together these results suggest that transparent contract enforcement was effective at improving revenue collection efficiency without incurring large social or political costs. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Highlights

Some 844 million people lack clean drinking water and 2.4 billion people do not have improved sanitation, most of which are living in low- and middle-income countries (LMICs).1 An estimated US$ 1.7 trillion is needed to finance the goal of universal access by 2030 (Hutton and Varughese, 2016)
Achieving universal access to improved water and sanitation requires innovations in service delivery approaches to help reduce the gap between available resources and the estimated costs of achieving national and global targets
In six of Nairobi’s informal settlements where compounds received comprehensive water and sanitation infrastructure upgrades, we find repayment on these loans, and payment of general service charges, is well below targets, despite these charges being affordable under standard global benchmarks

Summary

Introduction

Some 844 million people lack clean drinking water and 2.4 billion people do not have improved sanitation, most of which are living in low- and middle-income countries (LMICs). An estimated US$ 1.7 trillion is needed to finance the goal of universal access by 2030 (Hutton and Varughese, 2016). With two-thirds of the world’s population expected to live in cities by 2050, finding scalable and sustainable solutions to expand reliable urban water and sanitation services is critical. Africa’s cities, for instance, grew by 80% between 2000 and 2015, while access to piped water declined from 40% to 33% (World Bank, 2017). The primary route for expanding services in urban areas is through public utilities, but utilities are struggling to deliver reliable services to connected households let alone increase coverage (Trimble et al, 2016; World Bank, 2017; Soppe et al, 2018). Utilities worldwide failed to collect an estimated US$ 39 billion of billable water and US$ 96 billion in electricity charges each year (Liemberger and Wyatt, 2019; Northeast Group, 2017). There is well-documented concern over service quality degradation worldwide from poorly maintained infrastructure, and the vicious cycle between low payment and deteriorating quality of services (Jiménez and Pérez-Foguet, 2011; Cronk and Bartram, 2017; Foster et al, 2020; Dzansi et al, 2018; World Bank, 2017)

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Conclusion