Lessons for the Urban Century : Decentralized Infrastructure Finance in the World Bank

Abstract

This book takes a look at the past to
 gain insights for the future. Nearly 30 years ago, when the
 world urban population was only about half of the 3 billion
 that it is today, when most Less Developed Countries (LDCs)
 were primarily rural, and before the wave of
 decentralization of the 1980s and 1990s, the World Bank
 developed an instrument with great potential. The key
 characteristics of this instrument, the Urban Infrastructure
 Fund (UIF), are several. It provides finance for an array of
 urban services, not just one sector, such as water and
 sanitation, leaving flexibility for local beneficiaries to
 set their priorities. UIF projects operate in more than one
 city. Perhaps the most important distinctive feature is that
 these projects use local institutions to do the work of
 identifying, appraising and channeling finance to
 subnational entities (municipalities, local utilities, or
 community groups) on behalf of the World Bank. This
 arrangement makes it feasible to reach beyond the major
 capitals or business centers such as Chongqing, Mumbai, or
 Sao Paulo, or even regional capitals, to fund much smaller
 subprojects, suited to the needs and capacities of smaller
 cities and towns, because local agents are tasked with
 identifying and appraising these projects. Delegating these
 functions makes it practicable not only for a large
 International Financial Institution (IFI) such as the World
 Bank but also for national governments to reach small
 municipalities. Providing support to large numbers of
 municipalities with relatively small investment needs is a
 complex task, but it is fundamental to scaling up beyond
 small pilot projects to programs improving urban services countrywide.