Extending water supply and sanitation (WSS) services to urban dwellers will require major investments along with sound policies and effective, accountable, institutions.

By 2020, half of the developing world’s population will live in urban centers, including the mushrooming informal settlements that now account for 40 – 70 percent of the population in many cities in developing countries. Informal settlements have poor housing structures and poor facilities and services. Lack of secure land tenure and lack of effective ‘voice’ often prevent their residents from getting even minimally adequate services.

To reach the MDGs will require reforms to increase financial viability and improve institutional performance in the WSS sector, in order to provide a basis for expanding access and improving the quality of service. Institutional models for service provision need to fit local circumstances – using the private sector, public entities, communities, or a mix to deliver services can all be effective ways to improve performance.

Key Challenges
Reaching the new urban population is a complex task. Interventions need to be synchronized with policies towards informal settlements or slum upgrading, decentralization and fiscal policy.

WSS services are natural monopolies and have significant externalities, so need some form of regulation. But well-functioning utilities are allowed considerable autonomy, including substantial control to generate and retain revenues, and to use these revenues in day-to-day operations.

Even for a utility that functions efficiently, reaching the poor often requires targeted interventions. Partnerships between governments, utilities, and civil society can play an important role here. And, where traditional utilities cannot or will not provide service to the poor, standards and by-laws should be revised to allow small-scale providers to operate efficiently. Including poor people and other traditionally excluded groups in priority setting and decision making is critical to making good use of limited public resources, by permitting interventions to build on local knowledge and priorities.

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World Bank Response
The World Bank finances rehabilitation and extension of WSS infrastructure and helps countries select and implement customized sector reform options, operator institutional arrangements, institutional frameworks, and pricing and subsidy policies. Reforms focus on distinguishing the functions of policy setting, regulation, and oversight from those of facilities management and operations and on creating incentives for service providers to be more accountable, efficient, and customer focused.

The Bank supports countries in specifically addressing the needs of the poor by raising awareness of their priorities and needs; developing knowledge on the characteristics and requirements of poor households; improving consultation and communication with poor households; and monitoring progress towards improved access.

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