Lessons Learned Note 15 / June 2018 Output-Based Aid for Municipal Solid Waste Management in Nepal The participating municipalities were incentivized to: Development Challenge • develop SWM Service Improvement Plans (SWM-SIPs) that In Nepal, as in most developing countries, population increase identified improvements in service delivery and rapid urbanization have created challenges for effective and • choose a service delivery model (whether to use the efficient solid waste management (SWM) programs. In just over municipality’s own in-house team, contract with private a decade, Nepal’s population has grown by 67 percent, adding sector/non-governmental organizations pressure to a SWM sector that has not been managed properly. • carry out improvements in service delivery; implement fees Less than half of the 700,000 tons of waste generated each year and revenue collection; and is collected in the cities. Most of the waste is dumped • implement gradual increases in the fee structure. inappropriately, leading to serious environmental and health As the SWM sector is underfunded to provide optimum concerns for the urban poor who live near waste heaps and river quality of service to beneficiaries, an output-based subsidy banks. model was adopted to increase the capacity of the Municipalities are responsible for providing SWM services in municipalities. The subsidy helped deliver improvements in Nepal, but technical and financial constraints limit their capacity. service quality and enabled the municipalities to increase Furthermore, the unwillingness-to-pay for people who may SWM service fees. receive these services escalates the problem. To address these The graph below illustrates the funding model as reference: constraints, the Global Partnership for Output-Based Aid (GPOBA) implemented a project for municipal SWM in 2013. The $4.3 million project used an incentive-based approach, with a gradual diminishing subsidy as municipalities strengthen capacity and gain the resources to sustain the program on their own. Within four years after project implementation, each participating municipality had improved its SWM services, first by developing a SWM strategy and service implementation plan (SIP), and subsequently by following the plans with the support of the grant subsidy. The subsidy helped bridge the gap between the costs of delivering improved SWM services (capital costs, operations and maintenance costs, and other expenses) and the revenues collected. The amount of the subsidy was designed to decrease as services improved and as more fees were collected, helping to recover costs. The Project and Its Partners The project was implemented in five municipalities -- Dhankuta, FIGURE: OBA subsidy contribution to total revenues (in US$); Subsidy as a multiple of Ghorahi, Lalitpur, Pokhara, and Tansen -- which met certain collected revenues (local currency) in the Dhankuta municipality operating and maintenance requirements. The project aimed to build upon the municipalities’ existing systems and make them To measure results, there were two separate and independent more sustainable, rather than developing new systems. The stages of verification. The first part used indicatiors that main central government counterparts included the Town measure performance against technical criteria. If services Development Fund (TDF) and the Solid Waste Management proved satisfactory, the second part activiated subsidy Technical Support Centre (SWMTSC) within the Ministry of payment to match SWM revenues according to an agreed Urban Development (MoUD) which acted as the technical muliplier, provided that SWM operations and services met pre- implementing partner. agreed minimum technical performance criteria. s had been provided according to certain technical criteria. rate of solid waste fees collection increased by 400 percent.; Improved Service Quality while In Ghorahi and Tansen, household-level recycling and The service quality was measured though indicators that composting is keeping the cities remarkably Thisclean. These tracked the performance of each municipality in: results has have motivated other municipalities to improve their SWM systems. • Implementation of the approved SWM plan • Collecting and disposing solid waste against defined Financial sustainability has increased targets Revenue generation has increased considerably in each municipality. The results-based financing (RBF) design has • Providing satisfying services to households through encouraged the practice of segregating types of waste. The sampled household reporting that waste collection and OBA project encouraged municipalities to link the tariff with street cleaning services provided by the municipality have the quality of services, rather than the amount of expenses. met or exceeded their expectations in the key areas of reliability, frequency, improvement in environmental quality, convenience and responsiveness Lessons Learned • Improved financial sustainability: This was measured through financial performance indicators, which track fee collection, cost recovery, and efficiency of the system such as increase in SWM fee charged to all waste generators; 1 Awareness raising and outreach is crucial for successful delivery of the project as it focuses on the behavioral aspect of SWM, crucial for sustainability of the annual revenues from collected SWM fees; and percentage service. The project has established and strengthened the O&M cost recovery from SWM fees. SWM committees in municipalities leading to significant ward-level community mobilization. Also, awareness programs should also target the municipal staff and not just Results beneficiaries. Staff convinced on the benefits of SWM system An institutional framework was established would take the implementation seriously and take the project The project has been instrumental in setting up designated further. With the right system in place, this would then help units with allocated staff in all the participating the new incumbents, even if there is high turnover of human municipalities. Prior to the project, the municipalities lacked resources in municipal offices. the units specially designated for SWM services. This has paved way for ownership on SWM matters within communities. 2 The involvement of the private sector and other SWM actors in various sectors should be better integrated into SWM services. Private sector involvement The project has triggered better record keeping and should be considered as an integral part of Nepal’s SWM grievance handling adding to the sustainability of the project services. Private companies are operational in the SWM throughout the municipalities. Prior to the OBA grant, the sector without written agreements with the municipalities. A municipalities lagged on monitoring and evaluation system. policy- led inclusive framework for private sector is essential Their report mechanism for grievances were not in place. All keeping in mind the available SWM workers. Tariff categories the participating municipalities have established dedicated should be identified, revised and operationalized by the unit for complaint handling along with responsible municipal governing and implementing bodies. officer, responsible for tracking beneficiaries’ comments, recording arrangement for complaints registration, remedial action taken. 3 Results-based investments in SWM, needed to be coupled with comprehensive capacity building programs for communities and municipal staff. The capacity Municipal service delivery continues to improve. building programs need to be designed flexibly to address All five municipalities have developed waste collection routes the communities needs and opportunities for household-level and are providing waste collection services according to a improvements, for example in the promotion of recycling and regular collection schedule. Waste is collected either from composting programs. Additionally, technical assistance households or from designated collection points and programs are typically needed for municipal staff programs transported to the waste disposal site. Three years into the to fill knowledge gaps in establishing best practices for project, one of the participating municipalities, Dhankuta, municipal operations, for example in developing operational was named the “cleanest city in the country” in an annual manuals for sustainable landfill management, waste contest established by MoUD in 2013; in Pokhara, close to collection and transfer. 50,000 households are getting SWM service; in Lalitpur, the Part of the World Bank Group, the Global Partnership on Output-based Aid (GPOBA) provides innovative financing solutions that link funding to actual results achieved. Our results-based financing (RBF) approaches provide access to basic services like water and sanitation, energy, health and education for low-income communities that might otherwise go unserved. By bringing together public and private sector funders to maximize resources, and designing effective incentives for service providers, we give people the chance for a better life. Visit www.gpoba.org to learn more.