Results-Based Financing for Municipal Solid Waste

    Municipal solid waste (MSW) management is a crucial service provided by cities around the world, but is often inefficient and underperforming in developing countries. It is estimated that cities generated approximately 1.3 billion tons of MSW worldwide in 2010, and this is expected to increase to 2.2 billion tons by 2025. The challenges that cities face regarding their solid waste management systems vary, but generally depend on their financial capacities. Low income countries face the most acute challenges with solid waste management. In low income countries, cities collect less than half the waste stream. Of this, only about half is processed to minimum acceptable standards. Improving MSW in cities offers a high economic rate of return and significant environmental and public health benefits which contribute to overall city livability and competitiveness. At the global level, improving MSW also contributes to climate change mitigation through the reduction of methane emissions.

    The World Bank’s portfolio between 2000 and 2012 included 114 active projects in 58 countries in all regions, representing US$1.27 billion in investments, with a further 55 analytical and advisory activities. Despite this significant portfolio, the existing global annual US$40 billion shortfall for MSW requires the World Bank to reconsider its approach to MSW and leverage innovative instruments and partnerships to increase its impact on the sustainability and quality of the MSW sector. In this regard, since 2012 the World Bank has been exploring the application of results-based financing (RBF) in the solid waste sector as an instrument to improve MSW services and outcomes.