The increasing block tariff (IBT) is among the most widely used tariffs by water utilities, particularly in developing countries. This is due in part to the perception that the IBT can effectively target subsidies to low-income households. Combining data on households' socioeconomic status and metered water use, this paper examines the distributional incidence of subsidies delivered through the IBT in Nairobi, Kenya. Contrary to conventional wisdom, we find that high-income residential and nonresidential customers receive a disproportionate share of subsidies and that subsidy targeting is poor even among households with a private metered connection. We also find that stated expenditure on water, a commonly used means of estimating water use, is a poor proxy for metered use and that previous studies on subsidy incidence underestimate the magnitude of the subsidy delivered through water tariffs. These findings have implications for both the design and evaluation of water tariffs in developing countries.

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This paper presents the results of experimental fingerponds: an integrated flood recession aquaculture–agriculture production system in the Lake Victoria wetlands in Kenya. The overall aim of the study is to assess the potential of fingerponds as a sustainable wetland farming system for improving food security at the subsistence level and within the context of the existing livelihood activities. The contribution of this new activity to rural household livelihoods is evaluated. Since it is a sustainable technology, based on natural events, the production level is intermediate and the benefits may not be high in the short term. Economic analysis shows that the gross margin and net income of fingerponds is about 752 and 197 Euros per hectare per year, respectively. This is about an 11% increase in the annual gross margin of an average rural household around Lake Victoria. The additional per capita fish supply is 3 kg per season or more from a 192 m2 pond. The potential fish protein supply of 200 kg/ha is high compared with most existing terrestrial protein production systems. Fingerponds have the potential to contribute to household food security and to improve livelihoods. Sensitivity analysis indicates that biophysical variations, which may occur from one wetland to another, have implications for the functioning, and consequently the economic performance, of fingerponds. This reinforces the need for the integration of these systems into other household activities to buffer the household against potential risk.

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