Financing Municipal Water and Sanitation Services in Nairobi's Informal Settlements

Abstract

We estimate the impacts of two interventions implemented as field experiments in informal settlements by Nairobi's water and sanitation utility to improve revenue collection efficiency and last mile connection loan repayment: (i) face-to-face engagement between utility staff and customers to encourage payment and (ii) contract enforcement for service disconnection due to nonpayment in the form of transparent and credible disconnection notices. While we find no effect of the engagement, we find large effects of enforcement on payment. We also find no effect on access to water, perceptions of utility fairness or quality of service delivery, on the relationships between tenants and property owners, or on tenant mental well-being nine months after the intervention. To counterbalance the increase in payments, property owners increased rental income by renting out additional space. Taken together these results suggest that transparent contract enforcement was effective at improving revenue collection efficiency without incurring large social or political costs.

Public service delivery, exclusion and externalities: Theory and experimental evidence from India

“…As Burgess et al (2020) posit, funding electricity services with user fees in poor institutional settings is associated with a high prevalence of non-payment and, consequently, service rationing. A growing body of literature explores various solutions to address non-payment of electricity and water bills, including pre-paid meters, information campaigns, commitment devices, and heavy-handed tools like disconnection threats (Jack and Smith, 2015;Coville et al, 2020;Jack and Smith, 2020;Rockenbach et al, 2023). Adding to this stream of literature, our findings indicate that top-down incentives for quality improvements increase fee payment, with limited additional effects observed from a sensitization campaign.…”