Seven Transformations for More Equitable and Sustainable Cities

Image: WRI Ross Center for Sustainable Cities

Image: WRI Ross Center for Sustainable Cities

World Resources Report

Chapter 7

Service Provision Models – Partnering with Alternative Service Providers

Cities must transform urban service provision to partner with and integrate alternative service providers to increase access. Informal, semiformal, or community-run alternative services are a fact of life in cities across the global South, and populations without access to municipal water, sanitation, energy, and transport rely on them. Supportive regulations and policies can make these services more affordable and reliable in the short and medium term, expanding access for more people.


7.1 What Must Change and Why

Where there are gaps in public services in most growing cities in the global South, alternative service providers step in to fill the void. These providers include private, independent operators (such as minivan drivers or water vendors) as well as community-based organizations and small businesses that find ready markets for needed services.257 Whereas some providers in the service delivery chain may be formal, with legally recognized status and permits to operate, others may be informal. Different aspects of their services span the formal-informal spectrum. For example, water vendors may legally buy water from utilities but then sell it informally at higher prices. Auto-rickshaw drivers in India hold permits for their vehicles but may not work on formal labor contracts.

The services provided by alternative providers may sometimes be more convenient than public services, but they come at a cost that the lowest income groups cannot afford. Still, many poor urban residents often have no choice but to rely on their services. For instance, many global South cities do not provide reliable public transport to many areas, so informal or paratransit services,258 which offer the advantage of flexible and on-demand operations, are the only option for getting around. In many cities, they also offer shared rides to low-income people who split the fare so that it is more affordable.259

In addition to potentially high costs, the quality of these goods and services may be low or uncertain because there is little or no government oversight of operations. Thus, alternative water supplies may be unfit to drink, and alternative energy sources may be dangerous. In the case of alternative transport, for example, governments do not regulate these services or limit who can provide them. This results in severe on-the-street competition, with oversupply depressing profit margins and thereby forcing operators to reduce service or vehicle quality or to behave aggressively.260 Alternatively, providers may collude to raise prices. Informal buses, minibuses, and auto-rickshaws also contribute to congestion and pollution, especially in denser city centers.261

In sum, supply gaps in cities, usually filled by the formal or informal private sector, can create health and safety risks and can sometimes drain large proportions of poor people’s income. At the same time, these alternative vendors often provide the only opportunity for many households at the bottom end of the market to access basic urban services. Figuring out how to manage and regulate this diverse set of providers, make service delivery effective, and provide equitable access for all urban dwellers has been a key challenge.

Alternative or “informal” service providers are stigmatized or ignored

Despite serving as lifelines for marginalized urban communities, alternative service providers face hostility, obstacles, and operational challenges. This is especially true when they are seen as encroaching on the rights of conventional operators, and when they operate informally and without legal authority. Cities often respond by banning, restricting, and even harassing informal service providers to stop them from competing for customers or public space. This happens even when informal workers provide vital services. For example, informal waste pickers play an important role by collecting, sorting, and recycling waste in cities, serving the city, the economy, and the environment. A study of three cities found that waste pickers brought significant environmental benefits by recovering approximately 20 percent of all materials that entered the waste stream and reducing GHG emissions.262 Yet in many cities, they often face stigma, harassment, eviction from using public spaces, and confiscation of the waste by city authorities or municipal street cleaners.263 (We discuss the conditions and contributions of informal workers more in Transformation 4).

Voices: Sheela Patel on urban informality and the right to the city

Cities may also tend to ignore informal arrangements because they can be a benefit, even if unacknowledged. They require no money or effort from governments that lack the resources and capacity to meet growing demand. They meet otherwise unmet needs and operate almost universally without government subsidies.264 City authorities in the global South have neither the data nor the capacity to oversee and regulate numerous small-scale operators providing a range of services in the city. They often lack the necessary technical information and political will to set standards for service quality or technology or to enforce regulations that safeguard health and the environment. Instead, arrangements and payments for informal service delivery in the global South often rest on handshake agreements between households and small-scale informal providers.265 The government is spared any administrative involvement.

Alternative or “informal” providers are thus often viewed as a problem or are ignored; however, better regulation and performance standards that incentivize more efficient operations could make them part of the solution. Informal service providers are not going away any time soon. They will remain important, even as cities incrementally expand access to public infrastructure and services. Assuming responsibility for the patchwork of alternative, interim solutions that have sprung up in cities across the global South poses challenges. But this informal sector is too huge and vital to be stifled. A major mindset shift is needed for cities to support and regulate these services while recognizing their potential for local innovation and entrepreneurship.

7.2 Priority Actions

A. Integrate alternative services as an intermediate solution to expand access

Cities must build upon existing alternative modes of service delivery, integrating them into a citywide system instead of replacing them. City authorities must harness the vitality and diversity of multiple delivery modes, operated by conventional public utilities, local private entities (small firms, NGOs, individuals), informal and small-scale operators, and community-based organizations.266 In making them part of the citywide system, city authorities have a responsibility to create standards of practice and performance, nudging them to operate better. As cities integrate alternative solutions and incrementally expand public infrastructure, they can set regulations to meet basic standards of service delivery, public health, safety, environmental quality, and affordability for under-served groups. They can consider hybrid service delivery configurations in the short and medium term. Under these, conventional networks should coexist or merge with alternative services within an appropriate regulatory framework that ensures equitable service delivery. It is useful for rapidly growing cities in the global South to consider a ladder of service delivery where different innovative options and technologies help provide good-quality, sufficient access for people at varying levels of income.

While improving citywide infrastructure and services over the longer term, cities may find that more decentralized, alternate solutions may serve demand well in specific locations, such as in low-density or disjointed peripheral areas. For example, formal and informal transport services can complement one another in many places. In the neighborhoods of Johannesburg, where public transport services such as BRT exist, residents wanted help getting to bus stops. They asked for and got three-wheeler tuktuks to pick them up and drop them off. This much-needed first-mile/last-mile service poses no threat to public transport and, in fact, encourages more customers to use it.267

In sectors such as transport, water, and sanitation, the emerging consensus is that the public sector is best placed to undertake the planning, regulation, and oversight of public services, and alternative operators must provide services through some form of organization that is accountable to users and regulators.268 They can be required to meet service quality standards set by the city before their services are officially adopted and scaled to increase coverage. Regulating service delivery requires authorities to show flexibility and willingness to tailor approaches to the local context, engage with alternative service providers, and experiment with new approaches.

In cities with lower technical, political, and financial capacity, it may be more appropriate to upgrade informal services incrementally to improve productivity and service quality without requiring all-out formalization.269 For instance, in the case of transport, gradual fleet renewal programs for informal operators, coupled with funding and institutional support, successfully replaced thousands of old and polluting vehicles in Alwar, India; Dakar, Senegal; and Kathmandu, Nepal.270 Given the scarcity of funding, these actions must be deliberate and creative. For example, operators qualifying for such support may also be given access to infrastructure (such as priority lanes at intersections and terminals) to help improve their operating efficiency without losing the flexibility and demand responsiveness of the informal transit model.271

B. Establish and support new partnerships for joint service delivery

Cities can partner with alternative or informal vendors to help reach under-served communities quickly and cheaply. Instead of trying to replicate the development trajectories of cities in the global North, struggling and emerging cities can establish new institutional structures for more organized, efficient, and equitable service delivery. Partnerships with communities and small vendors to create or coproduce new, hybrid formal-informal models of service delivery can accelerate progress without imposing prohibitive costs (see Box 9). In some cases, formalization may be necessary to “integrate” these service providers effectively into the service delivery system and practices so that they can bid and receive payment for government contracts. But it is important to integrate them in ways that are humane and supportive and will improve both their livelihoods and the quality of service. Figure 24 highlights how cities can shift from ignoring to recognizing and integrating these informal and alternative solutions to transform service provision and improve access to services for all.

Box 9 | Coproduction between government, communities, and informal actors makes urban services more accessible

Coproduction has been defined as “a process through which inputs from individuals who are not ‘in’ the same organization are transformed into goods and services.”a In many cities that were the focus of the Towards a More Equal City series, the vast majority of urban residents reside in informal settlements, and much of the urban fabric is informal. Formal systems of infrastructure and service delivery must coexist and coordinate with informal systems if these residents are to receive even basic services in the short to medium term.b For instance, due to intermittent municipal water supply, low-income households in Lagos, Nigeria, meet their water needs through both communal sources and small-scale private hawkers or cooperative providers.c

Side-by-side formal and informal service provision is common in the water and sanitation sectors. Extending access to piped water and sanitation infrastructure is usually thought to require coordinated urban planning, good governance, and substantial financial investment, but coproduction has, to a limited extent, addressed the access gaps. Specifically, in the case of low-cost, on-site sanitation systems such as pit latrines, collaboration between city governments or utilities and community residents (or their organizations) is needed to improve sanitation, partly because neither can do it alone and partly because collaboration enhances mutual accountability.d 

Figure B9.1 | A man sells water in Lagos, Nigeria

Picture credit: Abdulmutalib Yussuf, 2016.

Sources: a. Ostrom (1996: 1073) cited in McGranahan and Mitlin (2016: 308) and McGranahan (2015: 245); b. Mitlin, 2008; c. Based on field observations in Lagos in 2016; d. McGranahan and Mitlin, 2016.

Note: Citywide impacts are schematic.

Source: Authors.

Partnerships can work on multiple fronts and across sectors. For example, the Slum/Shack Dwellers International (SDI) federations in many cities in the global South comprise community groups in low-income neighborhoods that bring together residents, primarily women, to save, share their resources, and jointly address their collective needs. They combine their own savings and loan funds with funds from external agencies, such as local and national governments, to improve infrastructure and services in their settlements in collaboration with local authorities. These local groups and the larger federations to which they belong engage in many community-driven initiatives to collect data, link to other grassroots groups and social movements, build relations with local authorities, upgrade informal and squatter settlements, improve tenure security, and offer residents new development opportunities.272

Partnerships can extend water and sanitation services

Utilities in some cities have been working with private water providers to extend access more affordably. Even with access to the piped network, service is likely to be intermittent, so the additional water supply continues to be a critical lifeline. In Hubli-Dharwad, India, the utility has contracted private vendors to install kiosks in urban areas with no piped connections or clean water supply nearby. The kiosks draw and filter water from reservoirs, improving water quality so that it is suitable for drinking.273 Utilities are also partnering with community-based organizations or water user associations to extend service into informal settlements. In Ouagadougou, Burkina Faso, the utility cooperates with small entrepreneurs to resell water at controlled prices to residents of informal settlements.274 In the Democratic Republic of the Congo, Mercy Corps has worked with the government to rehabilitate and expand the Goma Water Network to reach 150,000 unserved residents while empowering communities to participate in water systems management.275 In Lilongwe, Malawi, and Nairobi, utilities collaborate with community-based organizations and water user associations to oversee and manage service delivery through prepaid water kiosks in some informal settlements.276

Such arrangements give communities a say in how the service is delivered and where facilities are built, and they create local employment opportunities as well. These partnerships have also helped overcome residents’ mistrust of the utility and have convinced more people to pay for services.277

In Kampala, our case study details how the city government successfully partnered with small businesses, community groups, and the national water and sanitation utility to improve fecal sludge collection from pit latrines. It supported the use of affordable, nontraditional technologies while creating new livelihood opportunities for community residents. One example of such a technology is the Gulper, a handheld vacuum pump used to empty latrines and transport the fecal sludge on smaller three-wheeled vehicles to large tanks, where paths are too narrow for large vacuum trucks, which is a common situation in informal settlements.278 Between 2003 and 2015, Uganda’s national utility increased its fecal sludge treatment rate by 30-fold without a large increase in sewer coverage.279

In India, community organizations helped the city of Mumbai to rethink its approach to sanitation. Supported by Mahila Milan (the federation of women slum dwellers’ savings groups), groups of women living in informal settlements or on sidewalks redesigned public toilets so they were managed by the community rather than the local government, providing improved facilities to half a million residents. The Mumbai government financed the toilets’ construction, so the community pays only for operation and maintenance. Residents buy monthly passes that provide access to all household members for less than two dollars per month. People passing through the community can use the toilets for a higher fee. This helps cover maintenance costs and can allow the community to hire a full-time toilet manager to work on-site.280

In Pakistan, a local NGO, the Orangi Pilot Project (OPP), took the lead in improving Karachi’s sewage treatment through community-government partnerships. They built and financed OPP’s model of simplified sewers across informal settlements in Karachi and other cities. OPP ran programs that helped over 15,000 households across 285 communities in Pakistan build these systems in their neighborhoods and connect them to city sewers and sewage disposal points built by the government.281

Partnerships can manage solid waste

Cities in BrazilBelo Horizonte, Porto Alegre, Santo Andre, and São Paulo—were the first to integrate waste pickers and their cooperatives into city solid waste management systems.282 Several cities across Colombia and Argentina have also integrated informal waste pickers into their solid waste management services to support door-to-door recycling, as have Bengaluru and Pune in India.283 This has unlocked economic productivity as previously informal waste pickers now have better and more secure livelihoods, health insurance, and other benefits, and they provide waste collection services that reduce waste, pollution, health risks, and GHG emissions for the entire city through recycling. Our case study of Pune traces the story of how a waste picker cooperative (Solid Waste Collection and Handling) negotiated a contractual agreement with the municipal government to provide door-to-door waste collection for city households.284

The city of Pune creatively integrated informal waste pickers into its formal solid waste management system, with support from state and national policies and political commitment from the municipal government. Informal waste pickers were seen as making important contributions to door-to-door waste collection as well as to the environmental objectives of segregating, processing, and recycling waste materials. Some cities have invited informal workers to participate in relevant rule-setting and policymaking processes, which has increased their access to public services, public spaces, or public procurement opportunities that allow them to work for the city with reliable livelihoods.

Partnerships can provide transport

Although some cities have banned alternative operators, others have integrated them into new transport systems, with financial assistance to upgrade vehicles and training to build new skills.285 In many cases, transport providers are “semiformal,” meaning they are legally authorized with vehicle permits but operate under informal rules related to daily vehicle leasing and wages.286 Some city governments have helped transport providers better organize themselves, form corporations, and formalize their operators.

Cities can improve access for the under-served by partnering with existing providers of informal transit, bus, rail, and cycling services for a better-connected transport network. This helps develop a more user-oriented multimodal transport network, improving both access and efficiency. Specific strategies include building integrated, pedestrian-friendly transfer facilities for travelers switching between modes; reorganizing minibus and informal transit routes so they better connect to fixed-route public systems; and promoting integrated fare-payment solutions to reduce the cost of transfers for travelers, which can particularly burden low-income commuters.

Approaches to integrate informal transport services have varied across cities. Although there is no single path for this, several short-term measures have reaped benefits for cities, including investing in dedicated infrastructure and transfer locations, changing concessions and service agreements, and training and supporting informal operators. Cities implementing large formal systems, such as BRT, can help incumbent informal operators preserve their livelihoods by forming operating companies and contracting them to run parts of the new formal services (such as the trunk services in Lagos, the feeders providing essential last-mile access in Quito, or a combination of both, as seen in Cape Town and Santiago).287 Over time, they could move towards a competitive tendering regime (as in Bogotá; Lima, Peru; Mexico City; and Rio de Janeiro, Brazil).288 Research in Rio de Janeiro has shown that regulatory reform aimed at distributing route concessions among informal operators on the basis of competitive tendering confers significant benefits, especially to the poor, because of drastically lowered fares.289

Technology can be harnessed to improve productivity further and help knit services together. Mobile apps are already helping passengers travel affordably and efficiently by offering dynamic trip-planning features that consider multiple existing and emerging transport modes in cities. Examples include e-hailing for boda-boda motorcycle taxi services in Uganda, Thailand, and Vietnam or Ola motorcycle and auto-rickshaw services (aimed specifically at lower-income users) in more than 100 cities in India.290 Ola has been innovative in its use of text messaging to get around poor Internet connectivity in India, and it has a technology platform that is available in nine regional languages because few drivers speak English.291 Such technologies could enhance the productivity of informal transport operators by better matching supply with demand, especially in locations with poor accessibility.

Supporting and integrating informal transport services with appropriate regulations and investment has improved operators’ productivity, livelihoods and quality of service.292 This has also made cities safer and cleaner.293 Although it costs money and political capital to regulate and integrate services in this way, the increased efficiency and improved access provided by such an integrated system yields positive outcomes and long-term benefits for the city as a whole, with great potential to unleash private investment and innovation.

Cities will need to build the capacity to collaborate with and effectively oversee a wide variety of informal and alternative service providers. They will need to regulate competition, set quality standards, and incentivize joint delivery of services.294 This will require the following:295

  • Creating institutional arrangements to integrate informal, alternative solutions instead of banning or trying to replace them and cutting crucial lifelines for many households
  • Aligning incentives that encourage service providers to form coalitions based on clearly defined standards of service provision
  • Enforcing these standards of service provision
  • Overseeing operations of all service providers
  • Segmenting the market by differentiating supply by service levels, providers, and tariffs and demand for services based on people’s needs, ability to pay, and location in the city
  • Investing to scale solutions that have proven effective, affordable, and safe
  • Developing regulations that protect rather than repress and relocate alternative service providers

Accomplishing these goals will require a shift in the mindset of government officials and urban practitioners. They will need to recognize and value the contributions of alternative service providers, including those in the informal sector, and provide funding and institutional support to help create a more complete service provision ecosystem. Table 3 lists the actions and roles required of different actors to move Transformation 2 forward.

Table 3 | Roles of specific actors in advancing Transformation 2: Service Provision Models

Service Provision Models—Partnering with Alternative Service Providers

City Government and Urban Sector Specialists

  • Recognize the role of informality in the city, including how informal employment bolsters the formal economy, how informal settlements provide affordable shelter, and how informal service providers fill in service delivery gaps
  • Engage with community groups and alternative service providers regularly to implement and manage shared services at the neighborhood level
  • Incentivize joint delivery of services based on clearly defined standards of service
  • Pursue innovative partnerships with communities, the national government, and the private sector to finance and provide core services to under-served areas and populations; ensure the urban services divide is addressed in pricing policies
  • Establish institutional structures to integrate informal and alternative service providers into a unified service delivery system and enhance coverage, recognizing their livelihood concerns
  • Set regulations to meet basic standards of service delivery, public health, safety, environmental quality, and affordability for under-served groups; prevent exploitative practices and regressive pricing

National Government

  • Recognize the role of informality in the national economy, including how informal employment bolsters the formal economy, how informal settlements provide affordable shelter, and how informal service providers fill in service delivery gaps
  • Legalize the integration of informal and alternative service providers into a unified service delivery system, recognizing their livelihood concerns
  • Set regulations to meet basic standards of service delivery, public health, safety, environmental quality, and affordability for under-served groups; prevent exploitative practices and reform regressive pricing policies
  • Incentivize joint delivery of services based on clearly defined standards of service provision and appropriate governance structures
  • Pursue innovative partnerships to finance and provide core services to under-served areas
  • Establish social safety nets and insurance programs for small-scale or informal service providers and increase access to credit, public space, and public procurement opportunities

Civil Society, including Nongovernmental Organizations, Experts, and Researchers

  • Facilitate the engagement of informal worker associations and vulnerable communities with city agencies to improve service delivery
  • Mediate to help increase community buy-in to work with the government to improve services (e.g., water user associations operating water kiosks)
  • Participate in local coalitions to advocate for access to credit, public space, services, and procurement opportunities and services to city leadership
  • Encourage a shift in the mindset of government officials and urban practitioners to recognize and value the contributions of alternative service providers and the informal sector

Private Sector

  • Work with city agencies to provide affordable services to disconnected areas and under-served communities
  • Innovate on business models, products, and services to meet the demands and needs of low-income consumers
  • Partner with small-scale informal or semiformal providers to deliver services efficiently and at scale

International Community, including Development Finance Institutions

  • Share knowledge and good practices with practitioners and decision-makers to develop hybrid systems of service delivery, integrating formal, informal, and community-run systems and creating appropriate regulations to help achieve equitable access
  • Develop financing programs that help cities integrate alternative service delivery solutions into a better-regulated system over time, meeting basic standards of service delivery, public health, safety, environmental quality, and affordability for under-served groups
  • Encourage a shift in the mindset of government officials and urban practitioners to recognize and value the contributions of alternative service providers and the informal sector

Source: Authors.