From access to impact: Designing infrastructure policies that reduce poverty

Access to essential infrastructure services such as transportation, energy, digital connectivity, and water and sanitation is a fundamental driver of development and poverty alleviation. These services connect people to jobs, enhance access to goods and services, and foster productivity and economic growth. 

However, decades of evidence show that the positive impact of infrastructure varies greatly based on location, social demographics, as well as design and implementation. The recently released report Infrastructure and Poverty reduction: Innovative Policies for Effective Access, endorsed by the G20, highlights effective strategies to maximize development dividends and address current challenges.

Key attributes of effective infrastructure access

For infrastructure to be transformative, it must meet three critical conditions:

1. Availability: Infrastructure must be present and reachable by all households, regardless of income or location. This presence, while crucial, only represents potential usage. In Sub-Saharan Africa, 40 percent of households without electricity live on the grid but are not connected, and 9 out of 10 individuals not using the internet worldwide reside in areas with service coverage.

2. Quality: Infrastructure must be reliable, safe, and convenient. High-quality services enhance usability and lead to positive outcomes, increasing the likelihood that households will leverage them effectively. The World Bank’s Multi-Tier Framework for energy access (MTF) illustrates how different levels of service may affect households’ experience.  

3. Affordability: Services must be economically accessible so that households can utilize them without compromising other basic needs. Costs include initial connection and ongoing usage fees, as well as necessary equipment.

Policy approaches: Supply and demand-side interventions

These three dimensions can be combined to perform a mapping of effective infrastructure access. After defining a minimum basket and quality of services deemed adequate for the local context, households in different locations and income groups can be grouped based on whether they have access to a particular service and if it is affordable. This, in turn, points to different policy options to address the specific bottlenecks in each case, as shown in Figure 1.

Figure 1: Mapping affordable access and disaggregating policy options

Source: Authors’ elaboration

For households in Quadrant 3, supply-side policies are likely to be the priority to extend the availability of services to their area. In Quadrant 1, conversely, affordability is the main constraint, calling for demand-side policies, including sound tariff setting and subsidies. Finally, Quadrant 2 groups cases where both availability and affordability are at stake, and both supply- and demand-side interventions are relevant.

On the supply side, policies should include a drive to attract more public, commercial, and private investments. Crucially, innovative technological and contractual designs can reduce costs significantly through cost-effective technologies and maintenance practices. For example, one of the main benefits of well-designed public-private partnerships (PPPs) is the large gains in maintenance costs, which can lead to significant life-cycle cost reductions.

On the demand side, thoughtful fee structures help ensure financial stability for service providers while making services affordable for users. Subsidies, if well-targeted, can make basic services accessible to low-income populations, enhancing usage and contributing to broader social benefits. However, they must be designed carefully, drawing on the accumulated knowledge on the topic, to balance them with fiscal sustainability and sector efficiency.

Finally, smart technological solutions can deliver substantial efficiency gains. E-procurement, innovative contracts such as performance-based maintenance contracts, and digital technologies to gather information and target delivery have the potential to yield better supply policies. Pre-paid and smart meters, digital public registries, and smart cards in transportation are some examples of demand-side technological solutions to support better tariff setting and regulation, and well-targeted subsidies. 

Taking a multifaceted approach & building in resilience

Addressing infrastructure needs in the right way requires a multifaceted approach that considers availability, quality, and affordability, and supports the design of targeted policies. In addition, this will also allow governments and policy makers to develop more cost-effective and comprehensive strategies that integrate inclusiveness and resilience from the start, ensuring that infrastructure contributes effectively to poverty reduction and sustainable development. 

Building resilience into infrastructure ensures long-term benefits and adaptability to shocks such as climate change, pandemics, and conflicts. By adopting these best practices, infrastructure can truly serve as a catalyst for growth and improved well-being.

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