Municipal solid-waste management (MSWM) in developing countries has faced common challenges such as no separation at source, complicated collection processes, and open landfills. Previous studies suggested that it is essential that MSWM policy adapts to local contexts and situations in its implementation. In Indonesia, neighborhood associations exist to enhance cooperation among community members. Community-based recycling activities called waste banks (WBs) in Indonesia utilize the functions of neighborhood associations. This study analyzed how local governments supported community-based WB programs and examined the institutional mechanism of the central WB which was established as part of the community-based WB integration to the city’s MSWM policy in Makassar, Indonesia. Through a desk study and semi-structured interviews with key actors in community-based WBs, it was found that the local government’s major intervention was the establishment of a mayor’s regulation to set up a central WB using the municipal budget to facilitate waste transaction between community-based WBs and recyclers. The institutional framework of the central WB and the functions performed by the central WB, such as recyclable waste collection from community-based WBs and market price analysis on recyclable waste, were clarified through this study.