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Financial Innovations for Rural Water Supply in Low-Resource Settings

Summary

Millions of people in rural areas of low- and middle-income countries still lack access to basic water services. In fact, as of 2020, the majority of people without basic water services lived in rural areas. The United States Agency for International Development (USAID) Rural Evidence and Learning for Water (REAL-Water) program is working to address this issue by identifying ways to expand water access and safety in rural areas.

One of the challenges of providing rural water supply financing is that the populations are smaller, more dispersed, and poorer than their urban counterparts. This may reduce opportunities for economies of scale and complete cost recovery. To overcome these challenges, the REAL-Water program is focusing on identifying innovative and promising financing or funding mechanisms that can be used in small villages and dispersed settlements.

This report outlines several innovative financing mechanisms that show potential for benefits exceeding the status quo. These mechanisms include: 

  • Village Savings for Water
  • Digital Financial Services 
  • Water Quality Assurance Funds 
  • Performance-Based Funding 
  • Development Impact Bonds
  • Standardized Life-Cycle Costing
  • Blending Public/Private Finance

 

Financial Innovations Learning Note