Water Currents is produced biweekly by USAID’s E3 Water Office. Each issue contains recent news and articles on water sector issues, partner and donor updates, latest sector research, and a special focus on one topic. Please provide your feedback and suggestions by contacting the firstname.lastname@example.org.
This issue focuses on finance in the WASH sector and contains recent reports and publications from SHARE, UN Water, The World Bank, and others. Included are studies on microfinance, a podcast and reports on financing the WASH sector, and case studies on financing options from Tanzania and other relevant countries. We would like to thank USAID-funded WASH-FIN Project staff for contributing to this issue.
Financing WASH: How to Increase Funds for the Sector While Reducing Inequalities. IRC; Water.org, April 2017. This position paper for the Sanitation and Water for All Finance Ministers Meeting in 2017 addresses three key issues that are receiving limited attention in the WASH sector discussions on finance: 1) the lack of finance for strengthening the enabling environment; 2) the untapped use of microfinance; and 3) blended finance and inequities in the allocation of finance in the sector.
UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS) 2017 Report: Financing Universal Water, Sanitation and Hygiene under the Sustainable Development Goals. WHO; UN Water, June 2017. This report presents an analysis of the most reliable and up-to-date data from 75 countries on issues related to WASH financing and other elements of the enabling environment, including plans, targets, data availability, and measures to reach vulnerable populations.
Financing Systems for WASH: Cost and Finance Frameworks. IRC, March 2017. In this podcast, co-host Catarina Fonseca and other experts discuss the challenges of financing water and sanitation services, cost and finance frameworks, and the importance of public finance in reaching the Sustainable Development Goals (SDGs).
Sanitation and Water for All: How Can the Financing Gap Be Filled? The World Bank, March 2017. World Bank programs in Bangladesh, Indonesia, and Kenya demonstrate a growing opportunity for microfinance to expand and support household-level investment in water services. Efforts to scale up water-related microfinance are worthy of further assessment.
Introducing Commercial Finance into the Water Sector in Developing Countries. The World Bank, February 2017. This guidance note introduces the role of commercial finance in the WASH sector. It provides a step-by-step framework for building a local currency commercial finance market for the sector. While the emphasis is on bank lending, it is also applicable to capital market finance. Its aim is to help development specialists with limited exposure to the finance sector explore commercial WASH finance in their own countries.
Financing Options for the 2030 Water Agenda. The World Bank, November 2016. This report discusses a new WASH sector financing paradigm based on four themes, and includes lessons learned from microfinance programs. It concludes that achieving the new financing paradigm requires a more collaborative approach, with all stakeholders playing an active role.
Achieving Universal Access to Water and Sanitation by 2030: The Role of Blended Finance. The World Bank, August 2016. This report asserts that the substantial increase in funding necessary to achieve SDG 6 requires innovative structures that strategically use public sources to crowd-in private sources. Scenarios include guidance on tailoring blended solutions to the prevailing conditions in terms of the local finance sector/capital market and the extent of repayable finance being deployed for WASH. It notes that effective practice requires robust collaboration and coordination among government, service providers, and donors.
Microfinance for Sanitation Policy Brief. SHARE, May 2017. The brief defines sanitation microfinance and summarizes SHARE research conducted in India and Tanzania. It then discusses the research gaps that still exist, and provides recommendations for improving policies and programs on microfinance for sanitation globally.
Using Microfinance to Facilitate Household Investment in Sanitation in Rural Cambodia. Health Policy and Planning, May 2016. This study found substantial demand for microfinance for sanitation, however, immediate uptake of loans was relatively low at the time microfinance was offered. Given the importance of improving sanitation coverage and concomitant health impacts, linking functional sanitation markets to already operational finance markets has the potential to give individuals and households more financial flexibility.
Microcredit and Willingness to Pay for Environmental Quality: Evidence from a Randomized-Controlled Trial of Finance for Sanitation in Rural Cambodia. Journal of Environmental Economics and Management, November 2016. Missing credit markets may suppress willingness-to-pay (WTP) for environmental improvements that require large up-front investments. This study tested the impact of microloans on WTP for hygienic latrines in rural Cambodia. It found that microcredit dramatically raises WTP for improved latrines.
Case Studies/Upcoming Events
Between the Market and the State: Financing and Servicing Self–Sustaining Sanitation Chains in Informal Settlements in East African Cities. Centre for Global Development, University of Aberdeen, April 2017. This paper discusses how hybrid sanitation markets can contribute to improving sanitation in informal settlements in three cities in East Africa. It also includes the findings from several studies on sanitation and microfinance.
A Webinar on How Can a Program Design Rural Sanitation Financial Support to Reach the Most Disadvantaged? This webinar on June 29, 2017 will discuss how different programs have tried to design rural sanitation subsidies to reach the poorest. The World Bank, USAID, UNICEF and SuSanA are hosting this webinar to present and discuss an emerging rural sanitation challenge.
Income-Enabling, Not Consumptive: Association of Household Socio-Economic Conditions with Safe Water and Sanitation. Aquatic Procedia, August 2016. Water.org's program, WaterCredit, uses microfinance to improve WASH access. A major obstacle to scaling up this approach is the general assumption that loans for WASH are too risky because they are consumptive rather than income-generating. This article challenges that argument by highlighting the financial gains people derive from having WASH infrastructure at home.
Promoting Choice: Smart Finance for Rural Sanitation Development. Practical Action, 2016. Chapter 14 in the report Sustainable Sanitation for All discusses a range of sanitation financing options. It states that significant efforts and innovations are underway in sanitation microfinance, but few large-scale programs have yet been successful in increasing sanitation coverage among poor rural households. Key constraints include the reluctance of rural households to borrow against a non-productive investment, and the reluctance of rural banks and microfinance institutions to lend to poor households with no credit history.
Supply and Demand for Improved Sanitation: Results from Randomized Pricing Experiments in Rural Tanzania. Environmental Science and Technology, May 2017. To measure consumer demand for hygienic latrine platform products in rural Tanzania, the authors conducted a voucher-based sales trial with households using unimproved latrines. It was concluded that current household demand for latrine platform products is too low to achieve national goals for improved sanitation coverage through fully commercial distribution.
Scaling Up Blended Financing of Water and Sanitation Investments in Kenya. The World Bank, March 2016. This review of interventions to improve access to commercial finance for utility and community water service providers in Kenya describes prevailing sector reforms and innovative blended financing structures, including use of a USAID DCA Guarantee. It also includes lessons learned on accessing commercial finance and recommendations for scaling up.
Financing Mechanisms for Wastewater and Sanitation. Asian Development Bank (ADB), December 2016. Government and city planners can use this guide to identify financing mechanisms for wastewater and sanitation projects. Country cases focus on a variety of financing instruments – including blended structures with subsidies (Japan, India), output-based aid (Sri Lanka, Nepal), carbon credits (Fiji, Cambodia), microfinance/revolving funds (Vietnam, Cambodia), public-private partnerships (PPP) (India), and local partnerships (Philippines).
County Government’s Manual for Commercial Financing of the Water and Sanitation Sector of Kenya. The World Bank, 2015. This toolkit was designed to give subnational governments (counties in the case of Kenya) insights into how water service providers can use commercial financing. It provides a standardized procedure for WASH project appraisal and loan application and serves as a useful reference for other countries undergoing devolution/decentralization of WASH service provision and financing (e.g., state/province, county, municipality, etc.).
Recharging the River and Growing Incomes in Jordan. MCC, April 2015. Article describes an innovative project to expand a wastewater treatment plant on a commercially viable and environmentally sustainable basis. Through an innovative build-operate-transfer public-private partnership (PPP) structure, a $93 million MCC grant and $20 million of public funds leveraged an additional $110 million in private finance. The scheme returns treated water for downstream irrigation, allowing transfer of fresh water to benefit 2 million urban residents. The context is noteworthy considering the high level of water scarcity in Jordan, and the complex social and economic challenges stemming from regional conflict.
U.S. Ambassador Commends Chiefs for Upkeep of USAID Projects. News Ghana, June 2017. Robert Jackson, the U.S. Ambassador to Ghana, recently cited the Abutia-Teti community for its maintenance and upgrading of a USAID and Rotary International-funded water project that ended in 2014. He stated that the water project was an important success story for the WASH sector in Ghana.
How Small Social Enterprises Tackle Drought Challenges in East Africa. World Bank Water Blog, June 2017. The author discusses the current drought in Kenya and how the drought has affected water kiosks' operations. An organization, Siemens Stiftung, has developed networks and award-winning programs to develop technical solutions for dealing with the drought situation.
Water Security and U.S. Foreign Policy in India, Pakistan, and the Philippines. New Security Beat, June 2017. To help policymakers understand the implications of water problems for national security, World Wildlife Fund-U.S. is working with global experts to produce a book highlighting water conflicts and U.S. strategic interests. This article, and an accompanying video, features experts who spoke at the Wilson Center about the dynamics at play in India, Pakistan, and the Philippines.
Water and Sanitation Services: Rural or Urban Haiti First? Huffington Post, June 2017. This article summarizes research on the costs and opportunities for providing WASH services access conducted as a part of the Haiti Priorise research project. More than 50 economists have written new research papers studying the costs and benefits of different proposals to improve the nation’s environmental, economic, and social conditions.
Boat Toilets and Plastic Pillows: A Kenyan Town Tackles Its Environmental Challenges. UNEP Stories, May 2017. To address human waste challenges, an NGO has introduced the Arborloo and the portable boat toilet to communities near Lake Victoria in Kenya. An Arborloo is a temporary, shallow, dry composting pit latrine constructed of locally available, cheap materials. Portable boat toilets are another innovation where collected human waste is emptied into a biogas digester that provides energy for lighting. It is hoped that, over time, more biogas digesters will be installed to collect the excreta from portable fishing boat toilets
Water Safety Planning for Urban Water Utilities: Practical Guide for ADB Staff. WHO; ADB, May 2017. This handbook was prepared for ADB project officers as a guide for the efficient integration of the Water Safety Plan (WSP) approach into ADB's urban water operations. The WSP is a tool that assists water suppliers and other stakeholders to identify and prioritize system needs.