Water Currents: WASH and Financing

Addressing the global investment gap in water and sanitation is a USAID priority as it seeks to reach the poorest and most vulnerable with improved access to these most basic of services. It does so in a number of ways: facilitating greater use of public and private financing sources in partner countries, advocating for increased public expenditure for water and sanitation, and developing innovative financial strategies and tools. This issue focuses on finance in the water, sanitation, and hygiene (WASH) sector and contains recent studies, webinars, and other resources that discuss blended finance, subsidies, tariffs, and other issues related to WASH financing.
 
We would like to thank the USAID Water, Sanitation and Hygiene Finance (WASH-FIN) project for reviewing the content of this newsletter, which includes publications from Circle of Blue, IRC, OECD, the World Bank, WASH-FIN, and others.

In Focus

Overviews
How Improved Financing Enhances Water and Sanitation Service DeliveryGlobal Waters Radio, March 2019. How can better financing help extend water and sanitation services to those most in need? To answer that question, Global Waters Radio speaks with two experts: Ella Lazarte, senior water and sanitation advisor at USAID, and Barbara Kazimbaya-Senkwe, global knowledge management and communications lead with the USAID–supported WASH-FIN program.

Reform and Finance for the Urban Water Supply and Sanitation SectorWorld Bank, August 2019. This summary note integrates three lines of work—utility reform, sector reform, and sector finance—for readers to understand the critical links among the three spheres.

Utilities in Developing Countries, in Financial Tailspin, Try to Keep Water Flowing During Pandemic and BeyondCircle of Blue, May 2020. Water utilities are experiencing a “double hit” in their finances that could hinder operations into the future.

Rethinking the Economics of Rural Water in AfricaOxford Review of Economic Policy, January 2020. The findings conclude with policy recommendations to network rural services at scale, unlock rural payments by creating value, and design and test performance-based funding models at national and regional scales.

Channeling Financial Flows for Urban Water and Sanitation. Center for Strategic and International Studies, November 2019. New sources of financing are needed to provide clean water and sanitation for citizens around the world. The challenge is particularly acute in cities where population growth and urbanization are stretching resources and deteriorating living conditions.

Financing for Water—Water for Financing: A Global Review of Policy and PracticeSustainability, February 2019. The relationship between the water and financial sectors is explored through a review of past and current policies and practices, and new needs driven by growing water insecurity (i.e., drought and floods) and climate change.

Costing and Financing of Small-Scale Water Supply and Sanitation ServicesWHO, May 2020. This publication guides national and subnational policymakers responsible for water and sanitation interventions in defining strategies for the sustainable financing of service provision through small-scale water supply and sanitation systems.

Paying for the Spout: Innovative Financing Could Expand Access to WaterNew Security Beat, March 2020. Traditionally, the public sector has supported WASH–related financing. But in recent years, a more blended approach has come to the forefront.

Scaling Market-Based Sanitation: Desk Review on Market-Based Rural Sanitation Development ProgramsUSAID Water, Sanitation, and Hygiene Partnerships for Learning and Sustainability, June 2018. This review offers a framework that draws upon and contributes to existing evidence across the three crucial challenges to scaling market-based sanitation—appropriate product and business model choices, viability of sanitation enterprises, and difficulty of unlocking public and private financing for sanitation. View the webinar, which presents the report’s findings and recommendations.

Editorial: Shining the Spotlight on Household Investments for Water, Sanitation and Hygiene (WASH): Let Us Talk about HI and the Three T’sJournal of Water, Sanitation and Hygiene for Development, March 2020. This editorial argues that the three T’s financing source framework (taxes, tariffs, and transfers) leads users to ignore key costs to the customer, especially the poor customer, of accessing an adequate level of WASH service.

Addressing the Financing Gap in the Water Sector in Ethiopia, Rwanda and UgandaIRC, September 2019. IRC commissioned three country assessments (desk review and in-country interviews) to identify the main constraints to attracting additional finance to the sector in three countries: Uganda, Rwanda, and Ethiopia. This briefing note synthesizes the findings, highlighting commonalities and differences among the three countries.

Blended Finance
Making Blended Finance Work for Water and Sanitation: Unlocking Commercial Finance for SDG 6. OECD, August 2019. This brief summarizes key messages from OECD’s publication “Making Blended Finance Work for Water and Sanitation.” The publication draws on case studies, interviews, workshops, and extensive desk research to examine: what has worked so far in terms of experience with blended finance for water-related investments and the potential to scale up blended finance approaches.

Blended Finance in Cambodian Rural Water Supply: Triggering Private Water Operator Investment with Viability Gap FundingMarketlinks, March 2020. The Investing in Infrastructure program is testing a known blended finance tool, viability gap funding (VGF), in the Cambodian water market. VGF is a subsidy tool that governments use to incentivize private investment in infrastructure projects.

Subsidies
Doing More with Less Smarter Subsidies for Water Supply and SanitationWorld Bank, August 2019. The authors analyze subsidies in the sector, including their magnitude, their efficacy in achieving their policy objectives, and the implications of poor design.

Expanding Access to Clean Water for the Rural Poor: Experimental Evidence from MalawiStanford University, March 2020. This paper identified an intervention that effectively targeted a subsidy to poor households whose drinking water is unclean—providing free water treatment solution to households with young children, which households are required to pick up monthly from a central location.

Tariffs
Reflecting SDG 6.1 in Rural Water Supply Tariffs: Considering ‘Affordability’ Versus ‘Operations and Maintenance Costs’ in MalawiSustainability, January 2020. The balance of affordability and sustainable maintenance is a perpetual challenge under decentralized service delivery.

Study of the Distributional Performance of Piped Water Consumption Subsidies in 10 Developing CountriesWorld Bank, May 2020. This paper provides new evidence on how effectively piped water consumption subsidies are targeting poor households in 10 low- and middle-income countries around the world. The results suggest that, in these countries, existing tariff structures fall short of recovering the costs of service provision.

The Paradox of Water Pricing: Dichotomies, Dilemmas, and DecisionsOxford Review of Economic Policy, January 2020. The key to effective and efficient water pricing is a systematic process to understand: the value of water in alternative uses; the private and external costs of supplying water services; and the multiple options to determine an appropriate water tariff.

Understanding Demand and Funding for Piped-Water Supply in Mandalay CityIGC, August 2019. This report outlines study findings, along with a brief synthesis of the relevant literature on tariff setting and other nontariff mechanisms for funding water provision. Based on these findings, the authors present possible recommendations for improving funding for water provision in Mandalay.

On Inflation and Water Tariffs: What Are the Trends? Water Blog, April 2020. This article takes a look at how inflation and water tariffs have evolved in the last years to be able to foresee how COVID-19 may impact the affordability of water for everyone, particularly the poorest.

Others
Strengthening Municipal Finance and Solid Waste Management Services with Results-Based Financing Approaches: Experiences from South AsiaWorld Bank, May 2020. Results-based financing is an umbrella term for financing models that disburse funds only after measurable, pre-agreed results have been achieved and verified. This report focuses on the features of results-based financing schemes in Pakistan and Nepal.

Sustainable Sanitation and Gaps in Global Climate Policy and Financingnpj Clean Water, May 2020. The researchers describe gaps in how sanitation is being addressed in mitigation and adaptation, discuss how this results in little inclusion of sanitation in climate policy and financing at the global level, and implications of these gaps for different sanitation systems and geographic regions.

Global Water Access Fund: A New Idea to Bridge Operations and Maintenance Shortfalls for the Poorest Water UtilitiesJournal of Water, Sanitation and Hygiene for Development, September 2019. This article presents a potential solution that blends funding from global philanthropy, solidarity levies, and local matching funds.

Cambodia Rural Sanitation Development Impact Bond. IDE; USAID, November 2019. The world’s first development impact bond (DIB) for WASH, the Cambodia Rural Sanitation DIB, aims to eradicate the high rates of open defecation in the country and accelerate the Cambodian government’s efforts to reach universal sanitation and eliminate open defecation by 2025.

Informality as Experimentation: Water Utilities’ Strategies for Cost Recovery and their Consequences for Universal AccessJournal of Development Studies, February 2020. This paper considers the modalities by which utilities in four sub-Saharan African cities have extended water services into low-income settlements and examines their consequences for household access to water.

USAID Water, Sanitation and Hygiene Finance 
The USAID WASH-FIN project supports water service providers and private sanitation service providers to access additional capital for sustainable, climate-resilient water and sanitation infrastructure equipment. By exploring new roles for market finance, WASH-FIN complements funding from traditional sources such as transfers, taxes, and tariffs.

Selected reports and webinars include:
How Financing Facilities Can Close the Finance Gap for Universal AccessWASH-FIN, April 2019. This webinar summarizes the key findings on financing facilities and methods to successfully leverage public and private funds in the WASH sector. The presenters highlights the Philippines Water Revolving Fund, which received USAID support in the past, as an example.

Customer Service Reform for Water and Sanitation Service Providers: The Cape Town ExperienceWASH-FIN, March 2020. This case study demonstrates that a well-resourced and integrated approach to customer service reform can reap multiple benefits for water and sanitation service providers, including increased revenues and improved customer trust.

Cambodia Investor Landscape Assessment ReportWASH-FIN, November 2018. WASH-FIN assessed the investor landscape to gain insight on the state of financing for private water operators (PWOs) in Cambodia, assist PWOs to tailor their capital financing efforts to the different investor types, and help PWOs prioritize investor types based on their respective requirements.

Facilitating Relationships Between Private Sanitation Service Providers and Commercial Banks in SenegalWASH-FIN, April 2019. WASH-FIN Senegal is providing support to promote relationships between the sanitation service providers and commercial banks. The overall approach consists of creditworthiness assessments, reviews of technical proposals, preparation of financial models, and identification of suitable financing institutions.

Financing Facility Landscape Assessment Report | WASH-FIN Working Paper No. 1WASH-FIN, November 2018. The report collates available information on experiences of various facilities, noting individual features, advantages, and challenges as they relate to financing WASH providers and other subsectors at the global, regional, and national levels. 

 


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