Water, sanitation, and hygiene (WASH) programs are essential to human life, yet chronically underfunded. An estimated $114 billion annual financing gap—three times current investment levels—is preventing countries from achieving universal access to water and sanitation.
“Presently, there is a big gap between financing required and that which is available,” said Ella Lazarte, USAID senior water and sanitation advisor and WASH Finance (WASH-FIN) activity manager, in a recent USAID webinar.
To address this finance gap, USAID’s WASH-FIN technical assistance program is designed to mobilize public and private financial resources for WASH investments in target countries in Africa and Asia. “The demand for WASH services far exceeds the capacity of governments to finance on their own,” said WASH-FIN Chief of Party Sam Huston in the webinar.
In the past, USAID has supported financing facilities that aggregate, leverage, and blend sources and uses of finance as a means to crowd-in other sources of finance, including private sources. To better understand the use of these facilities for WASH and other sectors, WASH-FIN reviewed the landscape of relevant facilities and produced a working paper. To share the findings more broadly, USAID held the webinar, “How WASH Financing Facilities Can Close the Finance Gap for Universal Access.” The webinar summarized the key findings on financing facilities and methods to successfully leverage public and private funds in the WASH sector; the presenters also highlighted the Philippines Water Revolving Fund (PWRF), which received USAID support in the past, as an example.
Huston said financing facilities must focus on strong, reliable governance, sustained business models, and creditworthiness, which aligns with USAID’s Water and Development Plan and Development Result 1: strengthen sector governance and finance. Through varied technical assistance efforts, programs should also foster a mindset of willingness to borrow and political support.
WASH-FIN interventions like the PWRF demonstrate the potential for facilities to support closing financing gaps. The PWRF program launched when the Government of the Philippines was in need of an additional $2 billion in private investments to achieve its Millennium Development Goal WASH targets.
Commercial banks in the Philippines considered water and sanitation investments to be very important, but also high risk and political. In addition to providing a structure to mobilize public and private sources of finance, the PWRF worked with banks on a variety of measures, including awareness raising, orientation on the institutional and regulatory framework of the sector, project appraisal training, and the establishment of a credit assessment system.
“These efforts fostered confidence among banks to lend to public utilities,” Alma Porciuncula, the WASH-FIN Philippines team leader, said.
The PWRF ultimately mobilized more than $200 million, which accounted for 7 percent of the need, and provided up to 6 million people in the Philippines with water supply and wastewater systems. The accomplishments of the PWRF are now being leveraged as the Philippines embarks on a new Universal Financing Framework for the sector that aims to mobilize nearly one-half of the investment required to meet the Sustainable Development Goals through private finance sources. USAID’s WASH-FIN activity in the Philippines is supporting the government in this effort.
Interested in learning more? Listen to the full webinar above, access the webinar handouts below, and check out related resources in the sidebar on the PWRF and other USAID interventions in financing facilities for WASH.
By Elise Zaidi of the USAID Communications and Knowledge Management Project\