Rural Water Supply Network

RWSN Webinars – mini series 2017

November 2017

Webinar 2:

“Grown up” finance for rural water?

Supporting water sanitation

and hygiene services for life

.

“Grown up” finance for

rural water?

Catarina Fonseca

RWSN webinar

November 2017

Outline

.

1. The scale of the challenge

2. Financing options

3. Summing up. So what?

.

1. The scale of the challenge

We know its going to cost a lot, and its not

where you think

Fonseca et al.,

Capital expenditure

Minor maintenance

Major maintenance

Everything else:

- Regulation

- Policy

- Monitoring

- Institutions and

people

- Costs of borrowing

Woreda (district): South Ari

Rural and peri-urban population: 263,262

Number of water schemes: 241

Non-functionality: 31%

Omo Guderso - Rural Water Eng, part of 12 people team.

Salaries covered, 1 motorcycle for monitoring… no

maintenance fund, no allowances to leave the office…

We know these costs have accounting names and

we tend to ignore the most important

Fonseca et al.,

CapEx

OpEx

Capital Maintenance

CapManEx

Direct support

Indirect support

Costs of capital

We know the scale of the challenge (but less

details for sanitation)

• Reaching SDG 6 requires an estimate 114 billion US$/year for

capital investments – three times what is currently spent

• ODA (grants and loans) reached 18 billion US$/year and even lower

for middle income countries (2014)

• Capital maintenance of existing services is about 1.5 times the

amount needed for construction of infrastructure

• Amount needed for strengthening the people and institutions

delivering WASH services => at an absolute minimum of 1 US$ per

person per year for rural WASH

We know that costs for the enabling environment

become increasingly important as coverage

increases

With no change in expenditure: danger zone of

stagnation at 60% to 80% coverage (water)

Danger zone?

Coverage: % of rural population with access water 1990-

2015 (with expenditure in rural water increasing)

https://data.worldbank.org/indicator/SH.STA.ACSN.UR?end=2015&locations=KE-TZ-RW-ZM-UG&start=1990&view=chart

.

2. Financing options

Possible sources of finance for WASH

Transfers (ODA)

Taxes

Tariffs

Financing gap

Transfers (ODA)

Taxes

Tariffs

Financing gap

Tariffs + public finance = not fast enough, not

the amounts required… bring in private finance

https://openknowledge.worldbank.org/handle/10986/27948

BB/BBB AAA

Low risk

Utilities

C

Medium risk

Utilities

Decentralised providers

1.000.000.000

100.000.000

10.000.000

1.000.000

100.000

10.000

1.000

100

10

1

Pro

ject siz

e, U

SD

, lo

g s

ca

le

No credit rating

High risk

Decentralised providers

No formal providers

Micro loans

Project finance

Development Cooperation Funds

(incl. concessional loans)

Bond financing

Public

Finance or

Finance

Gap?

Commercial bank financing

What we don’t know: what financing options are really

available to address the rural water finance gap?

1. How much funds

do we have?

Transfers (ODA)

Taxes

Tariffs

Financing gap

Transfers (ODA)

Taxes

Tariffs

Financing gap

3. What

mechanisms

?

2. How much do

we need?

From 75 respondents WHO GLAAS report…

We still don’t have sector development plans

http://www.who.int/water_sanitation_health/publications/glaas-report-2017/en/

What Finance Ministers really think about the

WASH sector

Clarissa Brocklehurst, UNC Conference, October 2017

Summing up. So what?

Prioritise how to increase domestic resource

mobilization for WASH => some ideas

National level

• Understand budgeting processes and organisations involved,

their interests and constrains => where do they need YOU?

• Ensuring prioritization of WASH in national and local

expenditure plans => develop a detailed advocacy strategy =>

who to influence and how?

• Support development of multi-annual sector plans (which need

to go beyond construction) => Why are they not happening?

• “Experiment” with a combination of different finance

mechanisms (public and private) => Start discussing with private

finance what is possible and what is not

Prioritise how to increase domestic resource

mobilization for WASH => some ideas

National level

• Understand budgeting processes and organisations involved, their interests and constrains => where do they need YOU?

• Ensuring prioritization of WASH in national and local expenditure plans => develop a detailed advocacy strategy => who to influence and how?

• Support development of multi-annual sector plans (which need to go beyond construction) => Why are they not happening?

• “Experiment” with a combination of different finance mechanisms (public and private) => Start discussing with private finance what is possible and what is not

• Support CSOs to hold gov accountable to SDG6 and its financing => There are CSOs specialised in budget tracking and budget accountability, support them so they are aware of the budget issues in the water sector

Prioritise how to increase domestic resource

mobilization for WASH => some ideas

District level

• Support development and implementation of district wide

asset management of rural water services

• Support development of plan and budget for next 5 years

• Support understanding and increasing the tax base at

district level

• “Experiment” with a combination of different finance

mechanisms (public and private) => Start discussing with

private finance what is possible and what is not

Prioritise how to increase domestic resource

mobilization for WASH => some ideas

Service providers

• Support development of incentives for improving service

delivery and efficiency (reduce NRW, tariff collection)

• Support tariff regulation => at least to cover OpEx and

CapManEx

• Support development of shadow credit rating or at least

some sort of benchmarking for rural utilities/service

providers

Key Resources (all hyperlinked)

• WHO/UNICEF Joint Monitoring

Programme, 2017

• UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS), 2017

• The Costs of Meeting the 2030 Sustainable Development Goal Targets on Drinking Water, Sanitation, and Hygiene, World Bank, 2016

• Financing WASH: how to increase funds for the sector while reducing inequities, 2017

• Easing the transition to commercial finance for sustainable water and sanitation, 2017

• Universal water and sanitation: how did the rich countries do it?, 2015

• Roadmap to universal WASH district level, 2017

Visiting address

Bezuidenhoutseweg 2

2594 AV The Hague

The Netherlands Postal address

P.O. Box 82327

2508 EH The Hague

The Netherlands T +31 70 3044000

info@ircwash.org

www.ircwash.org

Supporting water sanitation

and hygiene services for life

Thank you! Any questions please reach me at: fonseca@ircwash.org

Rural Water Supply Network

RWSN Webinars – mini series 2017

November 2017