Financial sustainability and affordability of WASH services: Indicator proposals for global...

Financial Sustainability and Affordability of WASH Services: Indicator Proposals for Global Monitoring1 |

IRC Symposium “Monitoring Sustainable WASH” – Addis Ababa 11.04.2013

Financial Sustainability and Affordability of WASH Services:

Indicator Proposals for Global Monitoring

Guy Hutton

Based on a review carried out for UN Office for the High Commission on Human Rights and work of the JMP Post-

2015 Working Groups



Two Key, Linked Issues

Financial Sustainability

Fundamental to Sustainable Use of Improved WASH Services

Investments that cannot be maintained and operated over the duration of their design life is a waste of resources

Affordability

Fundamental to the Human Right and Achieving Universal Access

Unaffordable: reduced consumption and hence many socio-economic impacts



Achieving the Right Balance Between Financing (3 T’s) and Affordability

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This presentation

Introduce the indicators proposed for global monitoring post-2015

What do these indicators tell us? What do they not tell us?

What should be the thresholds values?

How will these indicators be measured?



Financial Sustainability: Indicators

Does revenue at least cover the recurrent costs?

Ratio of annual revenue to annual expenditure on operating expenditures, capital maintenance, and debt servicing

Are recurrent costs in balance with the infrastructure costs?

Ratio of annual expenditure on operating expenditures, capital maintenance and debt servicing to annualized value of capital assets



Example of data distribution (Indicator 1)

Ratio of Annual Revenue to Annual Recurrent Expenditure

68% of providers do not cover their operating costs



Issues in Measurement & Interpretation

Are capital costs being recovered? Therefore, is 100% for Indicator 1 enough?

What evidence is there for the ‘right’ ratio for Indicator 2? Would this vary across providers?

Data sources:– Global and regional utility performance initiatives?

Aggregation: can we aggregate across providers to get a national picture? Is aggregation meaningful?



Affordability

“Any payment for water services has to be based on the principle of equity, ensuring that these services, whether privately or publicly provided, are affordable for all, including socially disadvantaged groups. Equity demands that poorer households should not be disproportionately burdened with water expenses as compared to richer households.” (para 27) General Comment 15, The right to water

How does actual WASH financial expenditure compare with a universal ‘affordability’ threshold?

Percentage of population in the poorest quintile whose financial expenditure on water, sanitation and hygiene is below 3% of the national poverty line (rural and urban).



Example of data distribution

Household WASH expenditure as proportion of Poverty Line

39% of households spend more than 3% of NPL on WASH



Can affordability indicators be measured?

Stats can be provided on expenditure for ‘representative’ populations sampled in national surveys

– Household budget surveys– Living standards measurement surveys

But incomplete survey data for global monitoring

Current focus of survey questions makes it harder to monitor in contexts where services are not networked

Expenditure is what people actually pay, not what they would pay for a minimum service

– Some: affordable but not getting a minimum service– Some: unaffordable, but that is for more than the minimum



Comparing like-with-like?

WASH expenditure as proportion of National Poverty Line

No spending – inadequate service?

High spending – above minimum

service?

Therefore estimate lifeline costs? – Definition?



Issues in Measurement and Interpretation

Is there a ‘right’ affordability threshold– Variation in thresholds of countries/agencies– Can there be a single threshold for all

population groups?Should we monitor the non-poor? If so,

should we use NPL?Indicator excludes several types of WASH

expenditure and also non-financial cost items



Expenditure items excluded

Captured in Expenditure surveysWater and wastewater charges (regular costs(

Financial costs not separately captured in Expenditure surveysSpecific household works; connection; soap

Non-financial costsAccess time; own labour costs for construction

Most commonly incurred by poor households

Subsidies



Global – national alignment ?

The interest for an affordability indicator is potentially 2-fold:

• Is there an affordability problem nationally (in representative sample)? E.g. proportion of poor households paying more than 3%

• Where is improved programming needed to relieve financial burden? E.g. identifying specific households and neighbourhoods that have affordability issues

2 different monitoring systems? => Need to align interests of global and national monitoring



Conclusions

Positive that these questions are in the post-2015 technical proposal and have been translated in 3 sub-indicators only

Further research needed on existing proposals– Thresholds (per provider type)– Aggregation– Measurability

Additional indicators can help fill in gaps

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Financial sustainability and affordability of WASH services: Indicator proposals for global...

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