Which WASH finance solutions have the most potential to provide services to the poorest?

Published on: 25/04/2012

Financing water and sanitation improvements for the very poor remains a major challenge over large areas of the globe. IRC and WSUP show that effective solutions to this challenge do exist. See discussion paper: Financing water and sanitation for the poor: six key solutions (below).

Which of the following six key solutions do you think has the greatest potential to overcome this challenge?

1. Use life-cycle costing approaches to ensure that all life-cycle costs of infrastructure and services are fully taken into account, and that maintenance is financed.
2. Maximise local small-scale private-sector involvement in water and sanitation service provision for the poorest.
3. Introduce innovative water tariff systems that ensure financial sustainability and affordability for the poorest.
4. Use water revenues to cross-subsidise sanitation: incorporating sanitation charges into water bills is a key approach for financing sanitation services (including for people who could not otherwise afford them).
5. Use output-based financing approaches: by making disbursements dependent on demonstrated delivery of services to the poorest, there is an incentive for funds to be spent more efficiently.
6. Use progress-linked finance (PLF) approaches: the funder commits to provide concessional finance at a specified time in the future, on condition that the service provider has by that time demonstrated capacity for commercially viable service delivery to low-income areas.

These questions were posted to an audience of 150 participants at the session in 6th World Water Forum in Marseille, 2012. The dynamic session stimulated a very mixed group of participants to discuss the key solutions proposed. Some discussion points: Shouldn’t we call the life-cycle costs approach the life-cycle financing approach? What about having cross-subsidized systems for a life time? Wouldn’t the PLF require too much capacity building?

Based on these discussions participants were asked to vote which of the 6 solutions had the greatest potential to overcome the challenge of financing water and sanitation improvements for the very poor. Progress-linked finance approaches had the most votes followed by life-cycle costing approaches.