Financing facilities for the water sector

In recent years, finance has emerged as an important policy tool to support and stimulate water sector reform. Traditional grants and concessional loans have given way to ‘innovative’ finance solutions. Attention is increasingly paid to how finance mechanisms can be structured to increase funding flows. However, innovation in financing also requires, at a macro-level, attention to broader economic and governance functions as well as to financial sector capacity. As part of this evolution, project development and financing facilities have been created to help develop and finance projects from the ground up. Largely funded by donor agencies and hosted through multi-lateral development banks, including the World Bank, the International Finance Corporation (IFC), and the African Development Bank (AFDB), these facilities aim to support domestic private finance for a range of sectors and issues, including water supply and sanitation (WSS). Because of the strong inter-linkages between accessing domestic private finance and public governance, most facilities rely on collaboration with domestic-based non-governmental organisations (NGOs), local business and government. This Thematic Overview Paper (TOP) is intended to serve as an introduction to project development and financing facilities. It provides an initial look at these facilities, their intended role, and their relevance towards achieving the Millennium Development Goal (MDG) Target 10 for water supply and sanitation (to halve, by 2015, the proportion of people lacking sustainable access to safe water and basic sanitation). [authors abstract]