Innovative financing for water, sanitation and hygiene (WASH)

Published on: 21/12/2015

The first West and Central Africa Innovative Financing for Water Sanitation & Hygiene conference was convened by UNICEF in Dakar, Senegal from December 15 to 17.

UNICEF, in cooperation with the Government of Senegal and the African Ministers’ Council on Water, major investment banks, and other international organisations including IRC, convened this regional meeting with the main purpose to explore how domestic financial resources can be mobilized to ensure access and sustainable management of water and sanitation for all.

A total of 153 senior representatives from government, NGOs, and utilities from 24 Countries in West and Central Africa participated.

The global financial gap as estimated by the United Nations (UN) to meet this challenge is US$ 250 Billion per year.

Governments are called upon to establish specifically dedicated funding mechanisms that would work on the basis of commercial financing for water infrastructure, such as:

1. Water Banks – based on domestic resource mobilization (i.e., pension funds, insurance companies) using repayable finance to bridge the financing gap
2. A Blue Fund – Potentially a regionally or globally coordinated initiative
3. National Water Facility
4. Other mechanisms that have been identified include:

• Blended funding for the water sector
• Commercial financing
• Private equity
• Sovereign finance
• The one percent law - an example where 1% of the income from appropriate taxes is applied to water and sanitation. 
• Establishment of special taxes on large multi-lateral corporate companies
• A sanitation tax - this can be a percentage of the water bill to go towards financing sanitation
• Utilizing donors’ favourable credit ratings to provide guarantees

 Way forward

The meeting recommended AMCOW lead the innovative financing for WCAR’s WASH agenda to call upon governments to create enabling environments and build the sector’s capacity, including helping to connect the financial and WASH sectors.

Recognising that there are many challenges related to governance, transparency, and accountability, organisations like UNICEF and AfWA should consider establishing a governance index for both urban and rural water supply and sanitation. This can be applied through a peer review mechanism.

Sector reform, establishment of regulatory mechanisms and transparency in governance are necessary for appropriate tariff-setting and establishment of innovative financing mechanisms.

National programmatic approaches must be emphasized over project- and local-level approaches.

AMCOW should consider putting in place a team of experts in different domains (urban water, urban sanitation, rural water supply and sanitation etc) that can help countries develop bankable projects.

UNICEF should consider work with countries to develop regional landscape of the existing situations and also where innovative financing can work.

Governments need to demonstrate long-term revenue generation and donors need to guarantee fund to support financially viable start-ups, as well as implement evidence-based long-term sector strategies that include sustainability and universality. Strategic alliances can develop long-term sector investment/business plans (with a marketing strategy) that demonstrate ROI and risk mitigation.

UNICEF and other developing partners should work with Governments to establish regulatory authorities that will promote cost recovery based on appropriate tariffs and help service providers achieve credit worthiness.