Financing Facilities for the Water Sector

Updated - Thursday 07 December 2006

Rachel Cardone and Catarina Fonseca (2006)

‘Innovative’ finance solutions have emerged as important policy tools to support and stimulate water sector reform. However, innovation also requires attention to broader economic and governance functions.

This Thematic Overview Paper (TOP) explores the challenges of project preparation and financial risk. It argues that current funding flows are inadequate to the Millennium Development Goals. Global and country level estimates often fail to capture the cost of institutional reform and the support required to achieve sustainable water supply and sanitation, or long-term operation and maintenance costs. At the same time, public administration and financial management capacity at central and sub-sovereign levels often lack the capacity to use funds effectively and efficiently to meet policy objectives.

Successful project development leads to more sustainable delivery, and could help increase funding for the water sector through the PRSP and other processes. Although studies have shown a link between water and sanitation investment and economic growth, the water sector has not emerged as a core government issue in many countries.

The TOP serves as an introduction to project development and financing facilities. It addresses the following questions:

What are project development and financing facilities, and how can they meet the needs of the poor?
How do project development and financing facilities work?
Who are the different stakeholders in these facilities?
Who can access finance, and for what purposes?
What are the different opportunities and risks posed by these facilities?

You can download the whole document as PDF or browse through the summary (written by Peter McIntyre) below first.