Innovations in Financing Urban Water & Sanitation

Sophie Trémolet, Rachel Cardone, Carmen Da Silva, Catarina Fonseca (2007)

The Millennium Development Goals (MDGs) identified water and sanitation services as key factors in lifting people out of poverty. However, the influential Camdessus Report estimated that financial flows to the sector must at least double to achieve the MDG water and sanitation targets. Financing is a necessary (but not sufficient) condition for achieving adequate water and sanitation services and the resulting benefits on health, education and economic activity.

Traditional approaches to financing the sector are not meeting this challenge and have contributed to the development of unsustainable, oversized and inefficient facilities. Typically, governments, development agencies and the private sector fund large infrastructure projects, such as dams and reservoirs, through a top-down decision-making process that leaves little room for unserved people to express or satisfy their needs. While better off people in cities have piped water at low cost, millions of urban dwellers are excluded because systems cannot expand to meet their needs. In particular, people moving to urban areas, slum dwellers and people in small towns are often excluded.

Over recent years, innovative financing solutions have emerged to encourage financial flows into the sector from a wide range of organisations, each with its own responsibilities, but working together in greater coordination. These innovations seek to offer financial systems better suited to devolved services and to provide options for low income service users and communities.

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