What have we learnt

This section aims to capture different lessons about the financing of water and sanitation programmes that contribute to sustainable service delivery. Successful financing and cost recovery is a vital aspect of sustainability, and there are some common aspects that apply regardless of the management structure, geography, or size of the services under consideration.

Commitment from government is a pre-condition for sustainability

Political interference is mentioned as being an obstacle to cost recovery ( see also Komives et al, 2000). It shows itself particularly in unwillingness to charge for water services without guaranteeing proper financing from other sources, but also in other unsustainable water policies. For example, a government might proclaim that it should provide its people with "free" water, when in fact the funding, institutional arrangements and capacities to provide that water service do not exist. This is a reality and there will always be political interference in the provision of water services because it is indeed a political issue.

While transparency and stakeholder participation can contribute to more informed political decisions, the lesson is that unless there is a real commitment from a higher level of decision making for cost recovery policies that allow access to a sustainable service to the poorest of the poor, real change cannot be expected in terms of coverage for a wider number of people.

Build public administrative and financial capacity, mainly at local and regional levels of governance.

Lack of administrative, financial, and accounting skills in the public sector is a considerable obstacle to better service management, regardless of whether the public, private, or civil society is involved at the system level. With the trend towards government decentralization, the need for strong capacity building continues to grow specifically at the intermediate level (regional, district and municipality). As such, greater attention must be paid towards strengthening the skills of government staff. Long-term sustainability depends on a critical mass of trained public sector employees being retained. That means having the right incentives to retain the staff who are trained in the capacity building programmes.

Promote partnerships for service delivery among local authorities, local private sector water providers, local NGOs and community-based organizations.

Partnerships between donor agencies, local NGOs, communities, local authorities, and local private sector providers have been shown to improve the effectiveness of projects in many developing countries, including Haiti, Honduras, Indonesia, and South Africa. The development of effective partnerships, as opposed to parallel and government-isolated processes, tends to be time consuming, but as a result of active communication and shared work, these initiatives also tend to be better able to face financing challenges as they arise, without threatening service sustainability.

Besides shared financial responsibilities, partnerships can help to transfer training and skills, and, with the assistance of local NGOs and community organizations, to transfer knowledge about a community's structures and demands at a low cost to those that are not as well placed to understand local needs. Partnerships can help in replicating successful initiatives from districts to entire regions, providing increased opportunities for cross subsidies among richest-poorest regions and effectively contributing to increased coverage for the poorest.

Willingness and ability to pay are often assumed, based on income levels or general demographic indicators. However, there is a large and growing body of research that clearly indicates that those who are often assumed to be unwilling or unable to pay, in fact are, when provided with a range of different technological and financial options along with knowledge about the possible impacts and implications of the options and their prices. Once the expected outcome is understood, financing mechanisms can be generated to meet the outcome at a cost that is affordable to the consumers.

Promote flexible payment structures and service levels for consumers

The poor in rural and peri-urban areas do not generally have steady incomes, and are often unable to pay a monthly bill in a large, lump sum. Research has shown that the poor will pay, but payment needs to reflect the consumer's special circumstances. Hence, it may be useful to allow for the possibility to pay more frequently in smaller amounts, to accommodate household income cycles. This is particularly relevant to the installation and reading of household or neighbourhood meters.

Flexible payments can be encouraged both for recurring costs and for capital costs. For example, many projects in developing countries encourage communities to contribute to Willingness to pay and ability to pay for water services should be assessed and not assumedcapital costs not only in cash (up to 50% in some areas, but more often 10-20%, as in Latin America) but also through supplying labour and local materials. Other schemes allow consumers to pay after the harvest, when farmers are more likely to have available cash. Another option is to develop income-generating activities together at the introduction of a new water point, in order to help poorer communities be able to afford the system.

Subsidies can be more effective if used to increase access to water supply and sanitation; for example subsidising connection fees.

In general, subsidies should be allocated to promote access for the poor, rather than ongoing subsidies for consumption, which tend to have high administrative costs and tend to not reach the poorest of the poor. Cross subsidies should be used locally where tariffs in influential areas can support services in poorer areas. (An excellent discussion of this topic is in Accounting for Poverty in Infrastructure Reform, by Estache, Foster, and Quentin (2002), published by the World Bank.)

Promote locally based management

Water systems have been found to be more sustainable where central governments provide an enabling, rather than implementing role. Where local community committees or private entrepreneurs provide water services at a very localized level, systems have tended to achieve greater success in sustainability and effective cost recovery, not least because they focus on community empowerment at the design stage. Still, efforts must be made to ensure that both women and men, and the poorest are engaged in the decision making process. Specifically, women should be involved in all stages of a project cycle as well as in defining a cost recovery system best suited to the consumer's needs and community's capacities.

Establish a source of local finance to help users pay for improved levels of service, as part of the design and implementation process.

As part of the decentralization process, where communities' responsibilities for water services are increased, establishing a source of community finance specifically for the water sector can help lead to a system's long-term growth and viability. Common local finance mechanisms are savings clubs, micro-finance, or revolving funds (through donor agencies) for expanding and/or upgrading service levels. Local organizations that represent the poor in low-income urban areas can be used to purchase water in bulk directly from the source, and provide services at a fair price.