Investing in water and sanitation, is clear as water
There is still a long way to go for us to reach universal access to water and sanitation. But one thing seems to be clear: the challenge is political and financial policies are key for success. To help both finance ministers and sector ministers on this important mission, the Sanitation and Water for All global partnership has created the "A Handbook for Finance Ministers – how to make public investment work" - a tool on how to make better use of public funding and mobilize new financing sources.
The Handbook is a compilation of success stories from several countries which demonstrates that this is not a matter of belief or wishful thinking. Countries with effective financial strategies have proven to be successful.
Water and Sanitation - How to make public investment work
A Handbook for Finance Ministers
This Handbook is a call to action for ministers of finance, with inspirational case studies and forward-looking sector perspectives. It is part of an initiative by the Sanitation and Water for All global partnership to provide succinct insights and curated knowledge to ministers working in the water and sanitation sector.
While funding needs to be at least three times higher to meet Sustainable Development Goal 6, a lack of money alone is not the root cause of the water and sanitation sector’s problems. Political decisions and policies made at ministries of finance can have a considerable positive impact on the water and sanitation sector, as demonstrated by the examples from many countries presented in this Handbook.
Why Finance Ministers?
The current global pandemic COVID-19 and its impact on the world’s economies is irrefutable proof that solving water and sanitation challenges goes beyond the public health imperative. Now more than ever, finance ministers can look for opportunities to collaborate with their peers in other ministries – and use the examples and techniques suggested in this Handbook – to develop financial policies that contribute to lasting solutions.
Finance ministers can operate within the existing political constraints to help boost the level and effectiveness of sector financing, in close cooperation with their counterparts responsible for water, sanitation and hygiene.
Why invest in water and sanitation?
The overwhelming economic and social benefits of having universal access to water and sanitation provide a compelling case for finance ministers to take immediate action to resolve sector challenges. Benefits include reduced healthcare costs for individuals and society and greater productivity and involvement in the workplace.
Millions of children can be saved from premature death and illness related to malnutrition and waterborne diseases. Adults can live longer and healthier lives. Gains in quality of life include improved school attendance, greater privacy, and safety – especially for women, children, and the elderly – and a greater sense of dignity for all.
Spread the word!
SWA encourages partners and all those interested in financing of water, sanitation and hygiene to promote the use of the Handbook. For that purpose, SWA prepared several communication materials that highlight the key messages and case study learnings in the document.
If you have any additional requests, please contact SWA Secretariat.
Illustrations and GIFs
Cambodia: Costed national action plan 2019-2023
The Government of Cambodia aims to eliminate open defecation by 2025, five years ahead of the SDG target. In November 2019, the first social impact bond for the sector was issued: nearly US$10 million to move 1,600 villages in six provinces to open defecation-free status by 2023, improving health in rural communities – especially for children. The Stone Family Foundation provides the upfront investment (taking all the risk), with USAID providing up to $10 million in outcome funding to the Stone Family Foundation only where results are achieved.
Colombia: Subsidies and incentives targeted to rural areas and informal neighbourhoods
Colombia’s law governing public utilities has been successful in extending the provision of water and sanitation services in large urban areas. After the law came into force, drinking water coverage increased from 77% in 1993 to 92% in 2018. Despite these gains, rural areas and informal neighbourhoods in cities continued to be underserviced. The law states that utilities have the main responsibility to provide services and must comply with regulations, which include set tariffs and minimum service standards.
South Korea, Costa Rica & India: Wastewater Discharge Environmental Fee & Private sector investments in wastewater treatment
Indonesia: Water and sanitation incentive-based financing at scale
Financed by the World Bank, Indonesia’s ‘National Urban Water Supply Project’ (NUWAS) supported the establishment of an overarching framework for national urban water supply development. The project worked with Indonesia’s central government to design a structured and systematic way to help local governments (LGs) and utilities to improve their water supply service delivery. Around 400 target local governments and utilities were classified in five groups according to their performance (see below).
Kenya & Indonesia: The shadow credit ratings for utilities to attract domestic and international finance
The Kenyan regulator, WASREB, collaborated with the World Bank to develop a mechanism to assess utility creditworthiness. In 2011, given the non-existence of formal credit ratings by accredited agencies, shadow credit ratings for 43 Kenyan utilities were published, which gave borrowers and lenders an objective overview of creditworthiness and risk. Thirteen utilities were given investment-grade ratings and another 16 utilities were rated ‘near-investment’.
Kiribati: The South Tarawa water supply project
Kiribati is one of the most remote and least developed countries in the world, and faces significant challenges due to its vulnerability to climate change. South Tarawa’s water supply is almost entirely dependent on underground freshwater lenses (where freshwater sits above denser saltier water); the quality and quantity of which are seriously threatened by climate change-induced heavy rains and prolonged drought. Should such extreme events occur simultaneously or in quick succession, they can reduce the lenses’ yield to zero – for periods of up to five years.
Mali: How better sector financial reporting led to increased funding
In 2014, Mali committed to move towards allocating at least 0.2% of GDP to hygiene and sanitation, and 5% of the national budget for water and sanitation, in line with levels set out in the SWA framework. Mali developed national accounts for water, sanitation and hygiene using the TrackFin methodology in 2015, with support from WHO, UNICEF and WaterAid. However, when the first TrackFin report was published in March 2017, covering the years 2012 to 2014, it showed that in 2013 and 2014, only 1.1% and 1.2% of the national budget respectively was allocated to water and sanitation.
Mozambique: How the Mozambique Budget Forum coalition protects public funding for the sector
The Mozambique Budget Forum (BMF) is a coalition of Mozambican civil society organizations working on public finance transparency and accountability. Helvetas, Water Integrity Network and Swiss Development Cooperation have been supporting BMF since 2013. In 2016, BMF’s work with parliament contributed significantly to limiting priority sector budget cuts to only 1%, allowing the water, sanitation and hygiene sector to maintain its investments and core activities.
The influence of the enabling environment on microfinance
Water.org has been supporting the microfinance market for water and sanitation since 2004 by encouraging financial institutions across 13 countries to offer specialized water, sanitation and hygiene microloans. Training and technical assistance is provided alongside a small grant that goes towards project preparation and monitoring for institutions willing to try out dedicated water, sanitation and hygiene lending, but no capital for lending is provided.
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New Handbook for ministers of finance: the economic potential of water, sanitation and hygiene policies in times of COVID-19
Hon. Kevin Rudd
Let’s be clear: the biggest roadblock for many governments to deliver universal water and sanitation access is securing the necessary finance – whether it be for the ongoing costs of service delivery or for service expansion, quality improvement, or asset rehabilitation. This is therefore inherently a political challenge, requiring the involvement of both sector ministers and finance ministers. This Handbook is therefore designed specifically to help you in this task, including how to deliver greater efficiencies in the sector and ensure there are much needed reforms along the way.High-level Chair, SWA
Hon. Zainab Shamsuna Ahmed
I’m really excited about this Handbook. We're seeing lessons from other countries on how we can improve the management of public financial to deliver water and sanitation. We need to do a lot more in terms of innovative finance, and this publication shows us several innovative financing mechanisms we could adopt. Investing in water and sanitation is a profitable investment.Minister of Finance, Budget and National Planning, Nigeria
Catarina de Albuquerque
At a time where evidence shows us clearly that access to water, sanitation and hygiene is indispensable for building ‘forward’ better, for rebuilding economies, going back to school, preventing exposure to COVID-19 and reducing the stress on often fragile and under-resourced health systems, this Handbook provides national governments and their international partners with an indispensable tool to translate good intentions into reality.CEO, SWA