financing and sources of funding of sswm robert gensch, xavier university

Financing and Sources of Funding of SSWM


Robert Gensch, Xavier University


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Depending on the initial situations and respective local circumstances, there is no guarantee that single measures described in the toolbox will make the local water and sanitation system more sustainable. The main aim of the SSWM Toolbox is to be a reference tool to provide ideas for improving the local water and sanitation situation in a sustainable manner. Results depend largely on the respective situation and the implementation and combination of the measures described. An in-depth analysis of respective advantages and disadvantages and the suitability of the measure is necessary in every single case. We do not assume any responsibility for and make no warranty with respect to the results that may be obtained from the use of the information provided.

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• Supporting and developing an enabling environment

• Hygiene behaviour change activities

• Sanitation marketing costs ( including training, market assessments etc)

• Cost of public infrastructure and services (capital and operational costs)

• Cost of private infrastructure and services (capital and operational costs)

1. Financing for What?

Source: http://thewealthwarrior.net/tag/investment-strategy/



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• Beneficiaries contribution

• National Government (or public) funds

• Local government funds

• Private funds

• External funding flowing in from NGOs, donors etc.

2. Sources of Funding

Source: http://thewealthwarrior.net/tag/investment-strategy/



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2.1 Beneficiaries contribution

• Stakeholders might be willing to invest some of their own resources.

• For sanitation projects, a sustainable expansion of coverage can only be achieved if potential users have financial capacity and willingness to pay for new facilities and cover operation and maintenance costs.

• Households are key investors in on-site sanitation, and careful project design can maximize their involvement, satisfaction, and financial investment.

Many financing approaches :

•Cost-sharing model that encourages users to contribute for the services that they have chosen as best meeting their needs.

•Household invests in its own facilities and pays directly for operating and maintenance costs

•Tariffs paid to service provider (connection charges, volumetric tariff, etc).



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2. Sources of FundingExample: Social Community Fund Raising – Gram Vikas, India

• Gram Vikas enters into partnership with a rural village

• Each household must contribute Rs. 1000 ($22) into a fixed deposit community fund. Interest on this fund will be used to expand the facilities as the village grows.

• The first step is to build a toilet and shower stall for each family. The families collect local materials and provide manual labour.

• When all toilets are complete, a water source is tapped and a water tower built to supply piped water to each household.

• Once facilities are built Gram Vikas works with community for 3-5 years in O&M training, reinforcing hygienic practices and capdev of villagers for overall management and democratic governance within village.

• When this is done, Gram Vikas withdraws.



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2. Sources of FundingExample: Environmental User Fee – Puerto Galera, Philippines

• Collection of environmental user fees (50PhP) from tourists

• Fee used for sustainable coastal resource management, with sewage treatment as priority

• Constructing and operating of a sewerage system and wastewater treatment plant for Barangay Sabang and neighboring areas



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2. Sources for Funding

2.2 Government Budget

• Ideally, funding for most of the actions in a water and sanitation projects should come from the Government’s own resources.

The type of financing mechanisms included in this type of source are:

(1) Public subsidy for hardware or software,

(2) Subsidised credit to end-beneficiaries for investment in their own infrastructure

(3) Subsidised loans to service providers (public or private)

(4) Community-level rewards (e.g. grants to local govt)

• Depending on the institutional set-up of the Government, these resources may to a certain extent also derive from revenues gained through the delivery of services included in the project itself.



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Source: Villaluna 2009, Presentation on Sanitation Fianancing during the SuSEP Training of Trainors for Sustainable Sanitation Course in Tagaytay, Philippines, March 2009



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Example: Millennium Development Goal Fund (MDGF)

• Financing facility initiated by the Municipal Development Fund Office of the DOF

• Targeted at lower income LGUs particularly 4th-6th class.

• DILG is encouraging LGUs to undertake responsive MDG projects and avail of the financing scheme.

• Two components: Investment support (DOF), and institutional capacity building (DILG)

• The financing facility is not limited to civil works but may include procurement of goods, seed capital, detailed engineering design, and construction supervision.

• DILG offers various training on project implementation, management, operations & management and monitoring and evaluation.



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2.3 Private Participation

• Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies.

• In water and sanitation: Build-Own-Operate-Transfer (BOOT)

• In these cases, the private parties receive a concession to invest their capital in the construction and operation of the infrastructure. It enables the proponent to recover its investment through user fees.



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2.4External Funding

• The need for external funding arises when none of the above approaches would be feasible.

• However, it should always be kept in mind that tapping external sources usually means financing for a limited period of time and according to the rules of an external organisation. If the issue of long term financial viability has not been taken into consideration:

many projects may collapse once the external finances are no longer available!



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Examples - External Funding

Asian Development Bank (ADB) [www.adb.org/Water/default.asp].

•ADB promotes stakeholders participation in the management of water resources at all levels. It encourages partnerships between governments, private agencies, NGOs, and communities.

•25% of investment portfolio committed to water and sanitation



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•Small Grant Program for pilot and demonstration activities

•To improve and promote innovative water sector initiatives implemented by NGOs, development partners and local communities

•One of the Pilot activities in the Philippines:

•Low-cost decentralized Wastewater treatment for public market in Liloan, Cebu (US$ 50,000 grant)

•Aim here is to quantify a possible cost recovery by implementing user fees. This is seen as a valuable lesson to learn for future similar projects, which then might be based on loan funding.



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•Output based aid (OBA)

•OBA targets individuals who lack the financial means to pay for basic services. The service provider will receive subsidies to replace costs associated with providing the service to people, such as user fees.

•Individual agents will verify that service is being delivered and based on performance of the service-provider, a subsidy will be granted.

•Nepal: Water supply connection and household latrines with OBA approach to extend loan project to villages which were to poor to pay full connection feees but could afford user charges

•PH (under preparation): water and sewerage connection to poor households



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German Embassy Manila

•Grant for small-scale livelihood projects

•Small-scale Projects are financed by the German Federal Ministry for Economic Cooperation and Development (BMZ) and are intended to directly improve the quality of life of the poor and the poorest.

•Max 8000 Euro (450,000 PhP)

•Allotment Garden Project with UDDT and Vermicomposting Project in CDO as well as Low Cost Sanitation Project in Libertad financed through German Embassy Small Grants



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European Commission

•EC supports programmes for rural and natural resources development including integrated watershed management. Though a large part of the assistance is channelled to government implemented bilateral programmes, projects undertaken by NGOs are also supported.




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The World Bank [www.worldbank.org].

The World Bank is partnering with various organisations to reduce poverty and improve living standards. Among the focus areas is infrastructure development which includes water and sanitation sector.

SuSEP Program (Sustainable Sanitation Education Program for the Philippines)

•Aims to integrate Sustainable Sanitation into the countries educational system through development of formal and non-formal training courses

SUSEA (Sustainable Sanitation for East Asia)

•Aims to improve the institutional capacity of national and selected local government agencies and service providers, and to develop appropriate policies, services, and interventions to improve access to sanitation in a selected range from rural and urban areas to river basin scope.



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Australian Aid Agency (AUSAID)

AUSAID delivers aid to Asian countries in the water and sanitation sector including water and environmental sanitation.

US Agency for International Development (USAID) [www.usaid.gov]

Philippine Sanitation Alliance works with LGUs, water districts and private sector partners to develop affordable ways to protect biodiversity and reduce public health risks through improved sanitation.

Philippine Water Revolving Fund lends money to creditworthy water and sanitations service providers (LGUs and Water Districts). Blended ODA and private financing to lower rates and to introduce PFIs to the sector (interest rate market based)



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United Nations Children's Fund (UNICEF) [www.unicef.org]

UNICEF supports developing and implementing a range of replicable models for water and sanitation sector.

Other sources

Philippine Obstetrical and Gynecological Society (POGS): 100000 PhP

Others



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Examples - Private Foundations

Ford Foundation [http://www.fordfound.org]Focuses on rural development, including assisting efforts to improve the management of both large-and small-scale irrigation facilities using pumped groundwater. Small Grants Programme of the Global Environment Facility (SGP-GEF) [http://sgp.undp.org/Provides grants to NGOs, CBOs and other for projects that benefit the global environment and promote sustainable livelihoods in local communities, including water conservation projects. Bill and Melinda Gates Foundation [www.gatesfoundation.org]The Global Development Program leadership team oversees the foundation's work in developing countries on agricultural development, financial services for the poor and emergency relief.

Financing and Sources of Funding of SSWM 22

“Linking up Sustainable Sanitation, Water Management & Agriculture”

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