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The availability of finance mechanisms for the implementation of WASH service delivery approaches (SDA) differs for each of the specific approachesapproach. Moreover, none None of these finance mechanism suits all of SDAs. Their availability, however, can be considered an enabling factor for the implementation of the SDA itself.
In the 2006 “Landscaping of Approaches to Support Service Provision of Water, Sanitation and Hygiene” prepared for Cranfield University, AguaConsult and the IRC for the Bill & Melinda Gates Foundation, finance mechanisms (or finance approaches) are were considered one of the clusters for the enabling factors for the SDA, being the others "demand stimulation" and "support to systems". <ref>
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This Financial approaches portal illustrates a selection of approaches to water and sanitation service provision as well as some articles on project management. It is primary built upon the finance mechanisms identified in the above-mentioned landscaping documentprepared for BMGF, although several parts are edited according to the experience of the current editor(s). == Build Own Operate and Transfer (BOOT)==
The could be the most suitable model for service delivery, which could even have a higher impact if also repairs and replacement could be financed.
== Cost sharing for capital investment ==
(http://www.wsp.org/publications/sa_indiapoor.pdf). The NGO Dustha Shasthya Kendra in Dhaka has negotiated with the water authority to locate at least 90 community water points in slum areas, providing improved water to more than 8,000 poor households. Before a site is built, the community signs an agreement with DSK that covers its obligations to run the site and the charges made to recover the costs of the water, maintenance and capital costs.
(http://www.developments.org.uk/data/issue21/for-sale.htm). High potential to reach also poorer sections of the community, if properly targeted
== Cross subsidies/Differential tariff systems ==
Good approach in relation to differences in income provided total system cost are recovered which at present is often not the case. Also, it is difficult to ensure that subsidies reach the poorest groups (http://web.mit.edu/urbanupgrading/waterandsanitation/funding/estab-price-policy.html ; http://www.sanicon.net/themes/intro.php3?theme=3). High potential for connecting more people but costly and may reduce interest for dry alternatives
( http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2002/10/25/
000094946_02101104032679/Rendered/PDF/multi0page.pdf ). High potential because the part of the sector funds that are currently lost can be used for service improvement and expansion
Experience exists with SWPs, but impact is likely to be much larger if they are grouped under an umbrella organization to guarantee quality of water and service delivery. More than 650 local entrepreneurs sell water through water kiosks to half a million poor people in Kibera (Kenya). They are now forming an association with support from WSP-World Bank, which is self-regulating and can negotiate with utility on lower block tariffs.
(http://www.wsp.org/publications/Rogues%20No%20More-Water%20Kiosk%20Operators%20Achieve%20Credibility%20in%20Kibera.pdf ). Application of franchising holds a promising potential of a high impact
== Full capital investments by donor funds or government ==
People receive facilities as a gift; historically linked to large externally-funded projects
Significant in the past and applied by various funding agencies including national governments, foreign donors and even NGOs. Now discouraged, with a paradigm shift towards cost sharing because of overall costs involved and to enhance ownership. Leveraging public resources is seen as a key component towards increased financial sustainability
(http://planningcommission.nic.in/plans/mta/mta-9702/mta-ch20.pdf).
People receive facilities as a gift
In the past, governments often provided 50% to 100% subsidies for household latrines, which tended to ignore or even ‘crowd out’ household resources. It was a typically supply- driven approach which often resulted in many unused facilities. This approach is now discouraged, shifting to cost-sharing or no subsidy because of cost involved and to enhance ownership (http://www.wsp.org/publications/af_finsan_mdg.pdf ).
(http://www.irc.nl/content/download/11496/168599/file/Uso_Efficiente_2004.pdf ). High potential as it can lead to expanded coverage and better use of water resources at low cost
== Innovative financing mechanisms ==
Issuing bonds, equity mechanisms, pooling resources, etc.
Experiments with innovative financing are ongoing in different locations. These often involve considerable transaction costs that may not be attractive for donors. Further testing is needed and interesting (http://www.euwi.net/download_monitoring.php?id=209).
== Innovative financing mechanisms Micro credit for private sector == Helping small enterprises without sufficient collateral to obtain credit Improving local access to micro-credit is essential to enhance private sector involvement. Requires good regulatory framework because there is a large difference in the performance of micro-credit organizations. (http://www.microcreditsummit.org/papers/fundspaperfinal.htm#4.7). High potential as opportunities for private sector involvement in sector are growing
Good approach to enhance ownership. Also needed for replacement. Some examples of no-subsidy for hardware, but poorest sections may require subsidy. The governments of India and Bangladesh suspended subsidies because they did not reach the poor but then re-introduced them at lower levels (the equivalent of about USD 10) in order to reach the poorest of the poor. Management of subsidies remains a challenge. In Ouagadougou (Burkina Faso): a surtax on water supply is applied by ONEA, an autonomous public water and sanitation company, to subsidize on-site sanitation facilities (25% contribution and supervision of trained masons). 20,000 facilities have been constructed in schools and households. Management of funds presents difficulties, but approach was extended to other towns (http://www.wupafrica.org/toolkit/resources/pdf-files/good_practices/good_practice_Africa.pdf) Good potential to reach the poorer sections of society
== Pay and use toilets/public bath houses ==
Common practice in utility water supply, but much less in developing countries, where often no or negative profit margins exist. It is applied in some places benefiting from increased efficiency, but insufficient to quickly speed up coverage.
== Revolving funds ==
Interest in this concept is increasing and good results are reported for example from Anhui province in China, particularly where community leaders were involved (http://www.unicef.org/evaldatabase/index_14260.html). In Nepal the government does not provide subsidies for sanitation but has established revolving funds which the community can keep if they have obtained 100% coverage (http://www.livelihoods.org/hot_topics/docs/CLTS_update06.pdf). Requires transparent management. High potential particularly in homogenous communities aiming at 100 percent sanitation
== Self-financing ==
Widely used but often poor quality because of weak management and supply chain and particularly because many toilet technologies are unaffordable for the very poor. Needs better access to micro-finance, information, advice and products. Better access to support / stronger private sector involvement would be very beneficial. Actual examples demonstrating success in leveraging household and community resources for sanitation can be found in countries as diverse as India, Lesotho, Vietnam, Bangladesh, Pakistan and Burkina Faso. (http://www.wsp.org/publications/af_finsan_mdg.pdf). Self-financing is increasingly becoming an issue as more and more externally supported programme pay for the software costs for demand creation but no longer for facilities. High potential because of growing access to funding
Accepted as a rule, but not always covering all costs in sewered systems. Poor often cannot afford the fees. Also used for communal facilities that are managed by group of families, paying monthly rates, for example in Nairobi (http://wupafrica.org/toolkit/resources/caseExamples/narrative-form.html). In South Africa differential tariffs are used to support the poor, and no tariff is charged to families using less than 6000 litters of water per month (http://www.joburg.org.za/services/water3.stm). Potential relates to the need to sustain services
== References ==
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