=== Build Own Operate and Transfer (BOOT)===
Build-Operate-Transfer (BOT) <ref> in some countries, such as Canada, Australia and New Zealand, the term used is Build-Own-Operate-Transfer (BOOT) </ref> is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility for a specified period, often as long as 20 or 30 years. After the concession period ends, ownership is transferred back to the granting entity.
Once the project's risks are identified, the likelihood of their occurrence assessed and their impact on the project determined, the sponsor must allocate those risks. Briefly, its options are to absorb the risk, lay off the risk with third parties, such as insurers, or allocate the risk among contractors and lenders. The sponsor will be acting, more often than not, on behalf of a sponsor at a time when the equity participants are unknown. Nevertheless, each of the participants in the project must be satisfied with the risk allocation, the creditworthiness of the risk taker and the reward that flows to the party taking the risk. In this respect, each party takes a quasi equity risk in the project.
=== Cost recovery for operation and maintenance ===
According to the BMGF lanscaping, this principle has been identified mainly in water related service delivery approaches. The idea is that actual users pay the cost for operation and maintenance as a contribution to the whole system.
This could be the most suitable financial model for service delivery, which could even have a higher impact if also repairs and replacement were accounted and financed.
=== Cost sharing for capital investment ===
The idea is that end users contribute, mostly in kind or labour, to the cost associated to the capital investment. This is seem also as a way to enhance ownership and thus ensuring that service responds to demand.
=== Related links ===
=== Cross subsidies / Differential tariff systems ===
The idea is to differentiate tariffs based on a specific factor common to a group of users, as the volume of water consumed or users' living area. This can also also be used for connection fees.
This approach has high potential for connecting more people, but it is costly and may reduce interest for dry alternatives.
=== Fighting Corruption ===
Although this is not a finance approach on its own, increased transparency can have a great impact in allowing more efficient use of more available funding.
Fighting coruption has high potential because the part of the sector's funds that are currently lost due to its presence can be used for service improvements or expansion of water and sanitation systems.
=== Franchising ===
====Creating economy of scale, quality control and back-up support====
Franchising is not used in the sector, but amply in other sectors. It could provide the economy of scale and back-up support that is now often lacking
=== Franchised water treatment and sales ===
Entrepreneurs treating and selling water under an umbrella organization for quality control and back-up
=== 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.
=== Improving financial efficiency ===
====Reducing unaccounted for water by leakage control and improved billing.====
A considerable source of funding is in fact available within existing systems by reducing leakage, optimizing consumption (through water metering, making it possible to extend systems to more users) and by reducing backlogs in payment by users. This approach is successfully followed in large systems, but much less in smaller ones. It includes both savings in the systems by repairs and adjustments and in households by repairing leakages, and introducing water saving devices and meters. Good facilitation and promotion is needed. 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.
=== Loans/credits/guarantees ===
Different models are available for people, water providers and private sector to obtain funding from banks or others, including guarantees from enterprises with too little collateral.
(http://www.lboro.ac.uk/well/resources/Publications/Briefing%20Notes/BN16%20Local%20financing.htm) High potential because people and WPs may have to take expensive loans from local money lenders
====Loans made available to households ====
Good potential as people cannot afford paying high investment. Results of loan schemes specifically for sanitation are mixed if the demand for sanitation is low (sometimes poor repayment) but work better for broader schemes (house improvements). Instalment payments make capital investments easier for the poor. The vulnerable poor, (the poorest people) need additional support because they may not be reached (http://www.williams.edu/Economics/neudc/papers/What%20to%20Expect%20from%20Development%20NGOs%20July%209.pdf). Micro credit schemes exist in different contexts, often through local NGOs or with NGOs acting as a guarantor. Cases on sanitation loans show positive repayments in Honduras, but considerable back-logs in Ghana ( http://www.lboro.ac.uk/well//resources/fact-sheets/fact-sheets-htm/mcfs.htm ). High potential because it may be expected that attention for sanitation will create larger market
====Loans made available to municipalities====
Many municipalities are indebted by loans for water and sanitation facilities for which they pay from regular budget and too a much lesser extent from users contributions. Potential relates to changing this practice to a sound repayment on basis of users fees
=== 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
====Limited access to venture capital often restricts small private sector to expand ====
Risk capital needed for further experiments; quality insurance. Often paid through local NGOs. Since the 1980s over 7,500 different types of small family businesses have received credit from the Orangi project in Karachi, with good repayment
(http://wsscc.org/resources-feed/sanitation-business-approaches-demand-orientated-policies/?_sf_s=sanitation+is+a+business). Potential exists in removing a barrier for private sector to grow
=== Output based aid (OBA) ===
Using explicit performance-based subsidies to support basic services where conditions justify public funding to complement or replace user-fees.
The core of the OBA approach is the contracting out of service delivery to a third party, usually a private firm, where payment of public funds is tied to the actual delivery of these services. The Global Partnership for OBA is supporting programmes in different regions and sectors, including working with SSPs for on-site sanitation in Dakar and utilities in Punjab ( http://www.gpoba.org ).
=== Partial Subsidies in latrine programmes ===
====Users contribute in cash or kind or pay connection fee. ====
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 ===
People pay when they use the facilities that are built and managed by NGOs, entrepreneurs or local government
waterandsanitation/resources/caseExamples/sanitation-services.html ). Pay-and-use public toilets for crowded areas and slums, without space or funds for latrine construction. Also for transient populations such as bus stops. Managed by local government, NGOs or entrepreneurs. This includes women groups jointly developing sanitation facilities. High potential particularly in densely populated slums
=== Revenue financed expansion ===
====Expansion of piped system based on revenues====
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.
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. Requires transparent management. High potential particularly in homogenous communities aiming at 100 percent sanitation
=== Self-financing ===
people ====People investing individually or jointly in water supply====
Widely used, but often substandard performance. Could benefit enormously from proper support (advice, materials, innovation). Legalisation of property rights is key. Poorest need support. In Baroda (India) a 1999 study showed that households invested, on average, at least 70 USD in their own facilities such as rainwater tanks, underground tanks, lift pumps etc.
(http://www.chinadevelopmentbrief.com/node/248). High potential because of growing access also of poorer groups to credits and remittances of overseas workers
====People investing individually or jointly in sanitation====
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. 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
=== Social development funds ===
Donor funding to mitigate effect of structural adjustment; Often linked to income generation and employment targets
====Often grant or food/pay for work-based interventions====
Mixed track record in sanitation with earlier interventions even frustrating work of others. Risk remains that it operates as a parallel program. Approach is for example promoted in Latin America and Caribbean by the Inter-American Development Bank
(http://www.iadb.org and www.iadb.org/sds/doc/957eng.pdf ).
=== Tariff ===
====Users pay the cost for operation and maintenance====
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://www.wupafrica.org/). 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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