Over recent years a better picture of how money flows in the WASH sector is emerging. But it can still be hard to identify the balance of where WASH money comes from in terms of taxes, tariffs and transfers, and where it goes over time. In countries facing the biggest challenges in meeting the MDGs, financial requirements far exceed available funds, but in many cases existing funds are also not used cost-effectively. This is one of the themes that will be discussed at IRC’s 2010 Symposium on 'Pumps, Pipes and Promises: Costs, Finances and Accountability for Sustainable WASH Services' in The Hague, The Netherlands from 16 - 18 November 2010.

Current problems on financing and priority actions to address them in the next five years are described below.

2010: The problems

The current problems include:

• Opaque sector budgets with fragmented knowledge on origins of finances (transfer, tax and tariffs), on destination (country, water/sanitation, poor/non poor, urban/rural) and what is covered (development, enhancement, rehabilitation, support).
• Multiplicity of funders and inadequate clarity about who should pay for what: users to pay day-to-day or short term costs, governments the medium term costs and donors long term money. Nobody considers that if one fails, all the money is wasted.
• No proper risk analysis of financing policies and decisions from money providers: all risk are supported by end users (grant/loan end beneficiaries) who have to cope with risk of system failure and to complement what is not properly financed.
• Horizontal coordination has moved towards harmonisation and coordination issues which have become crucial under decentralisation policies and related financial transfers and management.
• There is a trend towards not providing subsidies for sanitation, while promoting hygiene approaches and expecting households to self- finance infrastructure. Demand creation, in a context where there is often much lower demand for sanitation than water, can be critical.

Impact on the present situation

The impact of these problems includes

• Financing flows don’t aim at providing sustainable services, don’t target the poor, are not based on cost and cannot prove their cost-effectiveness
• Lack of coordination at international sector level, with as many financing reporting formats as there are donors
• Poor coordination of funding flows at country level and below
• Poor knowledge of the effect of financial transfer from national to more local governance level on cost effectiveness
• Bias to finance hardware (impact measured in terms of infrastructure) whereas there is a consensus on the necessity to develop capacity to support, operate and change the perception on water

Desirable intermediate outcomes

The desired outcomes in five years from now include:

• Coordinated strategies of donors towards the water sector (same reporting format, shared performance indicators, sustainability-driven financing)
• Cost-based financing where amounts, mechanisms and beneficiaries are based on the cost to be covered by who at what scale and when
• Monitoring of financing flows is based on service delivery indicators
• Governance levels that receive money endorse the risk of misused of funds under appropriate regulatory mechanisms
• Post construction support for water and sanitation to be covered at scale, including monitoring impact of hygiene approaches.

Priority actions

Among the priority actions required are:

• Requesting unit costs per component, per service level and per capita when allocating funds
• Coordination of financial flows in order to cover all costs component in any specific area for a well defined population before implementation begins
• More flexibility in financing mechanisms to cope with risk mitigation strategies

Vision

The vision of achievements per stakeholder includes:

• Governance levels/cost and financing units develop strategies aligned to the duration of the costs they finance
• Money receivers are accountable to money providers based on the service delivered to users and the match-funding mechanisms to cover the other cost of WASH services
• Decision makers develop services according to the secure funding available to mitigate the risk of being short in fund to cover small but crucial costs (O&M).

See for more details of the three sub-themes in financing the symposium page.

By Catarina Fonseca and Dick de Jong

Tags: financing, governance, hygiene promotion, sanitation, water supply