Q&A: How to plug the WASH financing gaps

The World Bank has estimated that to meet Sustainable Development Goal targets 6.1 and 6.2 — the former on achieving universal and equitable access to safe water for all and the latter on achieving access to adequate and equitable sanitation and hygiene for all and ending open defecation — investments would need to triple to an annual $114 billion.

Catarina de Albuquerque, CEO of Sanitation and Water for All — a global, multistakeholder partnership committed to achieving universal access to clean drinking water and adequate sanitation — says the estimate is on the modest side.

“That figure does not consider climate resilience and mitigation, and that means maintaining existing water resources, which are increasingly under pressure,” Albuquerque said.

Aside from finding new sources of financing, she said governments need to make better use of existing funds to produce results that will make the sector more attractive to outside investors.

“There is lack of political prioritization of the sector, especially of sanitation, which leads to a lack of funding. Then the existing funding is also not used in an efficient way, which in turn leads to a sector that is hard-pressed to attract both public and private funding and seen as a drain on budgets, not as an investment,” she said.

Speaking to Devex, Albuquerque broke down why there is such a large financing gap in water, sanitation, and hygiene and how that gap can be filled.

This conversation has been edited for length and clarity.

Why do you think there is such a big financing gap when it comes to achieving the WASH-related targets?

There are several reasons that are all part of the vicious cycle. Very often, what we see is a lack of enthusiasm by ministers to give greater allocations to the sector because it is seen as a sector that brings bad news and drains public budgets. All these circumstances then also lead to a lack of political prioritization, which then leads to a lack of funding.

For example, it's as if the money is used to build a school, but no thoughts are given to finding teachers, furniture, and books. This is what happens in the WASH sector. Not enough attention is being given to the systems that are needed for the infrastructure to work properly: policies, regulations of monitoring, of accountable institutions, of professionals. This is what we call “systems blindness.”

Some years ago, I was in the Pacific island states. I saw a building and was told it was a desalination plant that had been built years ago with the support of a development partner. The problem was that this country did not have a systems approach, hence they could never recover the money they were spending on the energy to run the plant. They didn’t have anyone who knew how to operate the plant, or any spare parts, or anyone who could fix problems. It was basically a white elephant. When I asked the minister about his strategy to provide water, he said, “We are building eight desalination plants.” Here, you see a huge divide between just focusing on the infrastructure and focusing on the systems.

Official development assistance commitments to WASH increased by 36% between 2016 and 2017, indicating renewed focus by donors, but what other sources of investment need to be mobilized?

I could mention some out-of-the-box, innovative financing mechanism, such as creating enabling environments to attract private investment so the state could focus on the nonsexy, invisible issues such as independent regulation, policies, and capacity building. But the reality is that a large part of the change will need to come from how governments and their partners work with the financing sources they already have but are underutilized: domestic water tariffs, taxes, and micro and macro loans.

We know that when water and sanitation tariffs are low, the state is subsidizing the rich because they are the ones connected to the network. People living in remote and rural areas or slums are not connected. They either need to take the water from the well or a protected water source and then boil or filter the water, or buy water from a private, informal water vendor where there are no guarantees of quality.

There is also a tendency by donors and external support agencies — even United Nations agencies, big nongovernmental organizations, and private foundations — to fall back on project financing and not look at sectorwide approaches. External sources such as aid, development funding, and concessional loans can have a catalytic effect if well used.

Would you say there are certain political and institutional reforms that need to be made in order to achieve SDG 6?

It depends on the development of the sector in a specific country. Sector planning to ensure that public funds are effectively directed to the most challenging areas would indeed help governments focus on how to finance their goals. With that, there is tariff policy that is focused on cost recovery, allowing public funds and needs to be reserved for the less attractive investments: rural water supply, water supply to most-marginalized areas, et cetera. While we would then gradually decrease subsidies for the mainstream urban water supply — which is much more appealing for commercial investors, for example — in addition, adequate tariff structures being in place and an effective regulatory environment for the sector is essential to ensure the delivery of affordable, high-quality, and sustainable services.

In terms of banks and investors, their performance and accountability levels of water service providers in developing countries are too often still unknown. The foundation of a healthy investment climate demands stronger sector regulation: well-documented standards with targets for performance, clear lines of accountability, incentives, and penalties.

Are there any interventions that you believe represent best value for money for the private sector or government to invest in?

There are no silver bullets. The call of my partnership — SWA — is for a much more macro approach that is not mainly focused on projects. Only putting money into one side of the system will not lead to the desired changes. On the other hand, investing in the institutional setup and capacities of the people will mean more efficiency and money saved that can be used for additional investment.

For governments, I would say you need to lead and take up the responsibilities that you have. You cannot delegate, wash your hands, or expect international development banks, U.N. agencies, civil society, or the private sector to do the job that you are mandated to do. But don't do it alone — bring in others and gain from their experience and knowledge. Convene and work in a multistakeholder fashion. Allow for meaningful participation; involve the people who are the beneficiaries. Bringing along the people who make financial decisions is key, hence SWA’s regular Finance Ministers’ Meeting. The next one will be held in April 2020. They are a unique opportunity for our sector to position itself not as a drain on national resources, but as an investment in the human and economic development of a country.

Ultimately, make sure you also have an enabling environment. Invest in systems of accountability and you'll see you are planting seeds that will flourish very quickly. You will attract investments and build confidence among donors. You will have all the elements to allow the sector to flourish.