Easing the transition to commercial finance for sustainable

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Title: Easing the Transition to Commercial Finance for Sustainable Water and Sanitation
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WATER GLOBAL PRACTICE
Easing the Transition to
Commercial Finance for
Sustainable Water and
Sanitation
AUGUST 2017
Amanda Goksu, Sophie Tr?molet, Joel Kolker,
and Bill Kingdom
About the Water Global Practice
Launched in 2014, the Word Bank Group's Water Global Practice brings
together financing, knowledge, and implementation in one platform.
By combining the Bank's global knowledge with country investments,
this model generates more firepower for transformational solutions to
help countries grow sustainably.
Please visit us at water or follow us on Twitter
at .
Easing the Transition to
Commercial Finance for
Sustainable Water and
Sanitation
AUGUST 2017
Amanda Goksu, Sophie Tr?molet, Joel Kolker,
and Bill Kingdom
? 2017 International Bank for Reconstruction and Development / The World Bank
1818 H Street NW, Washington, DC 20433
Telephone: 202-473-1000; Internet:
This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and
conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors,
or the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations,
and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning
the legal status of any territory or the endorsement or acceptance of such boundaries.
Rights and Permissions
The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this
work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given.
Please cite the work as follows: World Bank. 2017. Easing the Transition to Commercial Finance for Sustainable Water
and Sanitation. World Bank, Washington, DC.
Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World
Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@.
Cover design: Jean Franz, Franz & Company, Inc.
Contents
Acknowledgments vii
Executive Summary ix
Abbreviations xv
Chapter 1 Introduction 1
1.1 A Global Commitment to Water and Sanitation for All 1
1.2 Purpose and Scope 1
1.3 The Broader Agenda: It's Not Just About Money 2
1.4 Target Audience 4
1.5 Report Content 4
Note4
Chapter 2 Why Is a New Financing Framework Needed? 5
2.1 The Status Quo Is Not Enough 5
2.2 The Investment Gap Is Widening 5
2.3 The Financial Landscape Is Changing 7
2.4 The Potential Benefits Are Immense 8
2.5 How Is the WSS Sector Currently Funded? 10
2.6 Conclusion 14
Notes 14
Chapter 3 A Proposed Framework for Financing Universal Access 17
3.1 Easing the Transition 17
3.2 Why Does WSS Not Typically Attract Commercial Finance? 19
3.3 A New Financing Framework 21
3.4 Conclusion 21
Notes 21
Chapter 4 Component 1: Plan, Budget, and Allocate Public Resources More Efficiently 23
4.1 What Needs to Change? 23
4.2 WSS Sector Strategy and Policy 23
4.3 Sector Financial Planning and Budgeting 25
4.4 More, and Better, Subsector Allocation 26
4.5 Better Use of Tariffs and Subsidies 27
4.6 Funding and Capacity Building of WSS Sector Institutions 31
4.7 Conclusion 32
Notes 32
Easing the Transition to Commercial Finance for Sustainable Water and Sanitation iii
Chapter 5 Component 2: Improve Service Providers' Performance and Governance 33
5.1 What Needs to Change? 33
5.2 The Status Quo 33
5.3 Incentives for Efficiency 34
5.4 Conclusion 39
Note40
Chapter 6 Component 3: Leverage Public Funds to ?Attract Commercial Finance 41
6.1 What Needs to Change? 41
6.2 How Blending Can Help Bridge the Finance Gap 41
6.3 Building Demand 43
6.4 Building Supply 46
6.5 Conclusion 49
Notes 49
Chapter 7 Bringing It All Together 51
7.1 Recapping the Objectives 51
7.2 Finance as Part and Parcel of Broader Sector Reform 51
7.3 Conclusions and Strategic Recommendations 52
Appendix A Types of Commercial Finance 57
Appendix B Analysis of Lending Parameters on Borrowing Costs 61
Debt Service: Short Term Affordability versus Total Cost 61
The Impact of Foreign Exchange Fluctuations 62
The Cost of Delay 63
Note66
References67
Boxes
ES.1. What Is Commercial Finance? x
1.1. SDG 6: Water and Sanitation for All by 2030 2
1.2. Relevant WGP Publications on Financing Universal WSS Access 3
2.1. Three Key Differences between the MDGs and the SDGs 5
2.2. The Camdessus Panel: A First Attempt to Break the Status Quo 7
2.3. The Potential of Climate Finance 8
2.4. The Real Cost of Water for the Poor 9
3.1. Lessons from the East Asia Financial Crisis 18
4.1. The Cost of Misaligned Incentives 24
iv Easing the Transition to Commercial Finance for Sustainable Water and Sanitation

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