A PROTOTYPICAL TOPICAL ISSUE PAPER by sofiaie

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									                     Theme 5: Finance - Topic 5.1: Sustainable Financing
                     Session 2: Addressing the financial demand

                     How can the gap between lenders and borrowers be bridged?
    What can the different actors do to increase the borrowing capacity of the service providers?

                                   Proposal for Session 2 of Topic 5.1

Topics covered          Enhancing the borrowing capacity, creditworthiness, risk mitigation, revenue
                         generation, building up the cash flow, ring fencing from social policy, regulation
                        Borrowers/service providers - sector fragmentation, decentralized vs. integrated
                         services/utilities, efficiency gains and contribution/role of private sector
                        Financial tools – role of different sources of supply of funds, guarantees,
                         blending, targeting.

Context              See Master document

Key Question 1       How can sector/utility reform reduce risk and therefore enhance the capacity
                     of the sector to access market finance? In other words how can we shift from
                     just “hedging” risk to addressing the underlying issues that affect risk and
                     therefore not just increase demand for finance but also improve its quality?


Key Question 2       How and at what level (sovereign or sub-sovereign/ utility level) can the
                     different sector risk be allocated/ transferred efficiently, so that the cost of
                     borrowing can be brought down and how can decentralisation be optimised
                     so that risk can be pooled and borrowing capacities increased?


Key Question 3       How can the often conflicting social goals of the water sector and commercial
                     objectives of a water service provider be reconciled in way that enhances
                     access to market finance and increases the financial sustainability of the
                     sector?


Supporting           Master document (available, to be reviewed), 4 supporting documents for each key
documents            question if judged necessary (to be prepared by invited specialist) and field cases
                     (to be prepared, see proposal )
What will be         The financing gap, the common objectives of lenders and borrowers, a finance
bridged?             demand driven approach

Format,              Chair:
participants (TBC)   Panellists:
                            Local/regional government:
                            Public borrower/service provider:
                            Private borrower/service provider:
                            Lender for public and private sector:
                         Other:
                     Moderator:
                     Rapporteur:

                     Participants could include IFIs, bilateral agencies, Representatives of the Ministries
                     of Finance and Water, private and public utilities, regulators, and local government/
                     municipalities, commercial banks, and other relevant stakeholders

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                  Session 2: Addressing the financial demand

Timing            Introduction by chair of session and key questions: 10 minutes
                  Comments by panellists on the key questions: 30 minutes
                  Questions from the floor and debate: 90 minutes
                  Rapporteur initial conclusions: 15 minutes
                  Debate conclusions: 30 minutes
                  Closing by chair: 5 minutes
Contact for       Name: José Frade, Niraj Shah
coordination of   Organization: European Investment Bank
the session       E-mail: j.frade@eib.org; n.shah@eib.org; Tel:+ 352 4379 82727 (82723)




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                       Theme 5: Finance - Topic 5.1: Sustainable Financing
                        Session 2: Addressing the financial demand


                                                 MASTER DOCUMENT

                                      Addressing the Financial Demand1


1. Financing the water and sanitation sector: what is the current state of play?

Access to a safe and reliable drinking water supply and adequate sanitation are essential to public
health and well-being. Since 2000, global efforts have been focused on achieving the internationally
agreed water supply and sanitation (WSS) targets of the Millennium Development Goals (MDGs). Yet,
according to latest coverage estimates, there still exists a significant global deficit in coverage, with
two out of every ten people lacking access to a safe water supply, and five out of ten having
inadequate sanitation. Where services do exist, they are often characterised by an intermittent and
poor quality supply of water, and inadequate sanitation. Lack of or inadequate access to water and
sanitation services presents an exceptional burden on the poor, both from an economic and a health
standpoint.

Increasing access and improving and maintaining existing service coverage and quality levels will
require significant financial resources. Many estimates of the financing requirements to meet the
global water supply and sanitation MDGs have been calculated. While these estimates tend to vary by
large margins due to differences in methodology, it is clear that requirements are significant 2.
Although data on actual financial flows going into the water and sanitation sector is difficult to
ascertain, there is a common consensus that it falls significantly short of even the lowest estimate of
the financing needs, resulting in a large global financing gap 3. In 2003, the Camdessus Report, found
that the supply of financing going into the sector, from all sources, needed to double in order to
achieve the targets for the water and sanitation MDGs. Despite efforts of recent years to increase the
amount of finance flowing into the sector, the gap between the sector financing needs and actual
investments remains large and the Reports’ conclusion still as valid as ever.

In the follow-up to the Camdessus Report, the 2006 Gurria Report, stated that the significant financing
requirements of the water and sanitation sector can only be satisfied if, in addition to measures to
increase the supply of finance, measures to improve the demand were undertaken in parallel. This
paper, drafted for Session 2 of Topic 5.1 – “Addressing the Financial Demand” under the Theme 5 on
“Financing” for the 5 th World Water Forum to be held in Istanbul in 2009, looks at the limits of
“traditional” sources of financing and explores the role of debt financing in filling the financing gap. It
then picks up on the demand side theme of the Gurria report and offers observations on how the
sectors’ capacity to “borrow” and therefore its demand for debt instruments, be increased.

2. Bridging the financing gap: are there limits to raising finance from “traditional” sources?

In most developing countries, financing for the WSS sector usually comes from one or more of three
sources: public budgets, service users, and official development assistance (ODA). The following


1
    The current version of the document is focused on developing countries. A review will be required to make it more “universal”.
2
  Estimates to achieve the MDG on water supply and sanitation vary between US$ 9 and US$ 30 billion per year (WWC, 2006).
Most recently, the WHO, calculated the annual investment needs for just increasing coverage to meet the water and sanitation
targets of MDGs in developing countries as US$ 18 billion (for universal coverage the estimate will be higher). The cost of
maintaining existing services totals an additional US$ 54 billion per annum.
3
  For example, in sub-Saharan Africa (SSA), annual water and sanitation investments needs are estimated to be around US$ 5 -
7 billion. According to cross-country budget analysis carried out for the 2006 Human Development Report, current annual
spending is about US $800 million annually (or about 0.3% of SSA GDP). Cost-recovery by service providers and financial
resource mobilisation by communities to finance water delivery would probably increase total current spending to US$ 2.5
billion (or 1% of GDP). This results in an estimated financing gap of around US$ 2.5-4.5 billion per annum.
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section reviews each of these sources in turn, with a view to determine their ability to fill the financing
gap.

2.1 Public Budgets: The importance of the domestic public sector in providing funds for WSS
cannot be overstated: many municipalities and public utilities in developing countries depend on funds
from public budgets (via inter-governmental fiscal grants/ subsidy transfers) for both long term capital
investments and short-term recurrent needs.

Public sector funds are mainly derived from domestic tax revenues and public sector borrowing. In
most low income countries, the tax base is small and collection systems poor. As economies grow,
the tax base widens, and revenue collection becomes more efficient, public budgets will gradually
increase over time. Till then, there will be a limit to the amount of finance that a government can raise
to meet its investment needs through annual tax revenues.

Public budgets face many pressing and competing demands for budgetary allocations to sectors such
as health, education and WSS. Budgetary allocations depend on the degree of sector prioritisation
within national policy frameworks, linkages between policy, planning and budgetary setting processes,
sector leadership, and articulation of the sector case to policy and decision makers at the national
level. The WSS sector often falls short on most of these measures and as such suffers from low
levels of allocations. While improvements across all these measures is likely to lead to increased
sector funding from the national budgets, the extent of the increase may be limited by the medium
term expenditure framework (MTEF) sector ceilings. It is therefore reasonable to conclude that
increases in public funding for the WSS sector are unlikely to be sufficient to fill the financing gap.

2.2 Service Users: Revenues generated by charging for water and wastewater services through
tariffs, are another significant source of financing for the sector. For a sector to be financially
sustainable in the long run, tariffs should be set to recover all capital, operations and maintenance
and capital maintenance costs. In reality, historical tariff levels in many countries have barely even
covered the recurrent costs of service provision, let alone made any contributions to capital
expenditures required to increase access and improve services. This has left the sector chronically
underfinanced.

The capital intensive sector has high initial financing requirements and a long payback period.
Affordability constraints make it impossible for users to pay for such large investments upfront;
instead users are more likely to be able to and willing to pay, if the costs are recovered over a longer
period of time. This means that although in the short-term, users will not be able to close the funding
gap, increases in tariffs towards cost recovery levels are important for the long-term financial
sustainability of the sector; however these increases should be gradual rather than abrupt and should
take into account any affordability constraints.

At the same time, a lack of political will to increase tariff towards cost recovery levels further
undermines the ability of the sector to recover the costs of services from the users and therefore close
the revenue cycle. Financial sustainability is vital in the long run as there are not enough public or
grant-based resources to maintain infrastructure and for new capital investments.

2.3 ODA from donors: Official development assistance (ODA) is made up of financial transfers
with a grant element. This is commonly referred to as aid and consists of mainly government (donor)
to government (recipient) transfers. ODA forms a relatively small portion of the total financing going
into the WSS sector; however in many Sub-Saharan Countries (SSA) a large share of the government
budget and hence the water sector budget comes from ODA via budget support or project aid
channelled via the central government but classified as off-budget.

Donor commitments to the WSS sector have increased since the World Summit on Sustainable
Development (WSSD) in 2002, after several years of decline. However, a significant amount of this
increase has been due to ODA going to Iraq. In addition, the share of WSS in bilateral ODA has

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                      Session 2: Addressing the financial demand
actually declined from 5.4% in 2000 to around 4.2% in 2004 indicating that there has been no
increased prioritisation of the WSS sector. In real terms ODA in 2004 was lower than in 1997, in
contrast to education or health, which have seen marked increases. Furthermore, research on aid
     4
flows has indicated that ODA commitments are not targeted to those countries that have a large
proportion of the population without access to water and sanitation services (i.e. those most in need).

Donor governments’ public budgets faces similar public financing constraints that recipient country
budgets face: limited pubic budgets with different sectors competing for budgetary allocations (both at
the level of the national budget and also at the level of ODA allocations to different development
sectors). International commitments and increased advocacy and awareness raising by various
international NGOs has contributed to increased allocations of public funds to ODA and within ODA to
the WSS sector. However, the current adverse economic conditions facing many donor countries may
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limit further increases in ODA in the near future . Therefore, despite the optimism generated at the
2002 Monterrey Conference on Financing Development and at the WSSD, it is unlikely that donors’
ODA commitments to support the water sector will increase sufficiently enough to cover the financing
gap.

3      Bridging the financing gap: is there a role for debt financing?

It is clear that the WSS capital expenditure requirements to increase access and improve services are
enormous; from the analysis above it is also clear that the availability of funds from the “traditional”
softer sources will not be enough to bridge the financing gap. Although no single source will be large
enough to fill the financing gap alone, access to debt financing, both from international financing
institutions and from domestic financial and capital markets, will be important to bridge the financing
gap for capital investments.

The capital intensive nature of the sector where the capital expenditures are made upfront and the
payback is over a longer period of time makes long-term debt ideal for financing investments in the
WSS sector. The long-term nature of the debt helps to spread the cost of debt servicing over a longer
time period, thus making it easier to recover the costs from users. Debt financing can be in the form of
loans, bonds or mixed systems, the use of which will depend on the extent of market development,
and varying policy contexts.

Whilst the supply of debt financing is potentially available at the required scale from commercial
banks (local or international), capital markets, and International Financial Institutions (IFIs), the
demand for it often is not; municipalities and utilities are unable to take advantage of such financing,
because appropriate country and sector enabling environment does not exist or that they do not meet
the requisite conditions at the utility level demanded by lenders, i.e., they are not “bankable” or
creditworthy. The lack of demand for finance could have various possible explanations; the next
section looks at the constraints from both the country and sector and utility levels.

4      Bridging the financing gap: what are the constraints to accessing debt financing?

Sector Constraints

Decentralisation of service provision has been a central component of sector reform; yet in many
countries, policy making, regulatory and service delivery functions have not been adequately
separated or institutionalised. In others, decentralising to the lowest level of government has led to a


4
    Fonseca and Cardone, 2006

5
 Many donor governments are facing large public sector deficits in 2008 that are only likely to increase further as governments
spent their way out of a recession.


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fragmentation of the sector, with too many small and medium-size municipalities or utilities that lack
the capacity to adequately provide public services or the scale to access financing.

The functional decentralisation has not been adequately followed up by fiscal decentralisation, where
the utility has adequate autonomy to determine the level and composition of its revenues and
expenditures, as well as the authority to mobilise financing from other sources (such as capital
markets). Governments often do not allow water utilities or municipalities to charge the full economic
costs of water services because of a potential political backlash; at the same time they are not willing
to plug the funding gap through the provision of public funds. Where public funds are available in the
form of inter-governmental fiscal transfers, they are often discretionary and unpredictable. To add to
the problem, a lack of clarity about ownership of assets is often an additional obstacle to investment.

Many governments are reluctant to decentralise borrowing powers to the municipal and service
provider level. It is often presumed that as water and sewerage utilities provide an essential public
service, the central government will not allow them to fall into financial distress and will fund deficits or
                                                       6
guarantee any debt repayment arrears that they have . This fall back position may encourage utilities
may borrow beyond their means (problem of moral hazard), in the absence of an appropriate
regulatory framework.

Utility Constraints

Creditworthiness of utilities is a demand-side requirement for borrowing. Generally it refers to the
ability and willingness of a borrower to repay the debt in a timely manner. Many utilities in developing
countries are not considered creditworthy because of significant performance problems in the
provision of WSS services, including low coverage rates, low tariffs levels and tariff collection rates,
high physical water losses (non-revenue water), and poor water quality. These performance problems
contribute to a downward operational spiral that the utilities find increasingly difficult to extricate
themselves from.

As tariffs are the main revenue source of utilities, the actual and future tariff collection are a significant
factor in a utilities’ ability to repay a loan and therefore to be considered creditworthy. In the absence
of operational autonomy, water utilities face huge political pressure to keep tariff levels low, leading to
poor cost recovery. This combined with low tariff collection rates, means that utilities are unable to
generate and sustain sufficient cash flows to make them financially sustainable. If the long-term flow
of funds is deemed insufficient, lenders are less likely to provide loans or may do so at a higher
interest rate to compensate for the higher risk of default or non-payment (they may also request a
sovereign guarantee).

Poor operational performance is also a good proxy for a poorly run utility that lacks the financial,
technical and managerial skills necessary to provide good water and sanitation services at a
reasonable cost. Without sound financial management skills, a utility may borrow beyond its
repayment capacity by developing unrealistic revenue projections. The lack of technical capacity may
lead to an over-engineering of the systems that are then expensive to construct and operate and poor
implementation capacity may make borrowing excessive and risky: if the loan is not translated into a
functioning system in a timely manner, and does not result in services that contribute to increased
revenues, the cost of the loan will rapidly exceed its benefits. Additionally, caps imposed by the
government (as a result of civil service policies) on how much a utility can spend on wages may result
in qualified staff leaving for better paid jobs in the private sector.

As long as these capacity issues are not addressed in a more systematic way, borrowing will not
become a viable option for utilities to finance their infrastructure needs.



6
 A risk of default may have important implications for ability of the central government to rely on fiscal policy as a tool to
manage macroeconomic stability.
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5. Bridging the Financing Gap: how can the capacity to borrow be improved?

The key factors that enable municipal and regional utilities from accessing financial markets can be
divided into two groups: the enabling environment (political and institutional factors) and utility
environment (factors related to the operations and performance of the utility). This section analyses
these groups in turn and looks at how grants and subsidies could be used to reduce some of the risks
associated with the sector.

5.1 Fostering an External Enabling Environment

Water is as much about governance and sector reform as it is about increases in funding, perhaps
even more so. Poor governance and a lack of sector reform may hamper the ability of the sector to
generate and attract finance. At the same time, increases in financing will not be effective unless
made within the context of these reforms.

   In order to facilitate good governance and accountability, policy making, regulation and service
    provision need to be separated: the first sets the policies and targets, the second monitors and
    regulates and the third provides the WSS services. Service providers need to be accountable to
    both customers and to the regulators. Relations between service providers and regulators should
    be based on transparent and stable rules.
   Experiences of municipal lending in many countries, do not suggest an a priori adverse link
    between decentralising borrowing powers and the central government's ability to maintain fiscal
    discipline and macroeconomic stability. Rather, the key seems to be the design of the regulatory
    framework under which borrowing powers can be decentralised. A good regulatory framework
    would allow water utilities to borrow, impose rules that reduce the risk of imprudent borrowing
    (including sensible limits to the amount borrowed) and, as an overarching role, provide
    predictability, clarity and confidence to the main actors involved.
   Governments should establish clear rules for setting and adjusting tariffs that reduces the
    discretion that politicians may have over the tariff setting process.
   The trend in most countries is to decentralise responsibility for water and sanitation to local levels.
    There is an optimal level of decentralisation that facilitates efficient service provision. To reach
    this level, smaller utilities may consider consolidating themselves into regional water companies,
    often with a larger utility as an anchor. The key driver for such a process is to generate
    economies of scale to share production costs over a larger customer base and reduce the unit
    costs of production. Furthermore, it is more efficient and less costly to provide a larger long-term
    loan to a single entity than smaller loans to a higher number of entities. Therefore, accessing
    finance is another driver for the consolidation process.

5.2 Increasing the Operational Performance of Utilities

Improvements in the operational performance of public utilities by applying the principles of financial
viability and commercial orientation (corporatisation), supported by institutional reform, will help
increase their bankability or creditworthiness and facilitate access to debt financing. Creditworthiness
leads to a good credit rating, which enables entities to attract lenders and borrow at reasonable
prices. To address this challenge, utilities need to pursue innovative reforms that will enable them to
close the revenue gap and realise operational efficiencies, conditions required to access external
capital.

   Although the purpose of water and sanitation services is to improve and maintain human health
    and well-being, the sustainability of water supply and sanitation services depends on generating
    sufficient revenues needed to cover the costs of service provision. Therefore, a gradual increase
    in tariffs towards cost recovery levels is vital for the financial sustainability of the utility; at the
    same time, the increases should be at a realistic pace that takes into account affordability issues.
    Subsidies could used to target poorer consumers who may not be able to afford full cost recovery
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    tariffs immediately, so as to promote consumption and facilitate access. Tariff setting should be
    based on well-defined financial principles that at a minimum aim at recover all recurrent costs
    such as operations and maintenance and debt repayments. Furthermore, tariff structures need to
    be simple, equitable, affordable, financially sustainable, and transparent.
   Widening the sources of long-term funds beyond tariffs is also an important determinant for
    creditworthiness. Many utilities depend on subsidies and other forms of transfer payments from
    regional or national governments, to supplement tariff revenues. As pointed out before, such
    payments/ transfers are often unreliable and irregular and would need to be made more
    predictable, performance-based and better targeted. Utilities would need to demonstrate that such
    revenue streams have a strong likelihood of being sustained (e.g., by a well-established history of
    transfer payments made to the utility).
   It is not enough to just raise the tariffs to cost recovery levels; a utility would also need to convert
    them into actual revenues streams. By ensuring that consumers are issued bills at the appropriate
    times and that revenues are collected within a reasonable time period, a utility can generate and
    sustain a sizeable cashflow and therefore improve its borrowing capacity. Billing and collection
    could be outsourced to other companies using appropriate incentive mechanisms so as to
    improve efficiency.
   Designing an effective leakage reduction and maintenance programme would help a utility to
    reduce the amount of non-revenue water, improve the manageability of the network, and
    therefore increase revenues and reduce operational costs.
   The availability of a suitably qualified managerial team composed of financial and technical
    specialists underpins the operational performance of a utility and therefore, plays an important
    role in the utilities’ ability to engage in borrowing. Utilities need attract and retain staff with the
    appropriate skill levels. They should therefore have the autonomy to set their own wage levels
    and offer staff development opportunities and other incentives-based systems to reward
    performance. Where utilities are overstaffed, options such as staff retrenchments and hiring
    freezes may need to be implemented so as to reduce staff costs and improve efficiency.

5.3 Improved Targeting, Effectiveness and Leveraging of Resources

Domestic public sector funds and ODA needs to be applied more strategically in order to leverage
funds from other sources and reduce some of the risk associated with the sector. The effectiveness of
public funds could be increased through the use of performance or output-based disbursement
mechanisms, used in blending with other sources such as debt financing, and used in risk-sharing
through guarantees instruments. At the same time the use of such soft financing should not “crowd
out” other financial sources, induce grant/ subsidy dependence, or block essential sector reforms.

5.3.1   Blending grants with Loans to minimise the affordability constraint: in many developing
        countries, large parts of the population cannot afford the level of tariffs required for full cost
        recovery. Affordability is a long-term issue that could only be progressively addressed by
        economic growth. As a result of low affordability, funding based entirely on loans cannot
        support investments aimed at providing universal services that reach the poor, thus limiting
        the achievement of the water and sanitation targets of MDGs. Blending of grant funds with
        loans with long-term maturity, is a potential solution in the short-term, to support the pro-poor
        aspects of water and sanitation projects and to scale up projects serving urban areas. Joint
        grant funding and loans can minimise the affordability constraint and buy down sector risks
        thus creating better conditions to leverage more local currency loans from commercial banks
        and equity from the private sector, promote coordination amongst donors, promote innovative
        approaches to service delivery, facilitate sustained access to the population that are not being
        served, and enable a relatively scarce source to be used more effectively and efficiently.
5.3.2   Increasing the effectiveness of subsidies through better targeting. Subsidies should only
        be targeted towards the poor so as to promote consumption and facilitate access. Targeted
        subsidies have several benefits: the total amount of subsidy required is lower; depending on

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        what the subsidy is targeted at, the impacts on poor households may be greater than
        otherwise; and there may be fewer distortions in consumption decisions. In the past few
        years, an innovative mechanism called output-based aid (OBA) that links subsidies to the
        performance of service providers has been used to facilitate access to WSS services.
5.3.3   Improving the absorptive capacity and efficiency and effectiveness of funds at the
        local level. As many public utilities lack the operational experience, qualified staff and training
        to implement their responsibilities for WSS service provision, there is a need technical
        assistance to build capacity. This could be in the form of training, provision of facilities, long-
        term mentoring relationships with utilities in donor countries, and other support programmes
        tailor-made to the particular circumstances operating in a given local location. The TA should
        be undertaken in parallel with the implementation of projects and investment programmes to
        enable a “hands-on” and “learning by doing” approach.
5.3.4   Use of ODA to bring down transaction costs or “off take” risks to increase access to
        debt financing. ODA from donors has an important role to play in “off-taking” the risks
        inherent in the WSS sector. Specific measures include:

           Support project preparation. This involves providing technical assistance to public utilities
            and municipalities to develop investment-ready “projects” that can access debt financing
            from both domestic and international sources. Activities to make the projects investment-
            ready include institutional, management and financial reform. These measures help build
            the creditworthiness of the borrower. The costs of project preparation are often high and
            many projects have failed as a result of a lack of attention to the longer term commercial
            or financial sustainability of the investment rather than of the up front capital required.
            Grant money could be used to reduce the transaction costs of investments by carrying
            out project due diligence as requested by the lenders prior to financing.
           Provide credit enhancements such as guarantees to off-take risks in debt transactions.
            Credit enhancements are mechanisms to mitigate risks in debt transactions that lenders
            cannot or are not willing to take and can be used to leverage either international or local
            private finance for the WSS sector.

6   Bridging the Financing Gap: key questions for discussion

The key questions for discussion based on the issues identified above include:

    Access to market finance and sector/utility reform is interrelated: poor governance and a lack of
    reform may hamper the ability of the sector to tap into market finance; at the same time, increase
    in financing will not be effective unless made within the context of these reforms.

       How can sector/utility reform reduce risk and therefore enhance the capacity of the sector to
        access market finance? In other words how can we shift from just “hedging” risk to addressing
        the underlying issues that affect risk and therefore not just increase demand for finance but
        also improve its quality?

    Functional decentralisation has been a by-word for reform in the past two decades; however,
    decentralising to the lowest level of government has led to a fragmentation of the sector, with too
    many small and medium-size municipalities or utilities that lack the capacity to adequately provide
    public services or the scale to access financing.

       How and at what level (sovereign or sub-sovereign/ utility level) can the different sector risk
        be allocated/ transferred efficiently, so that the cost of borrowing can be brought down and
        how can decentralisation be optimised so that risk can be pooled and borrowing capacities
        increased?


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             Theme 5: Finance - Topic 5.1: Sustainable Financing
              Session 2: Addressing the financial demand
Although the purpose of water and sanitation services is to improve and maintain human health
and well-being, the long-term financial sustainability of the sector (and by that the sustainability of
water supply and sanitation service provision) depends on generating and maintaining sufficient
cashflows.

   How can the often conflicting social goals of the water sector and commercial objectives of a
    water service provider be reconciled in way that enhances access to market finance and
    increases the financial sustainability of the sector?

Other questions to be considered include:

   How can the capacity of local service providers to attract finance be increased and
    maintained? In what ways can the borrowing capacity, creditworthiness and cash flow be built
    up?
   What specific mechanisms to bridge the gap between those local governments/service
    providers that are financially too weak to be creditworthy and lenders?




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