Eight ideas to fund access to water and toilets for all by 2030

1 | Crack down on illicit financial flows and tax evasion

An estimated $1tn [£0.8tn] flows illegally out of developing countries and emerging economies each year – more than they receive in foreign direct investment and aid combined. Beyond bleeding the world’s poorest economies, this propels crime, corruption and tax evasion. Most of the money is lost through trade mis-invoicing – where trade invoices are manipulated to change the value to secretly move money across borders. Folks in the water and sanitation sector could help promote the importance of raising more domestic revenue by combating tax evasion and avoidance, and push for some of that money to go towards water and sanitation projects. Christine Clough, programme manager, Global Financial Integrity

2 | Increase public investment

The most important route towards financing sanitation and water is increased domestic government investment. For example, a recent estimate of the annual sanitation financing gap in Ghana is $93m [£71m]. Ghana’s GDP is around $38bn [£28bn] and its total tax revenues amount to about 21% of GDP – a pretty good percentage for a low- to middle-income country. But the Ghanaian government currently invests only $7m [£5m] yearly in sanitation: a tiny, trivial amount. If it were instead to invest 0.5% of GDP in sanitation, we’d be looking at about $190m [£145m] – more than enough to cover the country’s financing gap. The bottom line is that countries need to use equitable taxation to support the provision of basic services for poorer citizens. Guy Norman, director of research & evaluation, WSUP

3 | Consider development impact bonds

Development impact bonds (DIBs) for water and sanitation have huge potential; they open up interesting revenue streams from private investors and allow public entities to transfer the risk of failure to private investors. Another benefit is that they force people in the sector to better understand and measure the benefits of interventions. Carlos Hurtado Aguilar, sustainable development manager, Femsa Foundation

DIBs need clear outcome metrics, and problems may arise if there’s a focus on easily measurable quick wins. For example, using DIBs to build one million toilets sounds great and is easily measurable, but those toilets won’t make much difference if they’re not part of a sustainable locally-led sanitation system. Guy Norman

And, currently, there is a lack of measurable outputs to use as universal indicators in water and sanitation – this makes the sector tricky for DIBs. There needs to be a universally accepted, quantifiable and indicative metric – such as CO2 emissions in climate change – by which to measure results. The potential for DIBs to be used for water and sanitation has also become more complicated by the move towards water as a service rather than a project; the number of toilets built is no longer a sensible indicator as it does not reflect behaviour change. Duncan Goose, founder, Global Investment Fund for Water & One Water

4 | Invest in services, not just infrastructure

Most approaches to services in the sector are wrong, based on “drill and leave for the community to manage”. A couple of countries are hitting 80% coverage but despite massive injections of funds, they are not moving towards the SDG of universal and equitable access because the systems are not there to do the monitoring, the fixing, the training of technicians, or to support the markets to develop for the technicians to be there in the first place. Service provision needs people. Catarina Fonseca, head of international department, IRC

5 | Support water financing facilities

The Dutch government is working to set up Water Financing Facilities (WFF) – facilities at the national level that can provide long-term, lower-cost loans to public or private water utilities with little to no access to finance in the market. The loans are linked to specific water infrastructure investments that are designed to enhance climate resilience and mitigation. Incomes generated by water utilities are ringfenced to provide creditworthiness beyond the utilities’ own balance sheet for the loans. Dick van Ginhoven, senior adviser – water & sanitation, Dutch Ministry of Foreign Affairs

6 | Put a levy on bottled water

After running One Water for a little over a decade, I realised that we needed to be much more ambitious. The idea behind the Global Investment Fund for Water is to generate a one cent per litre micro levy from the global bottled water sector. We have a feasibility study underway with the support of the Rockefeller Foundation and the idea seems to be gaining traction. Hypothetically, the fund could raise $4bn [£3bn] if it was applied across the entire global bottled water sector. We think a realistic target to aim for is around $200m [£153m] in the first few years, and use that to spur investments and test different kinds of funding mechanisms. Duncan Goose

7 | Support microfinance, where suitable

Microfinance works where a service is already being provided that can be accessed, for example piped schemes and on-site sanitation. It seems to have been most effective in urban areas, small towns and densely rural populated areas in Asia. But for the large number of unserved people in sub-Saharan countries, there is no service provider to get connected to or buy toilets from, even if access to financial services is becoming easier. Catarina Fonseca

Microfinance can work when it is focused on a specific market failure. For example, Water.org has a great model which provides microfinance to households so they can pay for the last stage connection from standpipe to house. People want it and can afford to pay the subsidised finance. When it is poorly targeted, though, microfinance can lead to terrible debt problems. Duncan Goose

8 | Spend money more wisely

While it is important to strengthen countries’ tax systems and improve their incomes, making expenditures more efficient is a key first step. Several countries implement inadequate or inefficient water and sanitation programmes. No amount of money will be able to solve the problem with this kind of spending. Strengthening institutional capacities towards this end is key. Carlos Hurtado

Read the full Q&A here.

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