Financing and Sources of Funding of
SSWM
Robert Gensch, Xavier University
Financing and Sources of Funding of SSWM
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The contents of the SSWM Toolbox reflect the opinions of the respective authors and not necessarily the official opinion of the funding or
supporting partner organisations.
Depending on the initial situations and respective local circumstances, there is no guarantee that single measures described in the toolbox
will make the local water and sanitation system more sustainable. The main aim of the SSWM Toolbox is to be a reference tool to provide
ideas for improving the local water and sanitation situation in a sustainable manner. Results depend largely on the respective situation
and the implementation and combination of the measures described. An in-depth analysis of respective advantages and disadvantages and
the suitability of the measure is necessary in every single case. We do not assume any responsibility for and make no warranty with
respect to the results that may be obtained from the use of the information provided.
Financing and Sources of Funding of SSWM
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1. Financing for What?
• Supporting and developing an
enabling environment
• Hygiene behaviour change activities
• Sanitation marketing costs ( including
training, market assessments etc)
• Cost of public infrastructure and
services (capital and operational
costs)
• Cost of private infrastructure and
services (capital and operational
costs)
Source: http://thewealthwarrior.net/tag/investment-strategy/
Financing and Sources of Funding of SSWM
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2. Sources of Funding
• Beneficiaries contribution
• National Government (or public) funds
• Local government funds
• Private funds
• External funding flowing in from
NGOs, donors etc.
Source: http://thewealthwarrior.net/tag/investment-strategy/
Financing and Sources of Funding of SSWM
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2. Sources of Funding
2.1 Beneficiaries contribution
• Stakeholders might be willing to invest some of their own resources.
• For sanitation projects, a sustainable expansion of coverage can only
be achieved if potential users have financial capacity and willingness
to pay for new facilities and cover operation and maintenance costs.
• Households are key investors in on-site sanitation, and careful
project design can maximize their involvement, satisfaction, and
financial investment.
Many financing approaches :
•Cost-sharing model that encourages users to contribute for the services that
they have chosen as best meeting their needs.
•Household invests in its own facilities and pays directly for operating and
maintenance costs
•Tariffs paid to service provider (connection charges, volumetric tariff, etc).
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Example: Social Community Fund Raising – Gram Vikas, India
• Gram Vikas enters into partnership with a rural village
• Each household must contribute Rs. 1000 ($22) into a fixed deposit
community fund. Interest on this fund will be used to expand the
facilities as the village grows.
• The first step is to build a toilet and shower stall for each family. The
families collect local materials and provide manual labour.
• When all toilets are complete, a water source is tapped and a water
tower built to supply piped water to each household.
• Once facilities are built Gram Vikas works with community for 3-5 years
in O&M training, reinforcing hygienic practices and capdev of villagers
for overall management and democratic governance within village.
• When this is done, Gram Vikas withdraws.
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Example: Environmental User Fee – Puerto Galera, Philippines
• Collection of environmental user fees (50PhP) from tourists
• Fee used for sustainable coastal resource management, with sewage
treatment as priority
• Constructing and operating of a sewerage system and wastewater
treatment plant for Barangay Sabang and neighboring areas
Financing and Sources of Funding of SSWM
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2. Sources for Funding
2.2 Government Budget
• Ideally, funding for most of the actions in a water and sanitation
projects should come from the Government’s own resources.
• Depending on the institutional set-up of the Government, these
resources may to a certain extent also derive from revenues gained
through the delivery of services included in the project itself.
The type of financing mechanisms included in this type of source are:
(1) Public subsidy for hardware or software,
(2) Subsidised credit to end-beneficiaries for investment in their own
infrastructure
(3) Subsidised loans to service providers (public or private)
(4) Community-level rewards (e.g. grants to local govt)
Financing and Sources of Funding of SSWM
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Source: Villaluna 2009, Presentation on Sanitation Fianancing during the SuSEP Training of Trainors for Sustainable Sanitation Course in Tagaytay, Philippines, March
2009
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Example: Millennium Development Goal Fund (MDGF)
• Financing facility initiated by the Municipal Development Fund Office of
the DOF
• Targeted at lower income LGUs particularly 4th-6th class.
• DILG is encouraging LGUs to undertake responsive MDG projects and
avail of the financing scheme.
• Two components: Investment support (DOF), and institutional capacity
building (DILG)
• The financing facility is not limited to civil works but may include
procurement of goods, seed capital, detailed engineering design, and
construction supervision.
• DILG offers various training on project implementation, management,
operations & management and monitoring and evaluation.
Financing and Sources of Funding of SSWM
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2. Sources of Funding
2.3 Private Participation
• Public-private partnership (PPP) describes a government service or
private business venture which is funded and operated through a
partnership of government and one or more private sector
companies.
• In water and sanitation: Build-Own-Operate-Transfer (BOOT)
• In these cases, the private parties receive a concession to invest their
capital in the construction and operation of the infrastructure. It
enables the proponent to recover its investment through user fees.
Financing and Sources of Funding of SSWM
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2. Sources of Funding
2.4 External Funding
• The need for external funding arises when none of the above
approaches would be feasible.
• However, it should always be kept in mind that tapping external
sources usually means financing for a limited period of time and
according to the rules of an external organisation. If the issue of long
term financial viability has not been taken into consideration:
many projects may collapse once the external finances
are no longer available!
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Examples - External Funding
Asian Development Bank (ADB) [www.adb.org/Water/default.asp].
•ADB promotes stakeholders participation in the management of water
resources at all levels. It encourages partnerships between
governments, private agencies, NGOs, and communities.
•25% of investment portfolio committed to water and sanitation
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Examples - External Funding
Asian Development Bank (ADB) [www.adb.org/Water/default.asp].
•Small Grant Program for pilot and demonstration activities
•To improve and promote innovative water sector initiatives
implemented by NGOs, development partners and local communities
•One of the Pilot activities in the Philippines:
•Low-cost decentralized Wastewater treatment for public market in
Liloan, Cebu (US$ 50,000 grant)
•Aim here is to quantify a possible cost recovery by implementing user
fees. This is seen as a valuable lesson to learn for future similar
projects, which then might be based on loan funding.
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2. Sources of Funding
Examples - External Funding
Asian Development Bank (ADB) [www.adb.org/Water/default.asp].
•Output based aid (OBA)
•OBA targets individuals who lack the financial means to pay for basic
services. The service provider will receive subsidies to replace costs
associated with providing the service to people, such as user fees.
•Individual agents will verify that service is being delivered and based
on performance of the service-provider, a subsidy will be granted.
•Nepal: Water supply connection and household latrines with OBA
approach to extend loan project to villages which were to poor to pay
full connection feees but could afford user charges
•PH (under preparation): water and sewerage connection to poor
households
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2. Sources of Funding
Examples - External Funding
German Embassy Manila
•Grant for small-scale livelihood projects
•Small-scale Projects are financed by the German Federal Ministry for
Economic Cooperation and Development (BMZ) and are intended to
directly improve the quality of life of the poor and the poorest.
•Max 8000 Euro (450,000 PhP)
•Allotment Garden Project with UDDT and Vermicomposting Project in
CDO as well as Low Cost Sanitation Project in Libertad financed through
German Embassy Small Grants
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2. Sources of Funding
Examples - External Funding
European Commission
•EC supports programmes for rural and natural resources development
including integrated watershed management. Though a large part of the
assistance is channelled to government implemented bilateral programmes,
projects undertaken by NGOs are also supported.
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Examples - External Funding
The World Bank [www.worldbank.org].
The World Bank is partnering with various organisations to reduce poverty and
improve living standards. Among the focus areas is infrastructure development
which includes water and sanitation sector.
SuSEP Program (Sustainable Sanitation Education Program for the Philippines)
•Aims to integrate Sustainable Sanitation into the countries educational system
through development of formal and non-formal training courses
SUSEA (Sustainable Sanitation for East Asia)
•Aims to improve the institutional capacity of national and selected local
government agencies and service providers, and to develop appropriate policies,
services, and interventions to improve access to sanitation in a selected range
from rural and urban areas to river basin scope.
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Examples - External Funding
Australian Aid Agency (AUSAID)
AUSAID delivers aid to Asian countries in the water and sanitation sector
including water and environmental sanitation.
US Agency for International Development (USAID) [www.usaid.gov]
Philippine Sanitation Alliance works with LGUs, water districts and
private sector partners to develop affordable ways to protect
biodiversity and reduce public health risks through improved sanitation.
Philippine Water Revolving Fund lends money to creditworthy water
and sanitations service providers (LGUs and Water Districts). Blended
ODA and private financing to lower rates and to introduce PFIs to the
sector (interest rate market based)
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2. Sources of Funding
Examples - External Funding
United Nations Children's Fund (UNICEF) [www.unicef.org]
UNICEF supports developing and implementing a range of replicable
models for water and sanitation sector.
Other sources
Philippine Obstetrical and Gynecological Society (POGS): 100000 PhP
Others
Financing and Sources of Funding of SSWM
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2. Sources of Funding
Examples - Private Foundations
Ford Foundation [http://www.fordfound.org]
Focuses on rural development, including assisting efforts to improve the
management of both large-and small-scale irrigation facilities using
pumped groundwater.
Small Grants Programme of the Global Environment Facility (SGP-GEF)
[http://sgp.undp.org/
Provides grants to NGOs, CBOs and other for projects that benefit the
global environment and promote sustainable livelihoods in local
communities, including water conservation projects.
Bill and Melinda Gates Foundation [www.gatesfoundation.org]
The Global Development Program leadership team oversees the foundation's
work in developing countries on agricultural development, financial
services for the poor and emergency relief.
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“Linking up Sustainable Sanitation,
Water Management & Agriculture”
SSWM is an initiative
supported by:
Compiled by:
Financing and Sources of Funding of SSWM
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