Financial Sustainability of WASH
Services
Dominique Senn, seecon international gmbh
Financial Sustainability of WASH Services
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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
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Financial Sustainability of WASH Services
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Contents
1. Introduction
2. Financial Sustainability Framework
3. Cost Analysis Tools
4. References
Financial Sustainability of WASH Services
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1. Introduction
Investing in WASH Services (1/4)
• Recently, much effort has been directed towards the spatial
expansion of WASH (Water, Sanitation and Hygiene) services.
Source: http://de.slideshare.net/ircuser/costing-sustainable-services-the-lifecycle-cost-approach-12113668 [Accessed: 28.08.2013]
Financial Sustainability of WASH Services
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1. Introduction
Investing in WASH Services (2/4)
• Spatial expansion = creation of new or up-scaling of existing
infrastructure  need for initial capital investment
Financial Sustainability of WASH Services
Source: http://tap.waterforpeople.org/usercontent/site_6/s13/1000139565/179/watertaps.jpg?extra=FA
[Accessed: 27.08.2013]; MORGAN (2007)
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1. Introduction
Investing in WASH Services (3/4)
• With elevated coverage rates (>60%), most money should be spent in
existing infrastructure in order to maintain the service level.
Financial Sustainability of WASH Services
Source: http://tap.waterforpeople.org/usercontent/site_6/s13/1000139565/179/watertaps.jpg?extra=FA [Accessed:
27.08.2013]; http://etc.usf.edu/clipart/37600/37662/hdstack-07_37662_lg.gif [Accessed 27.08.2013]; MORGAN (2007)
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1. Introduction
Investing in WASH Services (4/4)
 Spatial coverage
 maintenance need for capital
recurrent expenditures, support efforts,
capital expenditure
Source: MORIARTY (2011)
Financial Sustainability of WASH Services
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1. Introduction
Importance of Financial Sustainability of WASH Services (1/3)
• But, in most cases, donors concentrate exclusively on initial
capital expenditures.
• Accounting for recurrent costs is often forgotten.
 Infrastructure decays, resources are wasted, people have no
access to water and sanitation services.
It is estimated that in rural areas 30-40%
of WASH systems do not function or
operate significantly below design
expectations (AGUASAN 2012).
Source: http://www.philippinecollegian.org/wpcontent/uploads/2013/07/inside-illus-e1374721492923-900x425.jpg
[Accessed: 23.08.2013]
Financial Sustainability of WASH Services
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1. Introduction
Importance of Financial Sustainability of WASH Services (2/3)
 To keep water and sanitation systems functioning, regular capital
maintenance is indispensable.
Regular capital
maintenance
(blue line) is
indispensable to
avoid a decline
of service levels
(red line).
Source: FRANCEYS & PEZON
(2010)
Financial Sustainability of WASH Services
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1. Introduction
Importance of Financial Sustainability of WASH Services (3/3)
 To ensure regular capital maintenance and financial sustainability,
ALL costs need to be considered when WASH systems are planned!
Source: AGUASAN (2012)
 Cost and finance planning must be an integral part of ensuring
sustainability.
Financial Sustainability of WASH Services
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1. Introduction
Cost Components of WASH Services (1/2)
CAPITAL
EXPENDITURE
Initial costs of putting new services into place:
„hardware“ such as pipes, toilets and pumps and oneoff „software such as training and consultations.
OPERATION AND Routine maintenance and operation costs that are
MINOR
crucial to keep services running, e.g. wages, fuel, or
MAINTENANCE
any other regular purchases. Neglect has long-term
consequences for service delivery.
CAPITAL
MAINTENANCE
Financial Sustainability of WASH Services
Occasional large maintenance costs for the renewal,
replacement, and rehabilitation of a system. These
essential expenditures are required before failure
occurs to maintain a level of service. This is one of
the most frequently „forgotten“ costs.
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1. Introduction
Cost Components of WASH Services (2/2)
EXPENDITURE
DIRECT SUPPORT
Pre and post-construction support costs not directly
related to implementation, e.g. training for
community or private sector operators or user groups.
These costs are necessary to achieve long-term
functionality and scale.
EXPENDITURE
The costs of planning and policy making at
INDIRECT SUPPORT governmental level and capacity building of
professionals and technicians. These costs have a
direct impact on long-term sustainability.
COST OF CAPITAL
Financial Sustainability of WASH Services
The cost of borrowing money or investing in the
service instead of another investment opportunity. It
has a direct impact on the ability to maintain a
service financially.
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1. Introduction
Tools to Ensure Financial Sustainability of WASH Systems
 Cost and finance planning must be an integral part of ensuring
sustainability.
• Tools, which can help to ensure that WASH Services are sustainably
financed and deliver services long after their implementation are:
◦ Financial sustainability frameworks
◦ Cost analysis tools, including:
- Life-cycle costs analysis
- Cost-benefit analysis
- Strategic financial planning
Financial Sustainability of WASH Services
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2. Financial Sustainability Framework
Six Key Elements to Financial Sustainability of WASH Services
Source: http://www.skat.ch/publications/prarticle.2005-09-29.5069774463/prarticle.2005-09-29.1875579521/skatpublication.2012-12-19.5550148854/image1
[Accessed: 23.08.2013]
Financial Sustainability of WASH Services
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2. Financial Sustainability Framework
Important Aspects of the Key Elements (1/2)
Conducive legal and policy framework; defined roles
and responsibilities of all stakeholders; independent
regulatory body; predictable sector financing and
planning; monitoring and evaluation; accountability
and transparency.
Identification, quantification and monitoring of
recurrent costs in their entirety; match costs with
revenues; include often forgotten costs; ensure
availability of necessary capital maintenance funding.
Equitable bearing of burdens of improved services;
mobilize revenues from tariffs, taxes and transfers;
assure access to the poor.
Financial Sustainability of WASH Services
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2. Financial Sustainability Framework
Important Aspects of the Key Elements (2/2)
Integration of the socio-cultural context;
responsiveness to institutional and organisational
contexts, household-centred problem-solving.
Administrational, managerial, technical and analytical
capacity building; institutional development;
resources allocation; training activities; institutional
support.
Committed leadership; demand-responsiveness and
understanding at the local level; advocacy
strategies; identify, understand and value economic
benefits.
Financial Sustainability of WASH Services
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3. Cost Analysis Tools
Three Tools for Financial Planning
Source: http://www.skat.ch/publications/prarticle.2005-09-29.5069774463/prarticle.2005-09-29.1875579521/skatpublication.2012-12-19.5550148854/image1
[Accessed: 23.08.2013]
Financial Sustainability of WASH Services
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3. Cost Analysis Tools
Life-Cycle Costs Approach
Objective: to estimate the disaggregated costs of all elements of
service provision to ensure delivery of an adequate, equitable and
sustainable WASH service level to a population in a specified area.
Source: AGUASAN (2012)
Financial Sustainability of WASH Services
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3. Cost Analysis Tools
Cost-Benefit Analysis (1/2)
Objective: to understand the relation between costs and benefits of a
water supply or sanitation policy or intervention and compare them in
monetary units.
Benefits:
• Health benefits
• Environmental benefits
• Social and private benefits
• Broader economic benefits
• ...
Source:
http://www.rollonfriday.com/Portals/0/Images
/cost_benefit.jpg [Accessed: 25.08.2013]
Financial Sustainability of WASH Services
Costs:
• Capital expenditure
• Cost of capital
• Operation and maintenance
expenditure
• Capital maintenance
expenditure
• Expenditure on direct support
• Expenditure on indirect
support
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3. Cost Analysis Tools
Cost-Benefit Analysis (2/2)
 Compare different policy or intervention options e.g. with regard to
their benefit-cost ratio (ratio by which benefits exceed costs), internal
rate of return (annual rate of return on an investment) or payback period
(period after which the net benefits become positive).
Benefit-cost ratios of different
sanitation service options.
Source: WSP (2011)
 utilise these results for better advocacy and decision-making.
Financial Sustainability of WASH Services
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3. Cost Analysis Tools
Strategic Financial Planning (STF)
Objective: make financing of infrastructure and services more
predictable by considering different aspects in a comprehensive longterm analysis.
STF:
comprehensive
long-term
analysis
Financial needs of the
sector and factors
affecting them.
Financial Sustainability of WASH Services
Main sources of
funds and
balance
between them.
How needs can be
reconciled with
potential resources.
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6. References
AGUASAN (Editor) (2012): Briefing Note: Financial Sustainability of WASH Services – About Mindset Change and an Eye
for the Future. St. Gallen: SDC, Eawag/Sandec, HELVETAS, Skat. URL:
http://www.aguasan.ch/ws2012/AGUASAN28_briefing_note.pdf [Accessed: 23.08.2013]
FRANCEYS, R. ; PEZON, C. (Editor) (2010): Services are forever: The importance of capital maintenance (CapManEx) in
ensuring sustainable wash services. Briefing Note 1b. The Hague: IRC International Water and Sanitation Centre.
URL: http://www.washcost.info/page/866 [Accessed: 24.08.2013]
MORGAN, P.; EcoSanRes (Editor) (2007): Toilets That Make Compost . Stockholm: Stockholm Environment Institute.
MORIARTY, P. (2011): Life-cycle cost approach policy meeting. Unpublished presentation.
WSP (Editor) (2011): The Economic Returns of Sanitation Interventions in Yunnan Province, People’s Republic of China.
Washington DC: Water and Sanitation Programme, Worldbank. URL:
http://www.wsp.org/sites/wsp.org/files/publications/wsp-yunnan-economic-returns.pdf [Accessed: 23.08.2013]
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“Linking up Sustainable Sanitation,
Water Management & Agriculture”
SSWM is an
initiative
supported by:
Created
by:
Financial Sustainability of WASH Services
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