Towards Inclusive Cities Pro-poor Financing Modalities for WASH

ADB Asian Urban Forum

Manila, 16th November 2011

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The gap

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Urban poor to low income consumer

WSUP empowers utilities, municipalities and SMEs to serve the urban poor as viable consumers

Lower capacity Poorer services

More capacity Better services

Stronger service providers, better services for all

URBAN POOR
Declining demand Lower revenues

LOW INCOME CONSUMERS

Increasing demand Higher revenues

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Urban poor to low income consumer

WSUP empowers utilities, municipalities and SMEs to serve the urban poor as viable consumers

URBAN POOR
Urban poor

Stronger service providers, better services for all

LOW INCOME CONSUMERS

Low income consumers

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Management tools
Management Contracts Concession Contracts Affermage Privatisation Municipal Funding

Recognise poor as market segment Tenders include professional partners for LIC Budgets & finance mechanisms for LIC Delegated management

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Finance tools
Insurance, Guarantees Municipal Allocations Equity Concessionary Loans Commercial Loans ENABLE Connection Policy Concessional Finance for PS MOBILISE City Level Cross Finance Environment Charge Sanitation Tax INCENTIVISE Progress Linked Finance (PLF) Results Based Finance (OBA) Grouped/Blended Finance 5 Yr Sustainability Metrics SME Enterprise Growth Fund Patient Capital Microfinance

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PLF rewarding success

Service Provider
Designs financially viable service improvements at representative scale Implements financially viable representative scale project Further enhance capacity to expand pro-poor services city wide
Service provider scales up pro-poor services city wide; loan finance repaid over time by service provider with expanded customer base and improved financial status

Financing Partners
Grant (TA) awarded for preparation of rep scale programme Grant/loan awarded for rep scale programme Increased access and commercial viability verified Grant (TA) to enhance capacity and plan for city wide scale up Capacity to serve poor at city wide scale verified Concessionary loan finance awarded for city wide scale up

Plan assessed

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PLF characteristics vs other financing modalities

(Sector) Budget support Explicit focus on commercially viable pro-poor services Demonstration required to trigger finance Directly accessible by service providers Does not require pre-financing by service provider

Project aid

Cash-ondelivery

Outputbased aid

Progresslinked finance

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Unique advantages of PLF

Increasing access and quality of service to low-income urban settlements in a financially sustainable manner
Linking finance to demonstrated results and capacity improvements to incentivise reform Directly engaging with and supporting the entities mandated to provide services in urban areas, i.e. utilities and municipalities (and, through them, smaller-scale or informal service providers) Providing an accessible finance option for such service providers regardless of their initial capacity and financial sustainability

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MDGs need management plus finance

WSUP empowers utilities, municipalities and SMEs to serve the urban poor as viable consumers

URBAN POOR
Urban poor

Stronger service providers, better services for all

LOW INCOME CONSUMERS

Low income consumers

Pro-poor finance mechanisms

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Maputo

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Antananarivo

Hygiene

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Lusaka

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Evidence that it works

2009-2011

Tana
Pop 1.5m LIC 0.5m
140,000 120,000 100,000 80,000 60,000 40,000 20,000 -

Lusaka
Pop 3.1m LIC 1.0m 117,000
100,000 80,000 60,000 40,000 20,000 Ja n-1 0 Ma r-1 0 Ma y10 Ju l-1 0 Se p10 No v -1 0 Ja n-1 1 Ma r-1 1 Ma y11 Ju l-1 1

Maputo
Pop 1.1m LIC 0.4m 94,000
120,000 100,000 80,000 60,000 40,000 20,000 Ju l-0 8 ct08 Ja n0 Ap 9 r-0 9 Ju l-0 O 9 ct0 Ja 9 n1 Ap 0 r-1 0 Ju l-1 O 0 ct1 Ja 0 n1 Ap 1 r-1 1 Ju l-1 1

Access

98,000

Ju l-0 Oc 8 t-0 Ja 8 n-0 Ap 9 r-0 9 Ju l-0 Oc 9 t-0 Ja 9 n-1 Ap 0 r-1 0 Ju l-1 Oc 0 t-1 Ja 0 n-1 Ap 1 r-1 1 Ju l-1 1

Financial

Cash positive for JIRAMA and local service providers NRW strategy Asset Management Improved Connection process streamlined

Cash positive via delegated management contracts Proposal writing

Cash positive for AdeM via increased revenue and reduced losses Pro-poor unit established 3o networks implemented Demand for legal connections increased Delegated management contracts More pro-poor connection policy Water tariff review

Capacity

Policy

Peri-urban a priority in JIRAMA strategy PUA services included in MAP

Decentralised governance LIC services tracked

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Advising on Pro-poor Financing Modalities for WASH

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