BOOK
Innovative Financing Mechanisms for the Water Sector
(2010)
Additional Information
Book Details
Abstract
Part of OECD Water Policy and Finance Set - Buy all four reports and save over 30% on buying separately!
This report examines innovative mechanisms that can help attract new financial resources into water and sanitation services. In particular, it focuses on mobilising market-based repayable financing (such as loans, bonds and equity) as a way of bridging the financial gap to meet the water-related Millennium Development Goals and other crucial sector objectives.
The Camdessus and Gurria reports, published seven and four years ago, respectively, formulated a number of recommendations in this area. This report examines the extent to which these recommendations have been implemented. It looks at the rapidly evolving global context and to the ongoing financial and economic crisis, and considers how innovation in financing for the water sector may need to adapt.
Further reading: Managing Water for All (2009); Private Sector Participation in Water Infrastructure: OECD Checklist for Public Action (2009); Social Issues in the Provision and Pricing of Water Services (2003); The Price of Water: Trends in OECD Countries (1999);
Visit http://www.iwawaterwiki.org/xwiki/bin/view/Articles/UsefulResourcesforDevelopingCountries_0 to access the OECD area on the IWA WaterWiki
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover\r | Cover | ||
| Table of Contents\r | vii | ||
| Abbreviations and acronyms | xi | ||
| Executive summary | xiii | ||
| Introduction | xxv | ||
| Overview | xxv | ||
| Target audience | xxvi | ||
| Structure of the report | xxvi | ||
| Chapter 1: Setting the stage | 1 | ||
| 1.1. Financial flows for water and sanitation services | 1 | ||
| 1.2. Why focus on market-based repayable finance in this report? | 3 | ||
| 1.3. Why is innovation needed to increase market-based repayable finance? | 5 | ||
| 1.4. Previous recommendations and their follow-up | 8 | ||
| 1.5. Key evolutions since the Camdessus and Gurria reports | 11 | ||
| Notes\r | 15 | ||
| Chapter 2:\rMobilising market-based repayable finance | 17 | ||
| 2.1.\rPotential recipients of market-based repayable finance | 17 | ||
| 2.2. Potential sources | 20 | ||
| 2.2.1. Bank finance (Commercial loans) | 20 | ||
| 2.2.2. Bond finance | 22 | ||
| 2.2.3. Project finance | 26 | ||
| 2.2.4. Equity finance | 28 | ||
| Listed equity model | 28 | ||
| Privately-held companies | 30 | ||
| 2.3. Critical mismatches driving innovation: a summary | 31 | ||
| Notes\r | 33 | ||
| Chapter 3:\rPushing the boundaries of innovative finance | 35 | ||
| 3.1. Blending grants and repayable financing | 35 | ||
| What does blending of grants and repayable financing consist of? | 35 | ||
| To which extent has blending been achieved in the water and sanitation sector?\r | 37 | ||
| What is the potential for further development? | 41 | ||
| 3.2. Extending the range of potential borrowers via micro-finance | 41 | ||
| What is micro-finance and what role can it play in the water and sanitation sector? | 41 | ||
| How has micro-finance been applied in the water sector? | 42 | ||
| What role can ODA play to catalyse the development of micro-finance products?\r | 45 | ||
| 3.3. Alleviating affordability constraints with output-based aid | 46 | ||
| What is output-based aid and what role can it play in the water and sanitation sector?\r | 46 | ||
| How has OBA been applied in the water sector? | 47 | ||
| What may be needed to expand the use of OBA subsidies in the water sector? | 50 | ||
| 3.4. Mitigating risks with guarantees and insurance | 52 | ||
| What are riskmitigation instruments and what role can they play inWSS? | 52 | ||
| How have risk mitigation instruments been used in the water sector? | 55 | ||
| What can be done to increase the use of risk mitigation instruments in the water sector? | 56 | ||
| 3.5. Creating grouped financing vehicles to increase access to finance | 61 | ||
| What are grouped financing vehicles? | 61 | ||
| What role can grouped financing vehicles play in the water and sanitation sector? | 62 | ||
| What role can ODA play to develop the use of grouped financing tools? | 67 | ||
| 3.6. Increasing lending to sub-sovereigns via innovation | 68 | ||
| What innovations can be used to increase lending to sub-sovereigns? | 68 | ||
| How have such innovations been applied in the water sector? | 68 | ||
| What role can ODA play to catalyse lending to sub-sovereigns? | 72 | ||
| 3.7. Strengthening the balance sheet via equity injections | 72 | ||
| How can equity injections help mobilize market-based repayable financing? | 72 | ||
| What role have equity injections played in the water sector? | 73 | ||
| What role can ODA play in this area? | 75 | ||
| 3.8. Increasing transparency in the sector via credit ratings | 78 | ||
| What are credit ratings and what role can they play to increase market-based financing? | 78 | ||
| How have credit ratings been developed in the water sector? | 78 | ||
| How can ODA support the development of credit ratings? | 79 | ||
| 3.9. Developing \"bankable\" projects through project preparation facilities | 80 | ||
| What are project preparation facilities? | 80 | ||
| How have they been used in the water sector? | 81 | ||
| How can ODA support the development of bankable projects? | 82 | ||
| 3.10. Summary evaluation | 83 | ||
| Notes\r | 86 | ||
| Chapter 4:\rAssessing the impact of the global financial crisis | 89 | ||
| 4.1. Potential impact on market-based repayable finance | 90 | ||
| 4.1.1.\rBank Finance (commercial loans) | 90 | ||
| Impact on the potential for innovation | 91 | ||
| 4.1.2. Bond Finance | 92 | ||
| Corporate Bonds | 92 | ||
| Sub sovereign debt | 94 | ||
| Impact on the potential for innovation | 95 | ||
| 4.1.3.\rProject finance | 95 | ||
| 4.1.4.\rEquity finance | 96 | ||
| Listed water companies | 96 | ||
| Privately held water companies | 96 | ||
| 4.2. Potential impact on the 3Ts | 98 | ||
| 4.2.1. Tariff revenues are likely to remain low | 98 | ||
| 4.2.2. Tax transfers to surge only where stimulus packages target water | 98 | ||
| 4.2.3. International transfers will increasingly be needed to fill the gap | 101 | ||
| 4.3. In sum: glimmers of hope after the drought? | 102 | ||
| Notes\r | 105 | ||
| Bibliography\r | 107 |