Financial Services to Improve Access to Water and Sanitation in Sub-Saharan Africa

Topic :

Achieving the millennium development goals, particularly, reducing child mortality (the fourth), and halving the proportion of people without sustainable access to safe drinking water (the seventh) requires significant improvements in access to safe water and basic sanitation. In Sub-Saharan Africa a water and sanitation crisis looms. Forty-four percent of the population does not have reliable access to safe water, and 63 percent remain un-served by sanitation facilities. Income poverty is also at a crisis stage. Some 72 percent of the population in Africa lives on less than US$2 a day and 41 percent suffers from extreme poverty on less than $1 a day. Despite the dire need and consensus on the goals, public funds for water supply and sanitation are drying up.

Marrying the financial with the water and sanitation sectors to make financial services available to low-income households and small-scale providers of water and sanitation services is a market-driven, market-friendly approach to resolving the credit constraint that is inhibiting the development of water and sanitation infrastructure in Africa. Depending on the situation, this approach: (1) promotes the provision of financial services directly to low-income households in order to enable their investment, (2) extends access to water and sanitation services to poor households by making financial instruments available to micro-, small-, and medium-size private operators, and/or (3) targets public funds more effectively to the extreme poor. Key strategies are: 1) closing the information gap that exists between the sectors at the policy and operational levels, and between service users and service suppliers; 2) supporting competition and financial viability in service provision in addressing policy challenges; 3) financial broadening by widening the range of financial products suitable for small-scale water supply and sanitation; 4) financial deepening by increasing the outreach and coverage of financial institutions to small-scale service providers and users; and 5) tight targeting of grant funding to the extreme poor and low-potential areas, and separating it from loans.

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