DFID commissioned a small study to evaluate how donor support for access to finance by small and medium scale independent providers of water and sanitation services can be used to leverage private sector finance.
The study focuses on small-scale service providers, also referred to as “small-scale actors”. In developing countries with limited service coverage, these are frequently key service providers particularly for the poor. This is especially the case in urban and peri-urban settlements where the main water and sanitation operators do not have the capacity or finance to extend formal water and service provision to poorer neighbourhoods. As a result, small-scale independent service providers (SSIPs) have stepped in to fill the void left by main operators and provide these basic services to the poor. Supporting SSIPs to enhance the quality of their services at an affordable price is therefore an important part of the approach used by donors to reach the poor.
The objectives of the report are:
(i) to provide an overview of donor engagement in this area to date classified by mode of engagement;
(ii) to evaluate the extent to which these programmes have been successful and the reasons for success or failure;
(iii) to identify specific gaps where donor engagement could have a catalytic effect in this area;
(iv) to draw the lessons learnt from donor engagement.
The report examines a series of financial instruments to support small-scale entrepreneurs, including output-based aid, grants or loans to support private sector leasing contracts, seed funding for revolving funds to support credits/loans, grants for challenge funds, equity participation in small and medium businesses, guarantees, and blending of instruments. The projects reviewed in this report show that donors’ experience of working with small-scale actors in the water and sanitation sector has so far been limited, but is growing.
Trémolet, S. Overview report: Donor approaches to improving access to finance for independent WASH providers. (2013) 60 pp. [DOI: 10.12774/eod_hd040.may2013.tremolet]