Existing Solutions

Water, Sanitation, AquaFund, Latin America and the Caribbean, IDB, Water Supply, local authorities and local operators, solid waste, water resources, grant, energy efficiency, transparency.

financial

The AquaFund provides grants that contribute to the achievement of the water-related Millennium Development Goals and the targets established under the Inter-American Development Bank’s (IDB) Water and Sanitation Initiative. It facilitates investment in the areas of water supply and sanitation, water resources management, and wastewater treatment,  It prioritizes working in alliance with local authorities and operators by providing support for both Institutional Strengthening and Project Preparation.

 Institutional Strengthening support is intended to bridge the service coverage gap by improving efficiencies, strategic planning, governance and management capacity of service providers. As such, it finances specific activities that make business performance and management of water operators more efficient and transparent and as consequence build trust among users, donors, and lenders. This includes financing of technical assistance initiatives at the municipal, state, and national levels and strengthening of water operators (public and private) with respect to their management capacity, corporate governance structure, transparency and operational efficiencies (energy efficiency, non-revenue water and information and monitoring systems).

 Given that the lack of financing for project preparation is a major stumbling block to increased investment in water and sanitation infrastructure, AquaFund support for project preparation is intended to  serve as a catalyst to attract more resources by financing the evaluations and designs needed to build rehabilitate and expand the water, sanitation, drainage and solid waste management systems.

 In addition, the IDB with AquaFund support has developed the following tools for service providers: 1.) The AquaRating is a rating system that assesses the performance of water and sanitation service providers in a comprehensive way (for more info http://www.iadb.org/en/topics/water-sanitation/aquarating,3809.html) and 2.) the Energy Efficiency for Utilities program comprises a series of manuals and electronic tools that guide users in performing detailed energy and maintenance audits (for more info http://www.iadb.org/en/topics/water-sanitation/energy-efficiency-for-utilities,4492.html).

The AquaFund provides funding to water operators and governments in its 26 borrowing member countries, all of them in Latin America and the Caribbean, in the form of Institutional Strengthening and Project Preparation grants. In general, national, sub-national, and local government entities, water and sanitation service providers (public, private, mixed-capital, cooperatives), and academic and research institutions are eligible to receive funding from the AquaFund. All operation financed by the AquaFund require a non-objection letter from the Government (institution or ministry responsible for managing relations with the Bank) of the beneficiary country.

The AquaFund was approved in September of 2008 by the IDB’s Board of Directors to support the water-related Millennium Development Goals and the targets established under the IDB’s Water and Sanitation Initiative.  AquaFund collaborates with many of the most distinctive organizations in the sector and receives funding from various international donors. IDB is the largest AquaFund donor followed by the Swiss Cooperation (represented by the State Secretariat for Economic Aff airs – SECO and the Swiss Agency for Development and Cooperation – SDC), the PepsiCo Foundation and the Austrian Federal Ministry of Finance.

 The AquaFund’s interdisceplinary team includes IDB Sector and Country Specialists that lead projects, as well as its funders, and beneficiaries (national and sub national entities and services providers). The articulation of its actors has proven strategic for the priorization, structuring and approval of  the projects  supported by the Fund . It is through this collaborative structure that resoures, knowledge and impact is leveraged to achieve a maximum impact of local programs to strengthen the efficiency of water operators,  and conduct the studies required for water operators to obtain additional funding resources.

 Articulation with local governments, and leadership from IDB team leaders (many of whom are based in country offices in Latin America and the Carribbean) to each of the programs approved for AquaFund support, ensure completion and follow-up at the local level of approved programs.

Despite progress towards the MDGs for water in LA&C, significant obstacles remain, including technical capacity and the scale of the required investments. Many utilities are inefficient, operate at a loss, and cannot meet operational and expansion demands. This drains local and national finances and, sometimes, donor contributions.Government-sponsored funds give limited added-value while local governments and water operators, lack experience and/or financing capabilities to sustain the preparation costs of many small projects. On average 40% of all water supplied by water companies goes unaccounted-for. Of firms providing service to 50% of the region’s population, 25% don’t cover operating costs and must ask national and subnational governments for help in financing maintenance, rehabilitation, expansion, and operation; the systems are becoming decapitalized through inadequate maintenance. The firms also display major shortcomings in their management and financial and operational transparency. The Dutch-based International Water and Sanitation Center (IRC) calculates that between 20% and 70% of resources in the water and sanitation sector could be saved, if transparency were increased and corruption eliminated.

In general, key outputs for financing provided by the AquaFund to local governments and operators for Technicals Assistance and Project Preparation is measured in the number of: project preparation studies; capacity building initatives for service providers; and strategic and investment plans in the areas of commercial management, operations and asset management, energy efficiency, and non-revenue water, among others. The output and impact of the AquaFund however, is measured in terms of the particular impact generated by each of the funded programs.

Over time  the AquaFund will be measuring the following key outcome indicators when it comes to measuring its success in funding  through Technical Assistance and Project Preparation support:

·         % of financed Project Preparation Studies that lead to funded investment projects

·         % of the benefit­ted utilities that adopt  capacity improvements

The support provided by the AquaFund to local operators and governments is of most interest to these beneficiaries, as it helps them access additional funding (if needed), improve internal institutional capacity, and remove barriers that can prevent local investment in the sector. It is also of interest to central governments as it provides them with strengthened water operators and institutional frameworks that can ensure more efficient and transparent services. Lastly, the AquaFund proposes mechanisms for coordination with other bilateral/multilateral agencies at the international and local levels, which provides leveraging of efforts and funding and opportunities for harmonization.

Proper systematization of successfully funded programs is key to ensuring that lessons learned can be easily replicated. In addition, collaboration between operators demonstrates opportunities for increased impact at a regional level. In this sense the AquaFund has upscaled its efforts to a regional level through its support  to the establishment of the Water Operator Partnership for Latin America and the Caribbean (WOP-LAC),  an effort to establish direct and effective partnerships and networking between operators and facilitate a sharing of successful experiences amongst them. By supporting a regional platform, as a complement to the financing of specific programs, it is providing a cost-effective mechanism to better equip the key players in the sector to play their crucial role in meeting the challenges of attaining the MDGs on drinking water supply and sanitation.

The AquaFund and the IDB have identified key lessons learned and challenges facing the sector. 

One the one hand, a key lesson learned is that there is no “one-size-fits-all” approach or shortcut to solving sector problems, and thus, innovative and flexible forms of intervention, financial and nonfinancial mechanisms which are adapted to local conditions demonstrate high impact returns.

 Furthermore, deepening the understanding of sector dynamics through articulation of AquaFund stakeholders which includes donors, IDB sector and country specialists, local and national governments, development agencies and operators is key to give rise to a variety of ingenious solutions at all levels. The WOP-LAC is an example of a collaboration mechanism to promote technical cooperation between water operators; to promote the development of strategic alliances with similar networks, including international donors; and to promote good practices through the training of water operators and other sector entities.

AquaFund has the commitment of many of the most distinctive organizations in the sector and receives funding from various international donors. IDB is the largest AquaFund donor followed by the Swiss Cooperation (represented by the State Secretariat for Economic Affairs – SECO and the Swiss Agency for Development and Cooperation – SDC), the PepsiCo Foundation and the Austrian Federal Ministry of Finance.

Inter American Development Bank

1300 New York Avenue NW

Washington DC 20577

e-mail: aquafund@iadb.org, wop@iadb.org,agua@iadb.org 

www.iadb.org/aquafund

www.iadb.org/aquafund

  http://www.iadb.org/en/topics/water-sanitation/water-operators-partnerships-wop,1493.html