2011年-世界发展银行全球_Financing_Small_Piped_Water_Systems_in_Rural_and_Peri-Urban_Kenya_36页_1mb

Summary: Sustainable Services through Domestic Private Sector Participation - Financing Small Piped Water Systems in Rural and Peri-Urban Kenya

Core Content

This document discusses a program initiated in central Kenya in 2006 to finance the development of small piped water systems managed by communities. The program combines commercial debt and equity with output-based aid (OBA) subsidies to support community-based water providers (WSPs) in rural and peri-urban areas. The initiative aims to improve access to safe and affordable water services and to enhance the financial sustainability of these systems by leveraging private sector resources.

Main Points

• Role of Community Water Providers: Community-run small-scale water systems are vital in supplying water to peri-urban and rural areas in Kenya, where municipal providers cover only 25% of the population. These systems are often under-resourced and face challenges in management, revenue generation, and access to finance.

• Financing Model: The program provides up to K Shs 12.5 million (US $160,000) per project, with 20% equity from the community and 80% debt from K-Rep Bank. The loans include a one-year grace period for construction and a five-year repayment period. A subsidy of up to 40% of the total project cost is disbursed upon achieving predetermined output targets, such as increasing water connections and revenue from sales.

• Pilot Results: In the pilot phase, 80 million K Shs (US $1 million) was lent to ten projects, which, with additional community equity, funded 100 million K Shs (US $1.3 million) of infrastructure. By November 2010, all projects were operational, with significant improvements in service coverage, water production, and revenue collection. The projects were able to meet debt service costs from water sales.

• Scaling Up: The program is being expanded nationally, with additional subsidy funds from the European Union and a revolving credit facility from K-Rep Bank. The goal is to finance 50 community water projects with an investment of K Shs 500 million (US $6 million) over five years.

Key Opportunities and Challenges

Opportunities to Access Market Financing

• Credit Appraisal: Lenders need to assess the community's ability to generate revenue from water sales to cover operating and debt costs. This requires understanding water utility operations, cost structures, and consumer demand.

• Consumer Willingness to Pay: It is essential that consumers in the project area are willing and able to pay for water services. This ensures cash flow for debt repayment and reduces the risk of default.

• Specialized Operators: The involvement of specialized private operators can significantly improve the financial and operational performance of community water projects. These operators can be contracted under design-build-operate (DBO) models to manage multiple projects, enhancing efficiency and economies of scale.

• Legal Recognition: Legal frameworks must recognize the exclusive rights of communities to supply water, which is critical for securing financing. Water Services Boards (WSBs) need to license communities to operate and charge cost-recovery tariffs.

• Subsidy Disbursement Structure: Structuring subsidy payments to be disbursed on interim outputs can reduce project costs and the risk of default, thereby increasing lender confidence.

Lessons from the Pilot Phase

• Lender Skills and Risk Tolerance: Lenders should possess credit appraisal skills relevant to project finance and be willing to lend to projects without tangible collateral, relying instead on projected cash flows.

• Community Capacity: Communities often lack the skills and experience needed to develop and manage water projects. Support from private consulting firms is necessary to prepare bankable loan applications and supervise implementation.

• Post-Implementation Management: Communities may struggle to manage systems after implementation. Therefore, it is important to ensure that management structures are in place to optimize operations and maintain efficiency post-loan.

• Incentives for Operators: DBO contracts should include incentives for operators to ensure the systems are functional for the entire loan period, thereby improving sustainability.

Conclusion

The program has demonstrated the potential of leveraging donor subsidies to attract private sector investment in rural water infrastructure. This approach can help address the finance gap in the water sector, improve service delivery, and ensure long-term sustainability. The use of OBA subsidies is crucial in making water services affordable while ensuring that private lenders have the necessary security and oversight to manage risk effectively.

Key Information

• Target Coverage: Kenya's MDG target for improved water access by 2015 is 73% of the population, requiring significant investment in rural water infrastructure.

• Current Infrastructure: There are approximately 1,200 rural piped water systems managed by communities, serving around 3.7 million people.

• Annual Investment Needs: To meet MDG targets, annual investment in rural water is estimated at K Shs 14 billion (US $175 million), with a total investment requirement of K Shs 70 billion (US $900 million) between 2010 and 2015.

• Financial Gap: There is a substantial finance gap of K Shs 5 billion (US $60 million) annually, as public funds are mostly allocated to new infrastructure rather than upgrading existing systems.

• Legal and Institutional Framework: The Water Act of 2002 promotes community and private sector participation in water service provision, particularly outside major towns and cities. Service Provision Agreements (SPAs) and licenses are essential for legal recognition and operational security.

• Subsidy Formula: The OBA subsidy is based on output targets such as the number of water connections and revenue generated. This encourages performance and ensures that subsidies are used effectively.

Annexes and Acronyms

• Key Acronyms:

  • AMCOW: African Ministerial Council On Water
  • GPOBA: Global Partnership on Output-Based Aid
  • K Shs: Kenya Shillings
  • CWP: Community Water Project
  • DCA: Development Credit Authority
  • DfID: UK Department for International Development
  • DGIS: Netherlands's Directorate-General for International Cooperation
  • IFC: International Finance Corporation
  • MDG: Millennium Development Goal
  • MWI: Ministry of Water and Irrigation
  • NWCPC: National Water and Conservation Pipeline Corporation
  • OBA: Output Based Aid
  • PAC: Project Audit Consultant
  • PDF: Project Development Facility
  • PPIAF: Public-Private Infrastructure Advisory Facility
  • SO: Support Organization
  • SPA: Service Provision Agreement
  • WAB: Water Appeals Board
  • WASREB: Water Services Regulatory Board
  • WRMA: Water Resources Management Authority
  • WSB: Water Services Board
  • WSP: Water Services Provider
  • WSP-Af: Water and Sanitation Program – Africa
  • WSTF: Water Services Trust Fund

• Annexes:

  • Annex 1: Financial structure of projects
  • Annex 2: Loan application and appraisal process
  • Annex 3: Services provided by support organizations
  • Annex 4: OBA subsidy formula