Financing Water Service Improvements in Underserved Areas: 3rd IWA Development Congress
Utility companies face significant financial challenges as they improve water and sanitation services for growing populations in unplanned and informal urban settlements. Difficulties include weak credit ratings, limited access to loans, and high interest rates charged by commercial banks.
Finding solutions to these challenges was the topic of a workshop organized by USAID’s Sustainable Water and Sanitation in Africa (SUWASA) at the International Water Association’s (IWA) 3rd Development Congress and Exhibition held in October in Nairobi, Kenya.
The workshop, Accessing Commercial Bank Financing to Deliver Services to All: What Utilities Need to Know and Do, drew more than 100 participants from development organizations, Kenyan county governments, banks and more than 20 utilities. The workshop highlighted the role of commercial banks and guarantee facilities in providing resources to fund improvement projects, the role of robust utility regulations, and the need to demystify the commercial loan process.
In particular, the workshop outlined a loan guarantee program between USAID’s Development Credit Authority and some financial institutions in Kenya. The goal of the program has been to enhance utilities’ ability to gain commercial loans so they can improve access to water in underserved areas.
Presenters also discussed the purpose of the Utility Credit Rating Report released by Kenya’s Water Services Regulatory Board in 2011. The report provided a credit assessment of utilities and has been a critical tool for financial institutions seeking lending opportunities.
An example of progress in the field included a change in Housing Finance’s policies that has allowed utilities to apply for cash flow backed loans. Housing Finance recently approved a nearly US$ 1 million loan to Embu Water and Sanitation Company. The loan, the largest granted to a Kenyan water utility, will allow the company to extend service to more than 55,000 people.
Another success story was provided by KIWASCO, the water and sanitation company in Kisumu, Kenya. Working with SUWASA, KIWASCO secured a medium-term financial package from K-Rep Bank for US$243,000 in infrastructure improvements. The project created 1,500 water connections in Nyamasaria, a low-income neighborhood in Kisumu.
The workshop was facilitated by Zael Sanz Uriarte of the World Bank’s WSP and Sam Huston, Deputy Chief of Party for SUWASA.
The panelists were:
• Dennis Mwanza, Chief of Party, SUWASA
• Patrick Mwangi, senior Water and Sanitation Specialist, the World Bank’s Water and Sanitation Program (WSP)
• Kevin Kihara, General Manager, Business Development, Housing Finance in Kenya
• David Onyango, Managing Director, Kisumu Water and Sewerage Company (KIWASCO)
• Gyongshim An, Senior Urban Development Specialist, Asian Development Bank (ADB)
• Eric Adams, Kenya Team Leader, SUWASA
These reports were compiled and edited by Ms Emily Mutai. She is the Communications and Outreach Specialist with the SUWASA Africa Regional Office, Nairobi - Kenya.