4th World Water Forum, Mexico, 2006

New Models for Financing Water at the Local Level

Reference point for discussion from the beacons

Financing the MDGs means roughly doubling all funds from all sources: revenues from users, government contributions, MFI loans, aid donor finance, commercial loans, private equity, NGO funds, etc. However, maintaining even current investment levels, let alone doubling them, represents a daunting challenge in the face of constrained public resources and aid flows.

The management and provision of water services is largely a local responsibility. Financing Local Action is an essential part of the local capacity to develop and manage water related services in a sustainable way. Finance depends on repayment capacity, which ultimately derives from the direct contributions of users and indirect contributions from taxpayers (subsidies). This is valid at all levels, from grass roots to national investments.

Enhancing access to finance requires:
(i) local and national governments to recognise that loans for investments have to be paid back;
(ii) financers to adapt their instruments to the particular problem addressed;
(iii) stakeholders to concert their efforts and jointly structure the project in technical, institutional and financial terms;
(iv) use of funding to be done in a transparent and accountable way and monitored by those who ultimately pay for the investments: users and taxpayers.

Financing water for agriculture is complex. The use of water in agriculture, and rural occupations more generally, takes many forms, and there are many sources and options for finance. Diversity and choice of finance are highly desirable, and should be encouraged. The next generation of investment in water for agriculture is likely to be very different from the last one, with less investment in large surface irrigation schemes, and relatively more in private groundwater,modernisation of existing schemes, improved efficiency in water use, drainage, etc.

The complexity of the financing for water in agriculture calls for an better insight in mechanisms, interactions between local, national and international markets, governance and production structures and in the end, who is paying for what?

Key messages from the Voices of the Forum

  • Finance needs to be brought at the local level
  • Financing IWRM is a government responsibility but communities are willing to share the cost if they are part of the process
  • Financing access to water for all requires solidarity and innovative mechanisms
  • Financing water for agriculture requires coherency
  • To attain water security, Sub-Saharan Africa needs financing for both large-scale and small-scale water infrastructures, as well as additional support for the further development of relevant institutions
  • Payment for environmental servicesPayment for environmental services

Sessions synthesis

Please click on any underlined session number to accede to the corresponding session synthesis.

Water and free trade agreements

How to overcome corruption in water resources and service management

Financing water infrastructure in the Americas
Financing mechanisms for local water initiatives
Innovative strategies for financing projects by local authorities. How to implement transparent, responsible and ethic models
Access to finance for local governments
Financing and IWRM
Public private partnership towards IWRM in MENA region
Participation of the public and solidarity in basin management
Solidarity and decentralised forms of North/South ans South/South funding
Innovative financing mechanisms for drinking water and sanitation : Local governments alternatives
Financing water for agriculture
Approaches and challenges to creating appropriate and cost-effective mechanisms for measuring and monitoring watershed services for ecosystem markets at different scales
Virtual water in the Arab region
Investments in agricultural water management in Sub-Saharan Africa : Diagnosis of trends and opportunities