Financing mechanisms for peri-urban, small towns and rural water supply

The objective of this paper is to assess experiences and current trends in sector financing and to review and assess different options for and provide recommendations on specific financing and subsidy mechanisms to be used by Danida in the delivery of water supply infrastructure in peri-urban areas, small towns and rural areas. Its focus is on the use of financing mechanisms including subsidies. After the Introduction and Recommendations chapter 3-provides the context by presenting a number of key issues and challenges. Chapter 4 presents selected donor policies and strategies in the use of financing mechanisms for WS and provides examples of Danida’s use of financing mechanisms. The lessons from piloting new financing mechanisms are highlighted and selected promising new financing approaches are presented in more detail. Finally, chapter 5provides an assessment of how alternative financing mechanisms could be incorporated into budget support as an emerging aid modality as well as into existing sector programmes. The paper is based on a review of relevant recent literature and interviews held with selected Danida staff, advisers and consultants. The general target audience are staff at the Danish Ministry of Foreign Affairs, and Danish Embassies, national cooperation partners, advisers, other donor partners and external consultants.