WASH Talk Podcast on blended finance by Sophie Tremolet, World Bank

1. Supporting water sanitation
and hygiene services for life
19 October 2017
WASH Talk Podcast on
blended finance
Sophie Tremolet, World Bank
Episode 7

2. Introduction
To meet the incredibly audacious SDG 6, there's an estimated yearly
financial gap of 114billion for capital expenditure and 1.5 times that
amount for maintenance.
Blended finance, described as the use of grant funding and
concessional finance to mobilise private (commercial) capital, has
been identified as one source to fill that gap.
On this episode of WASH Talk we cover:
− what blended finance is;
− how it might help us meet that financing gap;
− Practical steps to utilise blended finance to finance SDG6.
HOW CAN BLENDED FINANCE HELP IN MEETING THE
FINANCING GAP FOR REACHING SDG 6?
19 October 20172

3. 1. There's a risk that grant and concessional
finance could 'crowd out' commercial finance
− Concessional finance may have taken the easier, low-hanging fruit
of investment (i.e. the most financially viable utilities in the most
stable, progressive markets)
− The idea is to use concessional or grant funding in a strategic way to
mobilise commercial financing towards the most financially viable
uses, whilst putting concessional finance to work in the harder, more
challenging contexts.
HOW CAN BLENDED FINANCE HELP IN MEETING THE
FINANCING GAP FOR REACHING SDG 6?
Example source19 October 20173

4. 2. There are many combinations of different types of
finance and more economists are needed to help
design financing solutions for each individual project
− One example, is using grants to provide training and technical
assistance to local banks and microfinance institutions to help them
see the opportunity for investment in the water and sanitation sector
− Guarantees or a line of credit (for commercial banks to on-lend)
alongside grants have been used in the energy sector to help
industry convert to more renewable energy technologies, but less so
in the water sector.
HOW CAN BLENDED FINANCE HELP IN MEETING THE
FINANCING GAP FOR REACHING SDG 6?
19 October 20174

5. 3. WASH sector actors can take practical steps by
engaging with the Ministry of Finance who
understand the limitations of grants and
concessional finance
− Concessional finance is lent in hard currency, like Euros and Dollars,
which is risky when local currency can devalue, and can easily end
up costing government more than borrowing from local banks in
local currency.
− A strategic financial planning exercise can be undertaken in each
country to understand which sources of finance would make sense
in which parts of a country's WASH investment needs.
HOW CAN BLENDED FINANCE HELP IN MEETING THE
FINANCING GAP FOR REACHING SDG 6?
19 October 20175

6. Conclusion
− Concessional finance is no quick fix - it will take time and effort to
develop the financial markets as well as the bankable projects that
commercial finance would be attracted to.
− A total financing solution needs to be developed, in light of the
immense gap in financing needed to reach SDG 6.
− Listen to the interview in full at https://www.ircwash.org/washtalk
− Or on Soundcloud
− Key resource: Easing the transition to commercial finance for
sustainable water and sanitation
HOW CAN BLENDED FINANCE HELP IN MEETING THE
FINANCING GAP FOR REACHING SDG 6?
19 October 20176

7. Visiting address
Bezuidenhoutseweg 2
2594 AV The Hague
The Netherlands
Postal address
P.O. BOX 82327
2508 EH The Hague
The Netherlands
T +31 70 3044000
info@ircwash.org
www.ircwash.org
Supporting water sanitation
and hygiene services for life