FAQ

The origin of the idea for the UWCI comes from a study, commissioned by GIZ, to review outcomes of urban water reforms in five sub-Saharan countries in 2018. The study noted that the wide distribution in performance of utilities operating within the same country framework conditions could be attributed to a combination of leadership, management competence and governance at a utility level. Two reviews undertaken at about the same time by the World Bank and SECO showed that substantial improvements in utility performance were possible within a few years. Both studies proposed a set of necessary conditions for substantial performance improvements: committed and competent utility leadership able to secure political support and with sufficient management autonomy to undertake the necessary but often difficult changes required.

Germany and the Netherlands signed a Declaration of Interest at the UN Water Conference 2023 in New York on the 23rd of March 2023. Germany is providing the initial funding for the establishment of the initiative and provides support together with the Netherlands as political partner. Kreditanstalt für Wiederaufbau (KfW) and Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) are the main implementing partners for the German government. KfW and GIZ are working together with WaterWorX (WWX) and Dutch Water Operators (VEI) in a formal partnership to establish the initiative. The European Union (EU) will provide support through a guarantee mechanism to support infrastructure lending by the UWCI. Support from partner governments and development partners are welcome and discussions are underway.

The UWCI will focus on accelerating urban water utility turnarounds in low- and middle-income countries, particularly strengthening the water and sanitation sector for underserved population groups of the global South. While UWCI will follow a global approach, implementation of the first phase will start in selected countries.  In many vulnerable countries water services are threatened due to a combination of the effects of climate change, like droughts and floods, financial incapacity for investments and low performing utilities with insufficient service quality and technical inefficiencies, such as high non-revenue water.

The Urban Water Catalyst Initiative (UWCI) will support public urban water and sanitation utilities operating in low- and middle-income countries based on eligibility criteria. A key criterion is the leadership and motivation of the top management of the water utility and the commitment of the political leadership, regulators or owners of the public utility to support the changes necessary to achieve substantial improvements in performance over a few years.  

In addition, the utility must have a suitable corporate legal structure (ring-fenced revenue, management autonomy), and an appropriate legal mandate for investing in infrastructure and taking on debt finance. The utility must have a mandate to service all citizens in its service area. It needs to be able to provide audited financial statements.  

The utility should have an adequate size in terms of current and future revenue and population served, not be too large, have a minimum and relevant SDG 6 and SDG 13 investment need and operate within a defined performance band (an operating cost coverage ratio that is not too high so that the utility does not need the UWCI and not too low so that it will take too long to achieve cost recovery).  

Utility turnaround experiences have shown that strong and viable water and sanitation utilities are able to expand access to piped water to underserved urban areas. A utility can offer services, especially piped drinking water, at a much lower price and tariff compared to informal, small-scale water vendors. Experience shows that low-income households are able and willing to pay for utility water and sanitation services. This also strengthens their rights as customers and citizens.

The UWCI is built on the premise that access to water and sanitation is a basic need and human right. These services therefore need to be provided universally including to low-income households by financially sustainable utilities. This does not mean that investment in water and sanitation should be financed only from public sources but rather that the introduction and use of commercial finance needs to balance the objectives of financial viability and cost recovery with affordable access for all. In this context, the UWCI will offer public donors, philanthropic organizations (e.g., foundations) and development finance institutions (DFIs) an opportunity to support public urban water and sanitation utilities to become financially viable and sustainable.

In the first phase of the initiative, and during the period 2023 to 2025, UWCI will start with ten eligible reform-minded utilities operating in low- and middle-income countries. These will be identified competitively based on market screenings, eligibility criteria and the submission of proposals. In further phases of the initiative, it is anticipated that reform-minded utilities operating in an eligible country, and who meet the utility eligibility criteria, will be able to apply for funding through an open, global call for proposals. 

Support of the establishment of the UWCI has been provided through grant and in-kind funding by BMZ (Germany). Based on a successful participation in the first call of the European Fund for Social Development (EFSD+) it is foreseen that a guarantee will support the financing of a loan and guarantee window and provide additional technical assistance funds. The UWCI is in active exchange with other donors and development financiers interested to support this innovative financing mechanism for urban water. In the medium-term, the UWCI aims to offer impact-first investors an opportunity to expand their portfolio in urban water and sanitation.