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Financing mechanisms for rural multiple use water services in developing countries

Congress: 2008
Author(s): Sylvie Morardet, Marielle Montginoul
Cemagref UMR G-EAU

Keyword(s): domestic uses, productive uses, financing mechanisms, rural areas, water services
AbstractIn developing countries, people use water concurrently for a range of domestic and productive purposes, in particular in poor rural areas where integrated livelihood systems encompass multiple water-dependent activities: drinking and other household water uses, cropping, livestock, fisheries, and small businesses. However, governmental and non-governmental sector-based water services providers tend to develop ‘domestic’ schemes, or ‘irrigation schemes’, or ‘livestock ponds’, planned and designed for only part of people’s water needs. The research project “Models for Implementing Multiple-use Water Supply Systems for Enhanced Land and Water Productivity, Rural Livelihoods and Gender Equity”, under the Challenge Program Water and Food (MUS project) conducted by the International Water Management Institute with other international and national research institutions proposes a new approach to water services provision, which takes people’s multiple water needs as starting point. Adequate financing mechanisms at household, intermediate and national levels have been recognised as one of the core principles of this approach. This paper aims at analyzing how the present financing mechanisms used in the irrigation and domestic water sectors in developing countries fulfill the requirements of the multiple use system approach. The paper draws upon existing academic and grey literature on the subject and uses the MUS project case studies located in 8 countries over 5 river basins (Limpopo, Nile, Indus-Ganges, Mekong and Andes river basins) as illustrations. The first section of the paper analyses to what extent multiple use water services differ from single use services in terms of financing. Then the second section reviews the actual financing mechanisms used in the irrigation and domestic water sectors in developing countries, as well as the mechanisms proposed to achieve the Millennium Development Goals, along the following lines: Who are the stakeholders involved in financing? What financial instruments (tariffs, subsidies, credit, grants…) do they use and what are the corresponding resource flows? The third section assesses how these instruments respond to the principles of "adequate financing mechanisms" for multiple-uses services. The paper finally concludes on recommendations for policy-makers and financing institutions to design new financing mechanisms adapted to multiple use water services.
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