The Role of Philantropic Capital in Supporting Private Finance Markets for Rural Water

Rural water has structural barriers that prevent private finance from  flowing: low and volatile revenues, high costs per customer, dispersed  populations, and tariffs that rarely cover full costs mean that, in many  contexts, private finance has reasons to stay away. This report is about  the more specific role philanthropic capital can play within those barriers.  Across eleven financing models now in use, philanthropic capital has  repeatedly built the pipeline, shifted the risk, converted impact into  revenue, or opened access to new pools of capital that a transaction  needed in order to close. Deciding which intervention to pursue and   the extent required depends on the market’s current stage, operator   constraints, and how the mechanism is designed to develop the market.  

The report builds this argument in stages. It begins with a typology of how  private finance markets mature, and with the four levers philanthropic  capital can pull within them. It then turns to eleven case studies, spanning  green and blue bonds, guarantees, blended finance facilities, and outcome-  based instruments across multiple countries, read not as success stories  but as evidence for where each lever did and did not hold. 

The cross-cutting findings and recommendations that follow are written  for funders deciding how to deploy capital, but the case studies themselves  are written for anyone trying to work out whether a specific transaction, in  a specific market, is worth attempting.