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Development Partner Roundtable on Sustainable Sanitation in Asia

21 September Tokyo

Dialogue Session 3:
Financing mechanisms for sustainable
sanitation

Megumi Muto

Global Environment Department, JICA

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the
Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and
accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

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Blended Finance

http://www.oecd.org/dac/financing-sustainable-development/development-finance-topics/blended-finance.htm
Main archetypes and instruments
used in Blended Finance

CONCESSIONAL DEBT GUARANTEE & RISK DESIGN / PREPARATION TECHNICAL ASSISTANCE
OR EQUITY INSURANCE FUNDING GRANT GRANT

•Public or philanthropic •Risk reduction tools that •Grant funding that supports • Funds to supplement the
investors are concessional protect investors against capital costs and activities that lead to capacity of investees
within the capital structure losses bankability of projects
•Subordinate and/or junior
terms compared to co-investors

CAPITAL STRUCTURE
CAPITAL STRUCTURE CAPITAL STRUCTURE CAPITAL
STRUCTURE Senior Debt

Senior Debt Senior Debt Senior Equity
Guarantee

Debt

Grants
Flexible Debt
Equity TA FACILITY
Equity Equity
Junior Equity Grants

Source: Convergence
Philippines Water Revolving Fund (PWRF)

DBP1 PFI2 LGUGC3
Two-step Loan Co-financing Co-financing Credit Risk
(75%) (PWRF) (25%) Guarantee
Sovereign Guarantee Co-Guarantee

DOF4 USAID
Water Service Providers
1. Development Bank of Philippines
2. Private Financial Institutions
3. Local Government Guarantee Corporation (private entity)
4. Department of Finance, Philippines

Background
• Philippines continue to experience water shortages and water pollution. DBP initiated the PWRF project as a
response to enable private sector financing in order to decrease the dependence on limited public funding.

Support Provided by JICA
• Concessional loan was provided with DBP.
• Technical assistance also provided by JICA and USAID in project development and policy reform.

Impact
• Households had increased access to water. Spurred other reforms in the sector such as regulations and
institutional reforms; utility governance improvement.
• PWRF changed the financing paradigm for the sector and stimulated interest from PFIs to finance sector
requirements. Increased size of the financing pie with mobilization of private funds led water service
providers to reduce borrowing costs and better management of their debt capacity.
Polio Eradication Project
in Pakistan

Loan Conversion (5)
(Repayment by BMGF)
Bill & Melinda Gates
JICA
Foundation

Assumption Agreement (1)

Loan Agreement (1)
Disbursement (3)

Government of
Pakistan
Disbursement (Transfer
Procedure) (4)

Procurement
Agreement (2)

UNICEF

Legal Framework
Cash-flow
Service Provision