Project Risks Influence on Water Supply and Sanitation Sector Financing Opportunities

Abstract

Private financing mobilized in the water supply and sanitation sector has not been sufficient to cover the sector’s needs. Several barriers hinder private financing leveraging, including the risk perception of water supply and sanitation projects. This study analyzed 185 water supply and sanitation projects financed by the World Bank between 2015 and 2021 to understand how perceived project risks can influence the financing of these sectors. This study demonstrates the parallels between different types of project risks, their ratings, and the different lending instruments and amounts committed by the bank. The most prevalent risks in the analyzed WSS projects were identified, namely, fiduciary, institutional capacity for implementation and sustainability, environmental and social, and political and governance. The World Bank appears to have different levels of tolerance for the different types of risks, and this tolerance seems to vary between regions and with time. Risks seem to have different weights when financiers decide which WSS projects to finance. Global and regional risk profiles of the 185 WSS projects financed by the World Bank were developed, which can help borrowers identify risks that they can mitigate to potentially improve their ability to attract private finance for WSS projects.