Change Story
Closing the finance gap for essential public services
For a decade, the sector's instinct had been “give us more money” – more aid, more tariffs, more private finance. Work on real lifecycle costs of services checks that instinct : you first need to know what something actually costs to deliver and sustain, and then you can see the size of the gap you're trying to close.
Stef Smits, CEO, Riva Netherlands, who has been involved in this work since it began, says: “What we found, working alongside organisations such as Sanitation and Water for All, the World Health Organization and UNICEF, is that there are three big buckets of actions you can take: spending less whilst achieving the same, raise more money, or borrow now and pay back from future sources of income – provided these are good investments. Within each, there are multiple options. But there is not one single best lever. In Honduras, the finance strategy we helped develop identified sixteen distinct policy options for closing the finance gap; none was the answer on its own.”
The efficiency lever is the one nobody wants to hear about. Our analysis consistently shows that efficiency gains – e.g. reducing non-revenue water – water produced but never billed; having more efficient use of energy; better maintenance and asset management – can close the biggest chunk of the finance gap on its own. It's also slow, technical unglamorous work, competing for attention against blended finance and climate funds that make for a better pitch to an investor.
The second bucket is raising more public finance and making sure that is used. There's a harder number underneath that. In water and sanitation, roughly 72% of public money allocated actually gets spent, against 98–99% in the energy sector. The difference is structure: energy tends to run through one national utility; water is split across ministries, regulators and hundreds of municipalities, most with limited capacity to design investable projects. That fragmentation is what we keep coming back to as the real constraint.
Financially, our sector still has a lot to learn. We run around after the latest blended finance mechanism, the latest climate fund, because that's what a financier or a borrower wants to hear about. But none of that works if a utility doesn’t have its house in order. The big gains come from the boring stuff – doing it a little better every day, consistently, and systematically, to become creditworthy
Stef Smits, CEO Riva Netherlands
Stef Smits is frank about where his own thinking shifted. "Financially, our sector still has a lot to learn. We run around after the latest blended finance mechanism, the latest climate fund, because that's what a financier or a borrower wants to hear about. But none of that works if a utility doesn’t have its house in order. The big gains come from the boring stuff – doing it a little better every day, consistently, and systematically, to become creditworthy."
What changed
In Malawi, this incremental, structural, unglamorous work has moved non-revenue water down at two major water boards and opened the door to development bank funding at below market rates from the World Bank and the African Development Bank. Neither country has solved its finance gap, but both have made it smaller, one reform at a time.
What began as individual country-level engagements have become a shared way of thinking: thought leadership that shapes how a sector understands its problems and solutions. It’s resulted in a guideline now used widely and beyond the countries that commissioned it, an advocacy brief for finance ministers, and an evidence base that UNICEF and others draw on directly.
We've spent a decade insisting on an inconvenient truth: there's no silver bullet, and no minister will find one by looking harder for outside money. The harder, more useful work is deciding, systematically, which of the options in front of you to act on first. If your country is at that stage, we'd like to talk.