Water Sector Development Programme Phase IV - Investment Finance Facility

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The Investment Financing Facility (IFF) is a new, innovative approach developed by the Federal Development Fund. For the first time, it enables high-performing water suppliers in Tanzania to make small investments, such as connecting new supply areas (last mile) or replacing damaged pipes, using commercial loans from local banks. Up to now, even profitable water suppliers have waited for the sometimes lengthy provision of scarce state funds instead of organizing financing themselves. The IFF enables these companies to act more independently and thus more quickly and efficiently. To achieve this, water suppliers are supported in preparing suitable investments for bankability, water suppliers receive bonus payments as an incentive when they use local loans as a source of financing for their investments, and the know-how and awareness of the joint business potential is increased among water suppliers, banks, ministries and regulatory authorities. The IFF is a performance-based approach. The water suppliers must initially qualify their project in a competitive process. However, they will only receive a partial refund of the investment costs as a bonus once the project has been successfully implemented (Output Based Aid). The aim of the measure is to persuade suitable water suppliers to use commercial loans from local banks to improve drinking water and sanitation supplies. The FC began piloting the facility in mid-2014. The project has a signal character due to its innovative approach and has attracted a lot of attention from all partners. The financing volume of the facility is EUR 12 million and consists of a financing contribution of EUR 5 million from the commitment for the water basket in 2012 (Water Sector Development Program III, PN 2012 65 149) and a further commitment of EUR 7 million from 2015 (Water Sector Development Program IV - Investment Financing Facility PN 2015 67 403).