IFC’s involvement in water and waste sectors has a substantial and a direct development impact.
Access to reliable and safe water and waste services plays a critical role in enhancing human health across all economic segments of society. By reducing people’s expenditure (particularly of the poor) on healthcare, these services enhance economic well-being of all people.
By linking the poor to reliable water supply systems, it reduces their dependence on informal arrangements that tend to be both costly and unsafe.
By promoting responsible use of scarce resources and reducing the environmental footprint of industrial and agricultural processes, it promotes environmental sustainability and mitigates impacts of climate change.
By providing access to reliable services, it creates economic opportunity in regions and communities that need support the most.
In 2013, IFC supported water projects provided water access to 42 million people.
Equity Financing for Water
IFC provides both debt and equity financing to water projects. Equity finance allows IFC to invest in projects that may be at a development stage or located in a high risk region where debt financing is not appropriate. There are also cases where IFC’s role as an equity investor can attract further funding. As with any financial support that the World Bank Group provides, we have controls to ensure that possible conflicts of interest between policy advice and investment portfolio management are avoided.
Pricing and Profitability of Water Companies
Water is a publicly regulated service. Companies that hold water and sanitation concessions generally have their pricing structures approved by local governing bodies. These bodies, established with public participation, work to ensure that a fair balance is found between the consumers’ need for access to reliable, affordable water and the needs of companies to set prices at a level that allows for the long term sustainability of their operations. This practice is the same for public and private water municipalities.
Enhanced profitability in water companies is largely achieved by increasing operational efficiencies, decreasing losses from water leakage and expanding service areas – not by raising water prices beyond acceptable levels. When water prices need to rise, it is best practice to design schemes that limit the impact on the most vulnerable of local populations.