Pushing the boundaries of innovative finance

This chapter seeks to evaluate which innovative financial instruments have been used in the water sector to access market-based repayable financing over recent years and with which results. Each type of innovative financing instrument is examined in turn, starting with a short description of the instrument, an evaluation of its current use in the water and sanitation sector and an evaluation of the role that ODA can play in developing the use of such instruments. Indeed, as mentioned in the Camdessus report, “aid should be used to catalyse other financial flows by such means as funding initial overhead costs, providing equity for revolving funds, guarantees, and subsidies targeted to performance (such as output-based aid)”.